2012 Social Security Wage Base Increase

Social Security Wage Base Increases to $110,100 in 2012

The Social Security Administration (SSA) announced on Wednesday, October 19, 2011, that the 2012 social security wage base will be $110,100, up from $106,800 where it had been set for the past three years  As in prior years, there is no limit to the wages subject to the Medicare tax; therefore all covered wages are still subject to the 1.45% tax.

The FICA tax rate, which is the combined social security tax rate of 6.2% and the Medicare tax rate of 1.45%, will be 7.65% for 2012. The maximum social security tax employees and employers will each pay in 2012 is $6,826.20. Note that the 2011 FICA tax rate was 4.2% for employees and 6.2% for employers under the Tax Relief Act of 2010, and that the rate is scheduled to be 6.2% for both employees and employers in 2012. However, bills currently being considered in Congress may change this.

The social security wage base for self-employed individuals in 2012 will also be $110,100. There is no limit on covered self-employment income that will be subject to the Medicare tax. The self-employment tax rate will be 15.3% (combined social security tax rate of 12.4% and Medicare tax rate of 2.9%). In 2012, the maximum social security tax for a self-employed individual will be $13,652.40. Again, note that the 2012 FICA tax rate for both employees and employers is scheduled to be 6.2%, but that Congress is considering proposals that would change this.

FICA coverage threshold for domestic, election workers
The threshold for coverage under social security and Medicare for domestic employees will be $1,800 in 2012, up from $1,700 in 2011; the coverage threshold for election workers will be $1,500 in 2012, unchanged from 2011. 

The Hidden Benefits of HR Outsourcing

Human resource outsourcing has a reputation for streamlining HR services and increasing the productivity of internal HR staff. But a study by PriceWaterhouseCoopers finds that companies generally underestimate the most profound benefit of outsourcing human resources: cost savings. Businesses evaluating the benefits of human resources outsourcing often focus on the improved productivity of internal HR staff. But the real reason to outsource  administrative tasks, say analysts at PriceWaterhouseCoopers, is cost savings. By the Numbers A study conducted by the research group over a two-year period found that in-house human resources carry hidden costs that most companies dont take into account when they compare internal and outsourced HR options. The studys sponsor, a leading human resource outsourcing provider, observes: "this years study showed that outsourcingandhellip; offers an average 35 percent savings on payroll and more than 50 percent savings on HRIS (human resource information systems)." The study concludes that "in-house human resource systems are more expensive and less strategic" than outsourced HR. Total Cost of Ownership (TCO) of In-House and Outsourced Models PriceWaterhouseCoopers white paper "The Total Cost of Ownership: Warning Signs of Hidden In-House System Costs" details the factors that obscure the true total cost of ownership of internal human resources. Payroll The two costs that businesses typically overlook when assessing TCO are: Costs associated with payroll systems Non-payroll department costs attributed to time collection These costs generally escape the financial assessment of in-house HR. The study cites the example of a business that assesses their in-house cost per paycheck at two to six dollars. Taking into account the two missing factors raises that estimate to sixteen dollars per paycheck. Taking all factors into account, the study found that "hidden costs account for sixty percent of the total cost of ownership component costs for payroll." Human Resource Information Systems (HRIS) Human resource information systems represent another source of cost underestimation. The hidden cost drags of an internal HRIS include: Future upgrades to the system. The useful life of in-house systems appears to be decreasing. HRIS technology is subject to a rapid rate of obsolescence, compelling businesses to invest in frequent system upgrades. PriceWaterhouseCoopers estimates that "the average in-house system has been upgraded within the last eighteen months." Yet few of the senior financial executives the study consulted anticipate any economic value added as a result of continued investments. Maintenance costs. Many businesses fail to account for all the costs associated with maintaining an HRIS system. The study finds that maintenance costs represent 72 percent of an internal HR systems total cost of ownership. Taking into account the following factors, the study estimates the average cost per employee per year for owning and maintaining an HRIS is $88. Application maintenance Daily application support Database administration Network and communication costs Help desk and end-user support Facilities and other overhead

Critical HR Recordkeeping: From Hiring to Termination 

Employee record retention is a daunting task for employers because there are so many different requirements based on a variety of criteria. For example, virtually every federal employment law, ranging from the Americans with Disabilities Act to Title VII of the Civil Rights Act, stipulates certain record-retention rules for all private sector employers. In addition, many state and local jurisdictions impose additional requirements. 

Record retention is complex and time consuming. However, in addition to complying with various federal and state laws, keeping good, well-organized records can be very helpful in documenting and supporting an organization’s employment actions. The best way to ensure that your records are in good order is to establish and publish a record-retention policy. It’s wise to consult with legal counsel, and you may want to engage the services of record-retention specialists who can help you customize your record-retention policies and practices to fit your specific situation. 

Recordkeeping also assists in managing human resources by providing hard data on the effectiveness of policies and procedures. For example, records of accidents in the workplace help identify why accidents are occurring and how to prevent them. Records also help prove compliance with government regulations. For example, documentation of equal employment opportunity practices can help show that an employer is in compliance with Title VII of the Civil Rights Act. 

Records provide documentation to defend—and even drive—employment decisions. They can help when defending against a lawsuit brought by an employee or employees under one of the employment laws. 

Responsible record-keeping practices begin long before a job candidate walks through the door and extend long after an employee leaves an employer.

Litigation is the ultimate test of the adequacy of an employer’s record-keeping practices. There are a whole host of laws that require employers to keep certain records on their employees for various lengths of time, and even after the employment relationship has terminated. 

As a practical rule of thumb, the attorneys recommend that employers keep employees’ records for the duration of the employment relationship, plus an additional 5 years. This satisfies the requirements of every record-retention law except: 

1. Pension and welfare benefit plan records, which must be kept for 6 years after 

the termination of the employment relationship; and 

2. Safety and toxic chemical exposure records, which must be kept for 30 years 

after the termination of the employment relationship. 

SPHR suggest breaking HR recordkeeping into three categories:

1. Hiring;
2. Employment relationship; and
3. Termination.

I will cover the details of these three categories in my next report.

10 Reasons we make YOU better

1. Avoid Penalties 

According to the IRS, 40 percent of small businesses pay an average penalty of $845 per year for late or incorrect filings and payments. SPHR provides a tax guarantee. 

2. Reduce Costs 

The direct costs of processing payroll can be greatly reduced by working with a payroll provider. Our clients average a savings of 23% on payroll costs. We offer a flat service fee based on your pay-cycle. 

3. Local Service 

SPHR is locally owned and headquartered in Mobile, Alabama. Each client is assigned a personal service team that can immediately address an issue. No more waiting on hold for a service representative. No more waiting for delivery from a service center in another state. On Site printing is available for clients outside the immediate delivery area. 

4. Confidence 

SPHR is a state licensed, locally owned Human Resource Administration Provider. Our staff includes both Certified Payroll Professionals and Licensed Human Resource Professionals. 

5. Free Up Free Time 

Payroll processing is a time-consuming process. SPHR can free up staff time to pursue more important value-added and revenue-generating activities. Inc. magazine recently identified payroll as the #1 task for small business to outsource, along with most accounting tasks. 

6. Avoid Technology Costs 

A constant question for small business owners is whether they have the latest version of their payroll software and the most recent tax tables installed on their computer. Using the wrong tax tables can result in stiff penalties. We offer 24/7 online access for reporting and service needs. No more waiting for the office to open to access your information. Also, use of our full service Human Resource Information Software can save thousands.

7. Leverage Outside Payroll & HR Expertise

Most business owners and controllers don't have time to keep up with constantly changing regulations, withholding rates, and government forms. By outsourcing payroll, a small business can take advantage of expertise that was previously available only to big companies.

8. Avoid Payroll Knowledge Leaving 

If your bookkeeper or controller gets a new job, they will walk out the door with their knowledge of the payroll process and how you do it. Using an outside service eliminates that business risk. 

9. Confidentiality / Security 

By allowing SPHR to handle your payroll administration, you can feel comfortable in knowing that your employee’s information stays private and secure. Our software allows for multiple levels of password protected access for your management and employees. 

10. Human Resource Management. 

Human Resource Administration and Management in today’s climate of ever-changing laws and regulations is not for the weak. Every business must spend valuable resources on ensuring compliance. Non-compliance is often overlooked when evaluating a company’s financial liability. Do not subject your company to an unnecessary risk of lawsuits, penalties and fines. Our licensed and experienced HR experts will help ensure that your company is current and compliant with Federal and State Labor Laws & Regulations.