HRMG Blog – Sage Abra Payroll, HR, & Timekeeping News

We have all heard about the Recovery Act that was passed by Congress and signed into law by President Obama, and part of this act represented a Federal Income Tax decrease for most Americans. I wanted to share a true story that occurred yesterday that represents the real effect this is having on people.

As some of you are aware, I’m a business consultant that helps companies build better strategies in their HR and Payroll departments. A lot of times this means discussing big picture ideas with CEO’s and CFO’s, and sometimes it means having a dialogue with an employee in an organization. Such was the case yesterday.

I visited a client of mine yesterday, and the VP of Finance informed me that there was an employee who was upset with her paycheck, and was specifically concerned with the amount of Federal Income Tax being withheld. I was asked to look into the issue to determine the correct course of action. I sat down and reviewed the employee’s paychecks from 2008, first quarter of ’09, and the most recent check that was given to her. This employee makes about $700 biweekly ($350/week) as a part-time janitor. She has some pre-tax deductions, taking their taxable Federal wage to about $640. I sat down and began doing the tax table math on this person’s check to see if it was indeed out of the ordinary.

What I found, much to the employee’s surprise, was a dramatic change in the person’s net pay (for the better). Applying the federal tables of 2008 to $640 of biweekly wages with a filing status of married, no exemptions represents a $33.23 federal tax withholding. Applying the new Recovery Act tables, the withholding is now $3.42. ‘Surely this is too low!’ the employee claimed, ‘I’m going to owe a lot at tax time next year!’. Not so. Indeed, this person is keeping approximately $30 per pay, or $775 this year. They were extremely happy that I shared this calculation with them.

There is relief happening, and even though it’s not a large, lump sum check (like the one we received last year), it is significant. For someone that takes home approximately $550-600 per pay, an extra $30 goes a long way. This is happening all over the country, as most Americans are experiencing larger net paychecks. Even my net pay was increased by $40 per month. And although that difference isn’t enough to make anyone a millionaire, it’s enough to help pay bills, buy groceries, or even go out to dinner for an evening. With rising costs in almost every good and service around, that money will go a long way.

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The American Recovery and Reinvestment Act (ARRA), also known as the 2009 Economic Stimulus Plan has many legislative changes.  Several of the provisions will require updates to Sage Abra. The Sage Compliance team has been reviewing the legislation and will take the following action one these items:

1. Changes to the Federal Tax Rate. This will be included in a Service Release that we plan to have available no later then March 6th, 2009 and will also be included in the 1st Quarter Tax Update for 2009.
2. Changes to EIC (Earned Income Credit.) This will also be included in our March 6th Service Release and in the 1st Quarter Tax Update for 2009.
3. Changes to Form 941 updates to accommodate the new COBRA subsidy data on the form. This will be added to Sage Abra in the 1st Quarter Tax Update for 2009.

During the rollout of ARRA, the Compliance team will continue to monitor the requirements to ensure timely and accurate implementation of the new laws as they are finalized and put into effect.

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The 2009 cost-of-living adjustments for pension and retirement plans are as follows:

401(k) and 403(b). The limitation on the exclusion for elective deferrals under IRC §402(g)(3) will increase from $15,500 to $16,500. This limitation affects elective deferrals to various plans, including 401(k) plans, and 403(b) annuities.

Deferred compensation plans. The limit on deferrals to IRC §457 deferred compensation plans of state and local governments and tax-exempt organizations will increase from $15,500 to $16,500.

SIMPLE salary deferrals. The maximum amount of compensation that an employee/participant may elect to defer to a SIMPLE plan will increase from $10,500 to $11,500.

Catch-up contributions. The dollar limitation for catch-up contributions to an applicable deferred plan for individuals age 50 or over will increase from $5,000 to $5,500. The amount for catch-up contributions under SIMPLE plans will remain at $2,500 in 2009.

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An estimated 14 million employees are playing Fantasy Football. Many are part of office pools, and most spend time at work managing their team. Although there are many cons to this activity for the workplace, there are also some hidden benefits to Fantasy Football.

Fantasy Football is a diversion to doing work, say many analysts. Global outplacement agency Challenger, Gray & Christmas Inc. suggests that employers look to lose $10.5 billion in productivity during the regular football season. Time lost to internet activity and “water cooler talk” are big detriments to this hobby. Nielson Online suggests that employees spend an average of 1 hour and 19 minutes per week online at work playing Fantasy Football. Also, many companies prohibit the use of company PC’s for personal matters, so using work computers might also be a direct violation of company policy.

There are some positives, however. Having employees participate in Fantasy Football can be a morale boost. The hobby opens lines of communication and allows employees to strengthen bonds with other employees. It can also improve working relationships and make the workplace more enjoyable. Fantasy Football can even assist with employee retention, say some analysts.

There are legal matters to look at as well. Many companies (such as those in the financial industry) are legally bound not to have betting as it interferes with their ethics policies. Employers also need to look at betting laws, as fantasy football, when it involves real money, is illegal in many states.

As HR and Payroll professionals, you should make sure your employees understand your policies and how they affect games like Fantasy Football. If you have internet policies, reiterate them prior to and during the football season. But most of all, maintain a fair and balanced management of this and other extra-curricular activities. Depending on your organization and team culture, Fantasy Football could be a great positive for your workforce.

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Beginning September 11th, Pennsylvania’s new Clean Indoor Air Act goes into effect. This act will ban smoking in public places as well as workplaces. With exception to the City of Philadelphia, this ban is statewide.

“Workplace” is defined as an indoor area serving as a place of employment, occupation, business, trade, craft, professional, or volunteer activity. Place of employment is defined as the area that an employee uses for work or any other purpose. This includes restrooms, stairways, garages, cafeterias, to name a few.

Implementing a smoke-free policy may not be at the top of your to-do list, but the fines for not implementing a policy and following through are costly. Owners, operators, or managers of premises may be penalized for failing to post proper signage in the amounts ranging from $250 to $1,000. Owners can also be fined $250-$1,000 for allowing smoking. Finally, persons (patrons or employees) may be penalized $250-1000 for smoking. What to do ASAP:

• Post “No Smoking” signs.
• Communicate and educate all employees that smoking is prohibited in the workplace.
• Address the violations and the fines imposed by law.
• Define how violations will be addressed.
• Address how to handle smoking during work breaks.
• Provide employees with a copy of the policy.

For additional pointers, the PA Department of Health has developed a great Compliance Toolkit for download here: Smoke-Free Compliance Toolkit. You can also visit www.PACTonline.org for signage or sample policies.

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Gov. Ed Rendell signed into law a bill that will streamline Pennsylvania’s local tax collection system. The new law (S.B. 1063) reduces municipal and school district Earned Income Tax collectors from 560 to 69. Essentially, one collector will be named for each county. The program will begin in 2010 and will be fully operational by 2012.

According to the Pennsylvania Economy League, Pennsylvania’s fractured and inefficient system left some $237 million uncollected each year, which would be enough to hire 3,000 more teachers and 3,000 more police officers, or lower property taxes. This bill, in essence, hopes to improve this. Sen. Jane Earll of Erie, the bill’s sponsor, said “The way we collect taxes now is antiquated, inefficient and results in a lack of withholding, lost revenue and revenue that ultimately does not get distributed to the municipalities where it belongs.”

If you’d like to read the bill, visit http://www.legis.state.pa.us/cfdocs/billinfo/billinfo.cfm?syear=2007&sind=0&body=S&type=B&bn=1063.

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Web 2.0. You may have heard this buzzword a lot recently. It is a common term used to define the trend in the use of the web for information sharing and collaborating among web surfers. MySpace, Facebook, Twitter, LinkedIn, and Google Reader are the predominate Web 2. o applications, and the generation of “millenials” (20-somethings) and Gen-X’ers (30-somethings) are widely using these applications to keep connected.

The internet is now a platform, and companies must start using that platform for better business strategies. Jason Averbrook, CEO of Knowledge Infustion, recently pointed out these facts during a session at the International Association for Human Resources Information Management:

• One out of eight couples married in 2006 met online.
• MySpace is the 11th largest country in the world.
• There are 2.7 billion Google searches monthly.
• Daily sent text messages exceed the total population on Earth.

With software tools getting better and better, Web 2.0 technology will begin to seep into businesses. Concerns of proprietary information leaking and other security issues are the largest reason for companies not to embrace the technology, but an employee does not need Web 2.0 applications to violate a companies ethics policy. The medium is always there for an employee to break the rules, whether it’s via printing/mailing documents, emailing, or faxing. Web 2.0 is just another platform, and because this is a new way for employees to violate company policies it does not mean they will be more apt to.

What is your company doing to embrace these technologies? Do you currently allow your employees to access their Facebook or LinkedIn pages from work? Do you use a blog (like us at HRMG) to communicate to staff, clients, or others? There are no easy answers to Web 2.0, but the reality is that it is not going away, and HR will need to adapt to harness the power of this rising technology.

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The Social Security Administration (SSA) announced on Wednesday, October 17, 2007, that the 2008 social security wage base will be $102,000, an increase of $4,500 from the 2007 wage base of $97,500. 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%, remains at 7.65% for 2008. The maximum social security tax employees and employers will each pay in 2008 is $6,324.00. This is an increase of $279.00 from the 2007 maximum of $6,045.00.

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