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  • On Dec. 20, 2017, Congress passed the most significant tax reform act in over 30 years. Business owners have been clamoring for this type of reform, but now that it’s passed, what does it mean? Who wins and who loses?

    The National Association of Professional Employer Organizations produced a comprehensive 40-page breakdown of the tax bill. Don’t have the time, stomach, or patience to read it? I’ll touch on a few of the highlights.

    Image of a breakdown on the Tax Cuts and Jobs Act of 2018. 

    Breaking Down the Tax Cuts and Jobs Act

    While the effects probably won’t be known for a few years, the gist of the legislation is the simplification of tax filing in future years. In exchange for reducing individual and corporate tax rates, many deductions have been eliminated. The extent and scope of the net gain or loss depends on your situation.

    As an individual, the reform increases your personal deduction from $10,000 to $12,000 for individuals and from $20,000 to $24,000 for married couples. There have been some changes in the child tax credit based on the age and number of children. The consensus is that this reform will be great for couples with no children, but it could be harmful to large families.

    For business owners, the good news is you’re going to see reductions in your tax rates. The potential downside is a large number of you are going to see the elimination of employee work-related expenses.  Among those are:

    • Mileage expenses
    • Union dues
    • Uniform expenses
    • Work safety expenses
    • Travel expenses
    • Moving expenses
    • Casualty and theft expenses

    As you can see, the trade-off costs are potentially significant and a radical departure from what you’ve been used to. With this kind of paradigm shift, it’s little wonder that most are comparing this reform to the Reagan tax reform of the mid-1980s. 

    Please keep in mind that these are my observations based on limited information along with input from accounting experts. Only your accountant is knowledgeable enough about your business to give you the best advice going forward.

    Next Steps for Business Owners

    With the elimination of a lot of expenses, you may be looking for new avenues of cost savings for your business. That’s where a PEO, like GMS, might be able to help. If you’re looking to grab control of your workers’ comp, healthcare, unemployment, and HR costs, many of the programs GMS has implemented for our 1250-plus clients can do just that. Contact us today to talk to one of our experts about how a PEO can help your business.

  • Payroll taxes are complicated, especially when you don’t have any payroll training. Small business owners have several tax responsibilities that they must manage throughout the year, which can take up hours of your time each month. Of course, if you incorrectly calculate the tax withholdings for someone’s paycheck, both the employee and the federal or state government may have a bone to pick with you.

    One of the most time-consuming and difficult parts of payroll tax management is that there is more than one type of tax that you need to handle. You are responsible for withholding multiple types of taxes from your employees’ wages, including income tax and payroll tax. These taxes each have specific rules in terms of how you and your employees contribute to them and what groups regulate them. Here’s a rundown of the difference between income tax and payroll tax.

    Income tax and payroll tax documents for a small business.

    What is Income Tax?

    Income tax is part of what the IRS deems as employment taxes, which also includes items like unemployment taxes. In all, income tax is comprised of federal, state, and local income taxes, depending on where your business and employees are located. These taxes are used to fund public services such as parks, education, and other programs.

    Federal income tax is mandatory for employees in all states. The amount of federal income tax you withhold from each employee’s paycheck will depend on the allowances they selected on Form W-4, which is required for each employee after they’re hired. The more allowances an employee claims, the less you’ll generally have to withhold from his or her paycheck. The IRS’ Publication 15 provides calculation methods and table so that you can determine what needs to be withheld from each employee’s paycheck.

    State and local income tax are regulated by individual state and local governments. However, only 41 states require employers to withhold state income tax from employees’ wages. Two states—New Hampshire and Tennessee—have income taxes that don’t apply to employment income. The seven other states simply don’t have any income taxes to worry about at all:

    • Alaska
    • Florida
    • Nevada
    • South Dakota
    • Texas
    • Washington
    • Wyoming

    Local income taxes are not nearly as common as state income taxes. There are only 16 states that require you to withhold local income taxes in addition to state and federal income taxes:

    • Alabama
    • Arkansas
    • Colorado
    • Delaware
    • Indiana
    • Iowa
    • Kentucky
    • Maryland
    • Michigan
    • Missouri
    • New Jersey
    • New York
    • Ohio
    • Oregon
    • Pennsylvania
    • West Virginia

    While you can use Publication 15 for instructions on how to calculate federal income tax, state and local income taxes are dependent on the location of your business and your employees. Each state has its own rates for state and local income tax (if applicable), some of which will be a flat percentage while others have their own personal allowance system that require additional calculations. You’ll need your state government’s site to find specific details in terms of withholding rates and depositing schedules.

    It’s also important to note that while your business may be in one state, out-of-state employees may be subject to different payroll regulations depending on their location. This can affect the amount of income tax you withhold from these employees’ wages and open you up to non-compliance penalties, so make sure you stay up to date with the regulations for different states and local governments if they apply to your employees or multiple business locations.

    What is Payroll Tax?

    While multiple taxes affect payroll, the IRS does have a more specific definition for “payroll taxes.” These taxes are also known as FICA taxes and are a combination of Social Security and Medicare taxes, both of which fall under the Federal Insurance Contributions Acts (FICA). As expected, these taxes are used to fund Social Security and Medicare programs.

    Unlike federal income tax and some state and local income taxes, payroll taxes are based on a flat percentage. However, FICA taxes also call for both employees and employers to contribute to them. For Social Security tax, both parties contribute 6.2 percent of an employee’s wages up to a wage base of $128,400 for 2018. Medicare tax is similar in that both the employer and employee contribute 1.45 percent of the employees wages up to the following wage base limits:

    • $200,000 for employees who are single
    • $250,000 for employees who are married and file jointly
    • $125,000 for employees who are married and file separately

    However, Medicare also requires you to withhold an additional 0.9 percent of wages once an employee passes those wage base thresholds. As an employer, you are not required to match this additional 0.9 percent contribution.

    Stay on Top of the Payroll Process

    The multiple types of taxes involved in the payroll process are just one reason why one third of small businesses spend at least 40 hours per year managing payroll taxes. Add in the potential for mistakes that can lead to fines from the IRS and it makes sense why many small business owners turn to outside companies to help them manage their payroll.

    As a Professional Employer Organization, GMS has a team of experts that can help decrease your payroll responsibilities and liabilities while saving you valuable time. Contact GMS today to talk to one of our experts about how outsourcing payroll administration and other HR functions can benefit your business.

  • There’s more to payroll than calculating wages and submitting pay stubs. Payroll management is a detailed process that requires business owners to properly compensate employees for services performed, which includes calculating employee hours, distributing pay, withholding taxes, and keeping detailed financial records. As a business owner, this can be a lot to tackle. Luckily, there are trusted companies like Group Management Services (GMS) that can provide payroll services to business owners just like you.


    Although outsourcing payroll services is more expensive, it can save you time and potentially reduce compliance issues. When you outsource payroll administration to an outside company, such as a professional employer organization (PEO), you have access to payroll experts who take care of every function of payroll management, such as recordkeeping, handling payroll taxes, and processing paychecks. While a PEO like GMS streamlines these payroll processes, you will still retain full control and direction over your employees.

    As a PEO with strong data security, quality customer service, and accurate payroll processing technology, Group Management Services can be the trusted partner that decreases your workload, lowers liability, and ensures compliance.   


    Setting Up Your Payroll 

    Before you can begin running payroll, you need to set up your payroll system. The first step involves registering for an Employer Identification Number (EIN). 

    1. Apply for an employer identification number

      An employer identification number is a unique nine-digit number the Internal Revenue Service (IRS) assigns to identify each business. EINs are also used for filing tax returns, submitting payroll, and providing identity protection for your company. You can obtain an EIN for free on the IRS website. Additionally, depending on local and state government regulations, you may need a state ID number to pay state income taxes. Learn more about your state’s registration requirements here.


    2. Collect employee information
      To properly pay your employees, you need to collect the necessary information. Employers must obtain each employee’s full name, address, Social Security number, and tax withholding forms. Each employee must also fill out the following government documents:
      • Form I-9: Employee Eligibility Verification 
      • Form W-4: Employee’s Withholding Certificate 
      • State withholding allowance certificates
        • In most states, you’re required to withhold state taxes, as well as federal income taxes, from employee wages. Therefore, your employees must complete the IRS Form W-4 or a state withholding certificate. 
    3. Determine a payroll schedule
      After collecting the necessary business documentation and employee information, it’s time to choose a payroll schedule. A payroll schedule is the length of your pay period and determines how often you pay your employees. The most common pay schedules are weekly, bi-weekly, or monthly.  

    It’s important to note that your pay schedule should meet state regulations and fit your employees’ needs. For example, a payroll schedule may differ for a business that employs all salaried workers compared to a company that employs mostly hourly employees. 


    Payroll Management 

    Once you’ve obtained your EIN, the necessary employee information, and selected your payroll schedule, it’s time to run your first payroll. We’ve listed a brief overview of how to get started running your first payroll: 

    1. Calculate gross and net pay
      To calculate gross pay, you must add up the hours worked by an employee during the predetermined pay period; make sure to include bonuses or overtime pay. The total hours worked is then multiplied by each worker’s pay rate to determine the gross pay. Employers often use timesheets, punch clocks, spreadsheets, or timekeeping software to make time tracking easier. 

      After calculating gross pay, it’s time to make your pre-tax deductions. If you offer your employees benefits such as a 401(k) retirement plan, health benefits, or life insurance, then you’ll need to withhold those contributions. Next, you must deduct Federal Insurance Contribution Act (FICA) taxes, which include federal and state income tax, Social Security taxes, and Medicare taxes. Then, you must subtract the post-tax deductions, which may include court-ordered wage garnishments or union dues. 

      When all pre-tax and post-tax deductions are subtracted from the gross pay, your final number is your employee’s net pay or the amount your employee takes home. 

    2. Pay employees and deduct withholdings

      After making your payroll calculations, you’re ready to generate paychecks and initiate direct deposits. Payroll taxes must be filed with the government regularly and vary based on local regulations, business size, and location. You may be liable to pay the IRS if you fail to withhold the employee portion of employment taxes. 


    Filing And Documentation 

    While calculating payroll and tax deductions is an important part of processing payroll, you also must file these deductions with various agencies, including the federal government.  These tax reports include: 

    • Form 941 – Employer’s Quarterly Federal Tax Return
      • Employers use this form to report income taxes, Social Security taxes, and Medicare taxes withheld from employee paychecks. 
    • Form 940 – Employer’s Annual Federal Unemployment (FUTA) Tax Return 
      • Only employers pay FUTA taxes – DO NOT deduct FUTA tax from employee wages. 

    After filing these reports, you must document and store these records. Filed records should include tax filings, pay stubs, and employee information such as address, occupation, birth date, and more. Business owners must keep all payroll records and documentation for at least three years. Failure to do so may result in costly penalties or non-compliance fees. Businesses that violate Fair Labor Standards Act (FLSA) requirements, such as minimum wage, overtime pay, or record-keeping, may be fined up to $1,000 per violation. Keeping payroll records is also useful when you send your annual report to the IRS and can provide evidence if there is ever an employee compensation dispute or audit. These fees can quickly add up and take their toll on your bottom line. 


    Choosing Your Payroll Process 

    It’s important to note that there’s more than one way to process your payroll. The best option for your company may depend upon your industry, budget, the type of workers you have, or the amount of time you have. There are three main options to choose from: 

    1. Manual payroll
      Manually processing payroll is the most inexpensive way to process it. Despite the fact that manually processing payroll is less expensive than software or outsourcing, you, as a business owner, will be liable for any mistakes made. If you’re like most business owners who don’t have extensive payroll training, manually managing payroll can leave you vulnerable to costly errors and IRS penalties.  

    2. Payroll software
      Investing in payroll software allows you to streamline your payroll process by managing tasks online, automating payroll calculations, and more. While software can save time and simplify the overall process, you will still need to oversee payroll compliance and management. 

    3. Outsourcing payroll
      Although outsourcing payroll services is more expensive, it can save you time and potentially reduce compliance issues. When you outsource payroll administration to an outside company, such as a professional employer organization (PEO), you have access to payroll experts who take care of every function of payroll management, such as recordkeeping, handling payroll taxes, and processing paychecks. While a PEO streamlines these processes, you will still retain full control and direction over your employees. 

    GMS: A Trusted Payroll Partner 

    Whether you’re a payroll expert or not, the payroll process can be tedious. It can also be time-consuming to manually calculate paychecks or stay up to date on payroll regulations and important filing dates. Luckily, Group Management Services (GMS), a PEO, can take the burden of payroll off your shoulders.  

    With GMS’ state-of-the-art payroll technology and dedicated Payroll Specialists, you can spend less time worrying about overtime calculations and tax deductions and more time focusing on growing your business. As a PEO with strong data security, quality customer service, and accurate processing technology, GMS can be the trusted partner that decreases your workload, lowers liability, and ensures compliance.  

    Contact GMS today to simplify your payroll process! 

  • Who doesn’t love payday? For many employees, payday makes them feel better than Christmas. As a small business owner, you have the freedom to decide how to handle payroll at your organization. Talk about a huge responsibility. It’s important to get it right, as payroll done wrong can cost a small business owner time and money. 

    There are a few different methods for distributing employee pay, but savvy business owners find that electronic payroll methods like direct deposit and payroll cards streamline the process and keep employees satisfied. We explored the different types of payment methods to help you determine the best payroll solution for your business.

     Small business owner determining employee pay.

    Direct Deposit

    Direct deposit lets you put your employees’ wages directly into their checking or savings account. Because everything is handled digitally, employees don’t need to be present to receive their pay. The convenience of direct deposit for both employers and employees has made it the most common payment method in the U.S., with 82 percent of employees receiving their pay this way, according to a survey by the National Automated Clearing House Association (NACHA). 

    Direct deposit can help save time since you don’t have to fill out and distribute checks each pay period. Online payroll software can further help streamline this process and save money. With software, payroll simply needs to be reviewed before submitting it to be deposited in your employees’ bank accounts. Without software, small business owners are responsible for paying fees for setup and for every transaction.

    For direct deposit, you’ll need to gather your employees’ banking information at the time of hire. Of course, it only works if employees have bank accounts. According to the Federal Deposit Insurance Corporation (FDIC), nearly 20 percent of American households are “underbanked,” meaning they either don’t have or actively use a bank account. If you choose direct deposit as your primary payment method, you’ll need to provide an alternative option for those who don’t bank.

    Payroll Card

    Payroll cards are another form of electronic payment that lets you automatically load an employee’s wages directly onto a prepaid card at each pay period. Employees can then either use the card directly to make purchases or withdraw cash at ATMs.

    With payroll cards, employees don’t need to have a banking account, making it a viable alternative to direct deposit. It also helps save businesses time and money compared to writing or printing paychecks. The benefits for both employers and employees are why payroll cards have become a growing trend, with the use of payroll cards expected to increase by about 43 percent by 2022, according to a study by Aite Group.

    Other Types of Payment Methods

    Paychecks and cash are two outdated forms of payment methods that simply aren’t worth the hassle or added costs. For employers, writing or printing paychecks can be an extremely time-consuming task, especially depending on the frequency of your payroll. 

    Additionally, you’ll have to factor in the cost of purchasing blank checks, and/or printing supplies like check stock, ink, and a printer that has the capability to print with magnetic ink to read, process, and print bank account and routing numbers on the checks.  Switching to paperless can cut these costs. A report in Business News Daily states that “businesses save between $2.87 and $3.15 per pay run by paying employees electronically, such as via direct deposit, instead of via paper check.” The report also points out that online pay stubs save an additional $1.20.

    The amount of recordkeeping that comes with paying in cash can also be a nightmare for small businesses. Cash payments could make the IRS suspicious that you aren’t taking out the correct tax amounts, making you susceptible to an audit. Even if you are in compliance, IRS audits cost significant time and money.

    For both methods, employees need to be present in order to receive pay, which could be a problem if employees are out sick or on vacation. According to CareerBuilder, nearly 80 percent of Americans live paycheck to paycheck, so a delay in pay could really hurt your employees financially.

    Save Time Through Payroll Services

    While we’re thankful electronic payment methods have replaced checks and cash, managing payroll and tax filings can still be a time-consuming and challenging task for small business owners. 

    Need assistance? Outsourcing payroll administration to a professional employer organization (PEO) like Group Management Services (GMS) can help save you time and give you peace of mind. From electronic payroll processing to software to taxes, GMS takes an active approach managing payroll, so you can spend the extra, time, money, and energy growing your business. In addition to payroll services, GMS offers a full suite of HR services that compliment payroll administration, including human resources, risk management, employee benefits, and more.

    Contact GMS today to see how we can help manage payroll at your organization.

  • Whether you’re trying to find a way to save time and energy by outsourcing payroll administration or your old payroll partner just isn’t cutting it, you’re going to have to deal with the process of switching to a new payroll system, also known as payroll conversion. A rough transition to a new payroll system can lead to serious issues, including IRS penalties for non-compliance. Fortunately, there are some ways to help alleviate some potential issues that can arise when you convert your payroll process to a new system.

    A small business owner going going through the payroll conversion process with a PEO. 

    Conversion Timing

    Once you’ve decided that it’s time to switch to a new payroll provider, it’s important to consider when you want to start the process. Planning a conversion at a certain point in the year can help simplify the conversion process. 

    Typically, the end of the calendar year is one of the best times to undergo payroll conversion as it allows you to start the new system off fresh regarding balances. You can also convert payroll at the end of a quarter, but you’ll have to enter historical data like employee earnings, taxes, and deductions based on the time of the year. If you decide to convert in the middle of a quarter, you’ll have to make sure everything matches up on the exact dates, which can leave you open to a greater potential for errors and a longer conversion process. 

    Data Transfer and Verification

    No matter when you decide to undergo payroll conversion, you’re going to need to transfer a lot of data to your new payroll company. A good payroll partner will have a set list of information you need to provide and how it should be delivered. Some companies may ask you to manually enter data yourself, but others will simply ask you to provide your information physically or electronically and they will transfer it to the new system for you. 

    Depending on the company, they may even tailor your setup checklist to your company or the payroll company you worked with previously to simplify the process. In general, the more your new payroll company takes off your hands, the easier the conversion process will be on your end.

    Once the information is in the system, it’s important to ensure that everything is set up properly and that all the data provided is correct. A new payroll company can test the accuracy of both the system and the data by running your old system at the same time as your new system to cross-reference key details so that everything runs as it should once you’re completely switched over to your new payroll process.

    Payroll Tax Management

    There are many different functions of payroll management, and handling payroll taxes is an extremely important one. One third of small businesses spend at least 40 hours per year managing payroll taxes, so you want to make sure that your new payroll partner has a payroll process that doesn’t complicate payroll tax management and reporting. 

    When you’re ready to switch to a new payroll partner, ask about how potential vendors update tax table information and convenient options for sharing information so that you aren’t left in the dark when it’s time to manage payroll through your new payroll system. In fact, you may find that some payroll partners can take on some of the responsibilities and liabilities involved with payroll taxes. This not only can help simplify the payroll conversion process by lowering the number of tasks you need to manage, it can save you time and energy for years to come.

    Customer Support

    Your new payroll partner is there to make your life easier, so don’t be afraid to ask questions and find out just what level of support they offer. These questions include:

    • Do you have any relevant clients that I can call for a reference?
    • Will I have a consistent contact during the payroll conversion process?
    • What hours is customer support available and how are they available?
    • Do you provide a checklist or timeline for what happens during the transition and who is responsible for these tasks?
    • How much do you help with payroll compliance issues?
    • Will you keep me up to date with any new payroll laws or changes to current regulations?
    • How will my employees access their payroll information and documents?

    If a potential payroll partner appears to dodge your questions, that could be a sign that they aren’t the right fit for your business. Instead, they should provide clarity as to how they’ll simplify the conversion process, which should include assigning you a dedicated point person and a detailed setup checklist. This list should clearly lay out the payroll conversion process, including meetings, system training, and other demos to make sure that you know how to work with the new system and avoid any early hiccups during the transition.

    The Advantages of Payroll Management Through GMS

    At GMS, we know that the process of switching to a new payroll partner and online payroll software can be stressful. That’s why any new GMS client is assigned a dedicated coordinator who will help guide you through the payroll conversion process, which includes gathering necessary documentation, entering data into the system, and communicating key details to ensure a smooth transition to GMS.  

    While some companies solely handle payroll, payroll administration is just one of many vital HR services that GMS offers. We provide comprehensive HR solutions for small business owners, including benefits administration, risk management, and other functions. As your business grows, your time becomes an increasingly valuable commodity. We help you reclaim that time to focus on building your business while strengthening your company through expert HR management.

    Ready to make the switch to a new HR partner? Contact GMS today to talk to one of our experts about payroll administration and other key HR functions.

  • Payroll management is no simple task. Regardless of whether your workforce is 50 strong or you can count the number of employees on two hands, there are lots of employees and documents to keep track of and failure to do so could result in serious penalties and fines. To help, we’ve put together a guide for better managing payroll records.

    Payroll records. 

    What Payroll Records to Keep and For How Long

    Payroll records are documents and items related to paying your employees. Similar to how a candidate’s job applications and interview records need to be kept for one year, the U.S. Department of Labor (DOL) Wage and Hour Division and Internal Revenue Service (IRS) require employers to keep payroll documents for a set amount of time. Here are the payroll records you need to keep in your files:

    Hiring documents

    Hiring documentation like an offer letter include DOL-required employee data, such as their residential address, job title, and pay rate.

    Keep for three years.

    I-9 documents

    These include information about an employee’s eligibility to work in the U.S. and DOL-required information like the employee’s full name and Social Security number.

    Keep for three years.

    Time cards

    Time cards show total hours worked, including unpaid lunch breaks and overtime pay.

    Keep for three years.

    Paystubs

    These will show payment dates and the total wages each period. Paystubs will also include any additions (like reimbursement) or deductions (like taxes and benefits) to wages.

    Keep for four years.

    Employee handbook

    Every employee should have signed your employee handbook. Employee handbooks provide information on how your employees are paid (hourly or salary) and how often you pay employees (weekly, biweekly, monthly). It also describes information regarding paid holidays, termination, and severance.

    Keep for three years.

    Compensation philosophy

    A compensation philosophy shows how you determine employee pay grades. You’ll also need to show rationale for pay increases or merit increases, as required by the Equal Employment Opportunity Commission (EEOC).

    Keep for two years.

    Tax forms

    The IRS requires employee and employer tax documents, including W-4s (employees’ withholding allowance certificates) and W-2s or W-3s (employee’s wage and tax statements). 

    You’ll also need to keep payroll tax payments, which can be found on Forms 941 (employer’s quarterly tax form, which also includes information on tipped wages) and 940 (employer’s annual federal unemployment tax return).

    Keep for four years.

    Retirement income

    Retirement income statements show 401k or profit-sharing plan details as required by the Employee Retirement Income Security Act (ERISA). You’ll also need to keep documents outlining enrollment, payment, and payroll deduction.

    Keep for six years.

    Leave documentation

    The Family Medical Leave Act (FMLA) requires payroll records regarding your leave policy, requests for leave, leave balances, and leave payments. This information is typically found in your employee handbook or on employee paystubs.

    Keep for three years.

    Termination information

    A termination letter outlines an employee’s end date and any final payments, such as unused paid time off or severance.

    Keep for three years.

    Keep in mind that anytime you have a dispute relating to payment or employment with an employee, it’s best practice to keep all payroll records until the dispute has been resolved.

    State-Specific Payroll Records Retention

    Most states abide by the payroll records retention guidelines provided by the U.S. Department of Labor and IRS, as detailed above. However, a few states have further legislation that affects what payroll records to keep and for how long. These include the following exceptions:

    • New York requires payroll records to be kept for six years.
    • California requires that all payroll records be retained for six years.
    • Illinois requires employers to keep all payroll records for five years.
    • Washington has more specific requirements of what payroll records to retain.

    Destroying Payroll Records

    Keep in mind that holding onto payroll records for longer than required can put business owners at risk. Financial and personal information related to payroll, such as bank account information, credit reports, and photocopies of social security cards, should be destroyed after the retention time frame to prevent confidential data from being misused. In case any questions about destroyed documents arise, you’ll also want to keep track of which payroll records you’ve destroyed and when.

    How to Store Payroll Records

    As you can see, there are lots of payroll records to manage. Business owners will need a good filing system to keep track of these documents. 

    Think twice before storing paper records in filing cabinets or boxes. Often, these records are forgotten about and kept for longer than needed. It’s also time-consuming to manually file each document and can be even more tiresome should you need to refer back to certain records. Security can also be an issue, as these filing systems are often easily accessible.

    Rather, savvy business owners have found that it’s much more efficient to digitally store these important documents in a payroll management system. This ensures that records are securely stored and can be readily available from anywhere there’s an internet connection. Additional online payroll software benefits include:

    • Payroll processing. Ensure employees are paid on time every pay period and electronically store information regarding paystubs, payroll deductions and time tracking.
    • Payroll tax. Streamline filing and ongoing maintenance of tax records.
    • Employee self-service. Give employees 24/7 access to their payroll and tax information.

    Outsource Payroll Records Management

    When it comes to payroll records, there’s a lot of information to process—mentally and literally. Outsourcing payroll records management through a professional employer organization (PEO) like Group Management Services can help business owners save time and worry. We take on the burden of payroll records management, so you can put your focus back on client relationships, building and effective team, and growing your profits. In addition, GMS provides human resources, risk management, employee benefits services to help make your business simpler, safer, and stronger.

    Stop wasting time on payroll records management. Contact us today to talk to one of our experts about our payroll services.

  • As an employer, understanding how to calculate payroll tax and income tax deductions is essential to running a compliant and efficient business.. A major part of that is making sure every employee’s paycheck has the correct taxes and other deductions withheld. Below is an overview of some of the most important payroll deductions for 2025, along with pointers on how to calculate them.

    Calculating Payroll Taxes for Employees

    The term payroll tax typically refer to Federal Insurance Contributions Act (FICA) taxes, which include both Social Security and Medicare contributions. For 2025, the employee-share rates remain:  

    • Social Security: 6.2% of gross wages
    • Medicare: 1.45% of gross wages

    This totals 7.65% for most employees, withheld each pay period. For example, if someone’s gross pay is $1,000:

    • Social Security withheld = $1,000 x 6.2% = $62
    • Medicare withheld = $1,000 x 1.45% = $14.50
    • Total Payroll Tax withheld = $76.50

    Meaning every paycheck for that employee will have $76.50 withheld.

    How to Calculate Federal Income Tax Deductions

    Unlike the flat rates for Social Security and Medicare, income tax deductions are determined by the employee’s Form W-4 and IRS tax tables. The IRS has 2025 Form W-4 instructions and updated tables in Publication 15-T. You can generally calculate withholding using either the wage bracket method or the percentage method.

    Wage bracket method

    This method uses easy-to-read tables. You simply:

    1. Look up how frequently you pay employees (weekly, biweekly, semimonthly, monthly, etc.).
    2. Choose the correct table based on the employee’s filing status (from the Form W-4) and whether they’ve checked the Step 2 box.
    3. Find the wage range in the table; the table cross-references the amount of tax to withhold based on any additional adjustments entered on the W-4.

    Percentage method

    This approach involves a bit more math, but it may be more flexible if your payroll amounts frequently exceed the ranges in the wage bracket tables. You will:

    1. Convert allowances (if you still have employees on 2019 or earlier W-4s) or interpret the relevant steps if they’re using a 2020 or later W-4. (For 2019/pre-2020 forms, note that the IRS publishes a “computational bridge.”)
    2. Subtract any allowances (or standard W-4 adjustments) from gross wages to get the taxable portion for that pay period.
    3. Apply the percentage method table.
    4. Add or subtract any additional amounts indicated on the employee’s W-4.

    Understanding State and Local Payroll Tax Withholding

    State And Local Taxes

    Federal income taxes aren’t the only concerns; many states and local governments require payroll tax withholding for state and local income tax deductions.. The method differs from state to state:

    • Some states (e.g., Florida, Texas) do not impose state income tax, meaning you only handle federal deductions.
    • Others (e.g., Ohio, New York) require both state and sometimes local income tax withholdings.
    • Check your state government’s website or official documentation for the 2025 rates and instructions.

    Additional (Voluntary) Paycheck Deductions

    In addition to required taxes, some income tax deductions are voluntary and may be either pre-tax (which reduce taxable income) or post-tax: These can include:

    1. Health insurance premiums for medical, dental, vision, etc.
    2. Retirement contributions (e.g., 401(k), IRA) chosen by the employee.
    3. Life insurance premiums paid via payroll deduction.
    4. Job-related expenses if you have agreed to recoup certain business expenses through paychecks (where legal).

    Ensure that these are set up correctly in your payroll system. Some might be pre-tax (reducing taxable wages), while others are post-tax.

    Why Payroll Tax Compliance Matters

    Staying accurate and up to date on payroll laws and tax tables is vital. Miscalculating payroll tax or income tax deductions can result in underpayment or overpayment, leading to potential penalties from the IRS or your state’s tax authority. It also impacts employees directly; over-withholding means smaller paychecks, while under-withholding can mean a big tax bill in April.

    • You’re responsible for timely depositing withheld taxes with the IRS, as well as filing the proper forms (like Forms 941 or 944 for federal payroll taxes).
    • For 2025, be sure you’re referencing the latest versions of IRS Publication 15 (Circular E) and Publication 15-T (2025) for the updated wage bracket or percentage method tables.

    Let GMS Simplify Your Payroll Tax Process

    Handling small business payroll taxes can be daunting, especially as forms and laws evolve each year. Group Management Services (GMS) can take the guesswork out of payroll tax and income tax deductions, ensuring accurate withholdings, filings, and tax deposits. If you’re:

    • Worried about maintaining compliance for 2025.
    • Unsure how to handle different forms (e.g., older 2019 W-4 forms vs. new 2025 W-4 forms).
    • Concerned about multi-state or local tax withholding.

    Group Management Services (GMS) can help streamline all aspects of your payroll tax management, from accurate withholdings to timely tax filings, allowing you to focus on growing your business. Contact GMS to learn more about our payroll tax services and how we can help you navigate the complexities of income tax deductions.

  • The Department of Labor announced a proposal in early March to change the salary-level threshold for white-collar exemptions. This move comes more than two years after a federal judge blocked another attempt to update the threshold for overtime eligibility, although the details of the proposal differ from the 2016 proposal.

    The current salary-level threshold for white-collar exemptions is $23,600 annually, which equates to $455 per week. The DoL’s new proposal seeks to increase the threshold to $35,308 annually ($679 per week) – nearly halfway to the DoL’s 2016 target threshold of $47,476 ($913 per week).

    While the new proposal is notably lower than the blocked attempt, it still marks a nearly 50 percent increase from the current wage threshold. As a result, the DoL “estimates that 1.1 million currently exempt employees who earn at least $455 per week but less than the proposed standard salary level of $679 per week would, without some intervening action by their employers, become eligible for overtime.” That’s a notable change that can have a direct impact on your employee’s compensation.

    Businessman contemplating options regarding the new salary-level threshold proposal from the Department of Labor. 

    Breaking Down the New Overtime Salary-Level Threshold

    The quick explanation of the new proposal is that employees who make less than $35,308 annually or $679 per week may be eligible for overtime pay. Overtime applies to any hours worked past 40 in a given week and will be compensated at a rate of one-and-a-half times an employee’s standard rate of pay. 

    Not all employees would be eligible for overtime pay, however. The job duties of an employee play a major part in deciding whether someone is eligible. As with the current salary-level threshold, employees must pass three tests to qualify for a white-collar exemption from overtime pay:

    • The salary basis test – Exempt employees must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed
    • The salary level test – Exempt employees must be paid at least a specified weekly salary of $679 per week
    • The duties test – Exempt employees must primarily perform executive, administrative, or professional duties as defined by DoL regulations (duty definitions can be found on the DoL website)

    The new proposal also increases the salary level for “highly compensated employees” (HCE) from $100,000 to $147,414 per year. This group faces what the Society for Human Resources Management (SHRM) calls a “relaxed” duties test. As such, these employees are exempt from overtime if their primary duty is office or nonmanual work and routinely “perform at least one of the bona fide exempt duties of an executive, administrative, or professional employees.”

    It’s important to note that the term “white-collar exemptions” is used, as the new proposal maintains overtime protections for “blue collar” workers who perform tasks that involve “repetitive operations with their hands, physical skill and energy.” This includes no changes in overtime eligibility for any of the following professions:

    • Police officers
    • Fire fighters
    • Paramedics
    • Nurses
    • Laborers
    • Non-management employees in maintenance, construction, and similar occupations (carpenters, electricians, mechanics, etc.)

    Another difference with the new proposal is that there are no plans to make automatic threshold updates in the future. This is a notable departure from the 2016 proposal, in which the threshold would change every three years to match the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region. This means that if the proposal were to go into effect, it would only lead to the $35,308 ($679 per week) threshold and not any pre-planned adjustments.

    What Can Small Business Owners Do About the New Overtime Proposal?

    It’s currently a waiting game to see whether this new DoL proposal will go into effect or not. Like the 2016 proposal, the new salary-level threshold could run into some roadblocks. Despite this, it’s best to plan ahead just in case the proposal becomes reality. 

    Your options are largely the same as they were back in 2016, some of which may be more feasible than others for your company. The first is to pay newly-eligible employees overtime pay for applicable hours. Another is to limit employee hours to 40 per week to stop any chance of overtime pay. Each route has drawbacks, as paying overtime will increase your payroll and limiting hours may lead to decreased productivity thanks to change in overall work hours. 

    If neither of those ideas sound appealing, there are some other alternatives. One possible way to mitigate the impact of overtime pay is to raise the wage of workers who are close to the salary-level threshold. For example, if an employee regularly worked extra hours makes $34,000 per year, you could increase his pay to $36,000 per year. You’ll need to do the math to see if the change in pay outweighs the potential costs of overtime, but this method can help you control costs while still offering some reward to an employee.

    A more cost-effective, but less popular, alternative is to lower the salaries of newly-eligible overtime employees. This will help you account for overtime costs, but employees won’t approve of decreased pay if they’re eligible for overtime.

    Protect Your Business Through Preparation

    It’s important to take any proposed regulations seriously, especially when you can face a civil monetary penalty of $2,014 for repeated or willful violations of overtime rules occurring after Jan. 24, 2019. There are still plenty of steps the DoL’s new proposal needs to take, but it’s always good to have a plan in place just in case.

    Unfortunately, there’s not always the time or means to stay ahead of new regulations or other changes that could impact your business. That’s why small business owners turn to GMS to help them stay compliant with current laws and prepare for future legislation and regulations. Our team of experts and integrated HR system allows us to take on the administrative burden of small business payroll management and other crucial human resources tasks.

    Ready to prepare for your business’ future. Contact us today to talk to one of our experts about how we can help.

  • Determining pay frequency can be challenging for business owners. While most employees prefer to be paid more often, a higher pay frequency can cost employers. Not to mention, there are federal and state laws that set standards for how employees are paid. That’s why exploring the different pay period options and federal and state payday laws is critical to help you choose the right pay frequency for your business and employees.

     Pay day.

    Pay Periods

    A pay period is a recurring length of time that determines how often employees are paid. Depending on your state, there are several to choose from, and each has its pros and cons (but we’ll get to that later). The typical options for paying employees are:

    • Weekly: This is usually on the same day of the week, like Friday, for the previous week’s work. Employees are paid 52 paychecks a year.
    • Biweekly: Employees are paid every other week, either for the previous two weeks or the two weeks before that. This pay period results in 26 paychecks a year.
    • Semimonthly: Workers are paid twice a month, usually on the first and 15th each month, receiving 24 paychecks a year.
    • Monthly: This is typically either on the last day of the month or the first day of the following month. Employees receive 12 paychecks a year.

     

    Federal Pay Frequency Laws

    Federal law does not set requirements for how often you have to pay employees—that’s left up to the states. However, federal laws do say that employers must keep a reliable and consistent pay frequency. This means that, for example, you can’t pay employees weekly one month and then biweekly the next.

    Under certain circumstances, you may be allowed to change your pay frequency. In order to do, so the following must apply:

    • You have a legitimate business reason.
    • The change is permanent.
    • You are not avoiding overtime or minimum wages.
    • You don’t unreasonably delay payment.

     

    State Pay Frequency Laws

    Almost every state has pay frequency laws indicating how often you should pay employees. Many states require a monthly, semimonthly, biweekly, or weekly payroll as the minimum frequency for paying employees. Keep in mind, you can always pay employees more often than the state requires.

    For example, Ohio requires a semimonthly payroll, but that is not the only pay frequency you can choose in that state. You can also pay employees biweekly or weekly, as long as you at least pay employees semimonthly. Or, in New Jersey, you can pay executive and supervisory employees at least once a month but must pay all other employees semimonthly at minimum. Find your state in the map below to see what the minimum pay frequency is for your business.

     

     

    Choosing a Pay Frequency

    After looking at your state’s pay frequency laws, you’ll have to determine how often to pay employees. While employees typically prefer to be paid more frequently, you’ll also have to consider factors that affect your business.

    Payment methods

    Depending on the way your employees are paid, certain payment methods are more of a hassle than they’re worth. For example, if you’re still using outdated methods like checks or cash to pay employees, then upping your pay frequency means spending more money on printing supplies and more time on bookkeeping. Even with direct deposit, higher pay frequency can mean more transaction fees if you’re not utilizing online payroll software.

    Employee benefits

    You’ll also want to factor in benefits. Employee benefits like health insurance typically run on a monthly basis, so paying employees monthly or semimonthly makes calculating voluntary paycheck deductions easier than if you were to pay on a biweekly or weekly schedule.

    Overtime

    While overtime isn’t a factor for salaried employees, it can be difficult to track for hourly workers if they’re paid on a semimonthly or monthly basis when the pay date falls in the middle of the week. For example, if employees are paid on a Wednesday, it can be difficult to calculate overtime for that week because that week’s pay is split into two different pay periods.

    Business owners typically find it’s best to pay different employees at different times. Many choose to pay salaried employees on a semimonthly or monthly basis, and weekly or biweekly for hourly workers.

     

    Payroll Services

    For small business owners, managing payroll can be one of the most time-consuming and challenging tasks there is. Need assistance? Outsourcing payroll administration to a professional employer organization (PEO) like Group Management Services (GMS) can ensure your employees are paid on time, every time. From electronic payroll processing to software to taxes, GMS takes an active approach managing payroll, so you can spend the extra, time, money, and energy growing your business. In addition to payroll services, GMS offers a full suite of HR services that compliment payroll administration, including human resources, risk management, employee benefits, and more.

    Contact GMS today to see how we can help manage payroll at your organization.

  • After some big changes in 2019, it’s apparent that New Jersey takes wage theft very seriously. The state adopted the new Wage Theft Act (WTA) and amended its Wage and Hour Law back on Aug. 6, 2019, giving it some some of the toughest laws in the nation regarding wage and hour enforcement.

    The new WTA has a direct impact on business owners in New Jersey, but it’s important for those outside the state to be aware of the updates as well. The Garden State is a common testing ground for legislative changes, so other states may adopt similar laws over time. As such, let’s break down exactly what New Jersey’s wage and hour enforcement laws mean for business owners (and what they can do to avoid issues).

    How the WTA Impacts Business Owners

    The adoption of the WTA places a lot more pressure on employers when it comes to correctly paying wages to employees. Simply put, the new rules are clearly designed to discourage owners from committing wage theft – and severely punish those who do, unwittingly or not. There are a few notable takeaways that owners should know:

    The WTA increases how much employees can earn back

    Employers who owe workers will have to pay back more to the affected employees than in the past. These employees can claim increased damages for any missing overtime or other hours, which can total up to 200 percent of the unpaid wages in addition to the original pay. That means employers can be on the hook for three times back wages. Employers found guilty of wage theft may also have to pay reasonable costs and attorney fees for the affected employee, making the situation even more costly.

    The WTA increases the statute of limitations for back pay

    Previously, any claims for missing pay had to be made within two years of the incident. The WTA tripled that window, which means that aggrieved workers can now fight for back pay within a six-year time period.

    The WTA offers more protection against retaliation

    The new legislation makes a concerted effort to protect employees when they inquire about missing pay. Any adverse action – including discipline, demotion, or termination – made within 90 days of a complaint about their pay is automatically presumed to be a form of retaliation. The employer can appeal this presumption, but will need “clear and convincing evidence” to successfully argue that the adverse action was justified and not made in retaliation. Employers found guilty of retaliation must make right by the affected employee, which can include reinstating that person to his or her position if fired or demoted.

    The WTA enacts harsher financial and criminal penalties

    Not only does the WTA make it easier for employees to claim back pay, it also drops the hammer on businesses to deter them from making the same mistake again. Wage theft can result in both a notable fine and jail time, with increasing punishments for repeat offenders. The penalties are as follows:

    • First violation – $500 to $1,000 fine, imprisonment of 10 to 100 days, or both
    • Second violation – $1,000 to $2,000 fine, imprisonment of 10 to 100 days, or both
    • Third and subsequent violations – The employer is charged with a fourth degree crime and faces a $2,000 to $10,000 fine, imprisonment of up to 18 months, or both

    The WTA adds joint liability

    With the new rules, employers may also get in trouble even if they themselves didn’t commit wage theft. Violations committed by hired contractors make a business jointly responsible if any of these contractors commit anything deemed as wage theft or retaliation.

    Potential Danger Areas for Wage Theft

    Regardless of whether a discrepancy in an employee’s wages is a genuine accident or a purposeful act, New Jersey’s new rules are a clear indication that it’s more important than ever to accurately complete payroll. However, there are a couple instances where someone who isn’t a payroll professional could make a mistake. These can include:

    • Incorrectly paying the wrong rate for overtime hours
    • Not applying different hourly rates for employees who perform two different types of tasks
    • Making a mistake when calling or faxing in payroll numbers

    It’s also important to consider the potential aftermath of a wage theft violation. Not only would you have to deal with the WTA-mandated penalties, word of that violation can spread to other employees. Even an accidental case of wage theft can create distrust among your employees and cause employees to be hypervigilant in the future. People are very sensitive about their pay, and an upset workforce can lead to less motivated employees and can even force good talent to leave for what they perceive to be a safer workplace.

    Protect Your Business Against Accidental Wage Theft and Other Payroll Issues

    Whether your business is based in New Jersey or somewhere else, it’s crucial to carefully record and maintain payroll documentation and employee hours. Not only will proper payroll management help protect your business against costly penalties, it’ll also ensure that your employees get exactly what they should each pay period.

    Of course, accurate payroll administration is easier said than done for someone without an experienced background. Managing payroll and filing taxes is a time-consuming process even when done accurately, which can take time away from other key business functions. Fortunately, GMS can help you manage your company’s payroll while you focus on growing your business.

    At GMS, we have the experts and processes in place to diligently process your payroll, manage and file taxes, and protect your business from costly compliance issues. We’ll do an HR analysis and identify new policies and procedures to help you protect your business from any current or future issues. Contact our New Jersey office or one of our other locations today about managing payroll or any other critical HR function for your business.