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  • 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.

  • Payroll forms can put a lot of pressure on business owners. When you’re in charge of a small business, it’s up to you to make sure that these forms are not only completed accurately, but on time as well. If you’re not careful, the penalties can range from $50 per faulty form all the way up to hundreds of thousands of dollars for notable violations.

    One of the biggest struggles of managing payroll forms is simply knowing which forms apply to your business and what they do. We’ve compiled a list of payroll forms that you’ll likely need to know for your small business and how they work.

    Form SS-4

    What is it?

    An SS-4 form is an application for an employer identification number (EIN). These unique nine-digit numbers are used to identify business entities and are required by most businesses before they can file and report taxes.

    When is it due?

    Unless you’re just about to start your business and haven’t paid anyone yet, you likely already have an EIN. There are some situations where you may need a new EIN, which the IRS has listed on its site. Aside from those scenarios, you won’t have to worry about refiling form SS-4 once you have your EIN.  

    Form W-2

    What is it?

    A W-2 form is a wage and tax statement that details what you paid an employee and the taxes you withheld from their wages for the government during the last calendar year. W-2s need to be completed for any employee who worked for you in the past year and copies should be sent to the Social Security Administration (SSA) and the employee listed on the W-2. In addition, you should hold onto a copy of each W-2 for at least years.

    When is it due?

    W-2 forms must be sent to your employees and the SSA by Jan. 31 of each year. Most state governments set the deadline at Jan. 31 as well, but make sure to check with your specific state tax agency in case your state’s date differs. 

    You can also request extensions to file forms with the SSA and distribute forms to your employees. For an SSA extension, you’ll need to fill out Form 8809 and submit it to the IRS between Jan. 1 and Jan. 31. The IRS will then either deny your request or grant you a single 30-day extension. 

    As for distribution to employees, you must mail a letter to the IRS to request an extension. The letter must explain why you need an extension, your name, business address, EIN, and signature. If approved, the IRS will grant you either a 15- or a 30-day extension.

    Form W-3

    What is it?

    W-3 forms are closely related to W-2s. Essentially, W-3s are transmittal forms that summarize the all the wage and tax statements made on the W-2s that a business files. In short, if you fill out 10 W-2 forms for your 10 employees, Form W-3 should represent a total of all 10 W-2s.

    When is it due?

    Form W-3 should be sent along with your W-2 forms to the SSA by Jan. 31. However, you don’t need to send W-3s out to your employees.

    Form 1099

    What is it?

    Form 1099 is used to report compensation for independent contractors and other nonemployees. If you pay a contractor more than $600 in a year, you need to report how much you paid them to both the contractor and the IRS so that these wages can be evaluated for tax purposes.

    When is it due?

    Contractors should receive their 1099 forms by Jan. 31. You also need to submit 1099 forms to the IRS by Jan. 31 as well.

    Form 1096

    What is it?

    Remember how the SSA requires a Form W-3 to show a total of all your W-2 forms? Form 1096 has the same relationship with your 1099 forms and should include a summary with the total amount of your 1099 payments from the last calendar year.

    When is it due?

    Form 1099 needs to be submitted along with all your 1099 forms by Jan. 31.

    Form W-4

    What is it?

    Form W-4 is used by employees to determine how much they’ll individually have withheld in payroll taxes. On this form, your employees will note how many withholding allowances apply to them. These allowances will allow you to determine the amount of payroll taxes each employee will have withheld from their paychecks.

    When is it due?

    Form W-4 doesn’t have an annual due date like other payroll forms. Instead, employees should fill a W-4 form out when they are hired. The IRS does recommend that employees submit a new W-4 form each year to account for any financial or personal changes, but it’s not mandatory. In this case, simply continue to withhold taxes based on an employee’s original Form W-4 until he or she provides a new one.

    Form 940

    What is it?

    Form 940 deals directly with Federal Unemployment Tax Act (FUTA) taxes. Your business must pay FUTA taxes if you meet the following requirements:

    • You paid at least $1,500 in wages in any calendar quarter during the past two years
    • You had one or more employees for at least some part of a day in any 20 or more different weeks during the past two years

    FUTA taxes are based on employee wages, but are only paid by the employer and not the employee, so make sure not to withhold FUTA taxes from employee wages. These taxes are paid quarterly and then reported once a year through Form 940.

    When is it due?

    Form 940 should be completed and filed to the IRS by Jan. 31. However, the IRS will extend the filing due date to Feb. 10 if you pay all your FUTA taxes on time.

    Form 941

    What is it?

    Form 941 is used to report both federal income taxes and Federal Insurance Contributions Act (FICA) taxes, the latter of which includes Medicare tax and Social Security tax. If your business’ quarterly tax liability is between less than $2,500, you can also use Form 941 to make tax deposits as well. If your liability is more than $2,500, the IRS requires that you follow a deposit schedule.

    When is it due?

    Form 941 is due quarterly, which means you should complete and report them by the following dates:

    • Jan. 31
    • April 30
    • July 31
    • Oct. 31

    Form 944

    What is it?

    Form 944 is very similar to Form 941, except that it’s used by employers who only need to file their FICA taxes once a year. The IRS grants an exemption for small employers whose annual liability for social security, Medicare, and withheld federal income taxes is $1,000 or less for the year. If your business falls within those limits, you get to file Form 944 instead of Form 941.

    When is it due?

    If you meet the requirements for Form 944, your reporting and payment deadline is Jan 31.

    Form 1095-B

    What is it?

    Form 1095-B is used by small employers to report employee health coverage if they offer a self-insured health plan. With a self-insured plan, employers pay medical bills instead of just a premium, so the IRS requires Form 1095-B to verify that individuals on your plan had minimum essential coverage. If you offer a fully-insured plan, your health insurance provider will fill out and file Form 1095-A for you.

    When is it due?

    A copy of Form 1095-B should be filed for each full-time employee covered by your plan. Individual forms should be mailed to corresponding employees by Jan. 31. The filing deadline for the IRS differs depending on how you send Form 1095-B to them. Paper forms should be mailed to the IRS by Feb. 28, but the deadline extends to March 31 if you electronically file the forms. It’s also important to keep a copy of each employee’s forms.

    Form 1094-B

    What is it?

    Like the W-3, Form 1094-B is a transmittal form used to summarize your collective 1095-B forms. This form is very simple and only requires some basic company information and a total for the number of 1095-B forms you will submit along with Form 1094-B.

    When is it due?

    The deadlines for 1094-B are the same as Form 1095-B. The only difference is that employees do not receive 1094-B.

    Place an Emphasis on Proper Payroll Management

    Payroll forms can be tricky, but they’re just one part of the payroll puzzle. Payroll administration is comprised of many different steps and responsibilities that can have major impacts on your business. To see just how much can go into the payroll process, check out our guide on what it takes to manage payroll for a small business.

    Even when you have a good understanding of each payroll form, the time and effort it takes to complete them and manage your payroll can put a serious dent in your schedule. That’s why many owners turn to GMS to handle payroll administration for their small business. Our experts take an active approach to managing your payroll so that you can spend your time growing your business instead of struggling with forms and tax calculations.

    Want to find out how GMS can save you time and money while strengthening your business’ HR functions? Contact GMS today to talk to one of our experts about your business.

  • When you’re entrusting your business’ administrative needs to another company, it’s critical that you find the right partner. A Professional Employer Organization (PEO) provides comprehensive HR solutions, but some may be a better fit for your exact business needs than others.

    There are a variety of reasons why you’d want to switch – additional services, better administrative services, costs, etc.. Whether you want to switch for one major reason or a variety of issues, don’t be afraid to explore your options. Here’s what it takes to make the switch from one PEO to another.

    A small business owner researching a switch from one PEO to another. 

    The Four Steps to Switching PEOs

    There are four main steps you need to take when it’s time to make the switch to a new PEO:

    1. Evaluation
    2. Information gathering
    3. Quote comparison
    4. Implementation

    Evaluation

    There are a variety of ways that you can find potential new partners – online research, recommendations from other business owners, etc. – but it’s important to know exactly what you want out of your new PEO. The types of services and support you want not only has a direct effect on which PEO is right for you but also impacts the transition process. As such, you’ll want to weigh the following factors.

    • The types of services you need
    • Administrative support and technology

    What services do you want to switch?

    When you switch to a new PEO, you’ll want to identify which HR functions you want them to manage. Some PEOs offer a full suite of services, including payroll, worker’s compensation, and a variety of benefits. Others may limit themselves to just payroll and workers’ compensation. If those additional services are important to you, you’ll need to vet each PEO to make sure they can expertly manage the HR functions that are important for your business.

    It’s also crucial to understand that you may need to switch multiple services over at the same time. For example, if your last PEO took care of both payroll and benefits, both of those functions must be switched over together – you can’t have one PEO handle payroll and the other handle benefits. If you have your benefits through a broker, you can switch to a new PEO for payroll without moving the benefits.

    Administrative support and technology

    One big reason to switch to a new PEO is that you’re unsatisfied with the level of support they provide. There are a variety of potential support issues:

    • You need localized support to help with onboarding and other needs.
    • You don’t have dedicated representatives for your administrative needs.
    • You encounter lengthy delays when you or your employees have questions regarding payroll, benefits, and other services.
    • You feel like just another number.

    You and your employees shouldn’t ever feel like you’re stranded. Make sure to ask each potential PEO about their administrative support. A good partner should have a team in place to manage your HR functions and assist you with any potential questions. If they can’t give you details about your contacts and their process, they may not have the means to give you the support you need.

    You should also take technology into account. Features like electronic onboarding, self-service portals, and other technology can make it easy for you to access your administrative needs in one spot and give employees the means to access important details like paystubs, benefits plans, 401(k), and more.

    Information gathering

    Once you weigh your different options, it’s time to get some quotes from viable PEOs. This process typically starts with a meeting so that the PEO can gather some key information. During this meeting, you’ll want to share what you liked about your previous PEO, what you didn’t, and how you’d like to improve on your situation.

    While you can get a lot of useful information during this process, your potential PEO also has a few questions for you regarding the following.

    • Payroll information
    • Benefits information
    • Timing

    Payroll information

    A PEO will require some details and documents in order to evaluate your current situation and provide accurate quotes for your needs. For payroll, that includes the following:

    • Your first invoice of the year.
    • Your most recent invoice.
    • A third invoice from the same year that highlights a typical payroll period.
    • A rate determination sheet for state unemployment.

    These documents will allow your PEO to conduct financial analysis for your business to extrapolate and forecast your projected payroll for the full year. It will also help the PEO identify opportunities, whether that means uncovering savings related to workers’ compensation, unemployment rates, or more.

    Benefits information

    If you plan to switch health insurance as well, your PEO will need to gather some information from the employees on your group health plan. This information includes:

    • Your most recent insurance bill.
    • Your renewal packet.
    • Your plan designs.

    The PEO will also need to conduct some form of group application to accurately underwrite your group. The exact process depends on how many employees are on your plan. If you have fewer than 28 employees – this does not include dependents – the PEO would need each participating employee to complete a two-page personal health questionnaire. If you have 28 or more employees on your plan, the PEO can conduct a census quote. This process simply requires a list of the participating employees to generate a quote instead of individual applications.

    Timing

    It’s important to consider more than just who you want to manage your HR functions. You’ll want to identify when this transition will need to take place. 

    In general, it makes sense to try and time up a transition with the beginning of a new quarter (or even year depending on the size of your company). Once you change PEOs, you switch federal IDs in the middle of a payroll season, which can lead to multiple W2s and potential confusion for you and your employees. 

    By timing the transition at the beginning of a year or quarter, you can streamline the transition for tax purposes. This transition process can take a good four to six weeks, but it’s heavily dependent on each situation. As such, you’ll want to give yourself enough time to switch to a new PEO when it best suits your company.

    Quote comparison

    Once you’ve received quotes from your potential new PEOs, it’s time to evaluate each one to find which company offers the most value to your business. You’ll want to find a PEO that is not only competitively priced, but also offers you all the services and the support necessary to streamline running your business.

    It’s also important to factor in how your PEO plans to bill your company. Some PEOs have bundle billing where they tie administrative fees and various rates (ex. social security, unemployment, etc.) into a single line item. This can make parsing out each cost confusing. For example, you might not be sure whether you’ve capped your unemployment costs. State unemployment caps once employees earn $9,000, while federal unemployment caps at $7,000. This change can be hard to see with a bundled bill, which means you may be paying more than what you should.

    Instead, look for PEOs that are willing to break out each line item. This way you can see what you’re being charged for social security, Medicare, federal unemployment, state unemployment, workers’ compensation, health insurance, and administrative fees.

    Implementation

    When you’ve finally picked out your next PEO, it’s time to officially switch over to your new partner. As you may expect, you’ll need to complete some paperwork in order to start the process. This includes:

    • A service agreement.
    • An AC-2 form (Request to Add/Change or Terminate Permanent Authorization).
    • A UA-3 form (Professional Employer Organization Client Relationship Notification).

    Depending on the PEO, you can either sign physical documents or submit these items electronically if the company is paperless. Once the initial paperwork is filed, your PEO would begin the implementation process. The implementation process can differ for each PEO. At GMS, a dedicated account representative would assist you throughout the implementation process. This person would also set up training sessions to make sure you’re comfortable with internal systems for payroll, benefits, etc.

    For payroll, you would receive an electronic onboarding spreadsheet to complete. Once the spreadsheet is done, an email will go out to the employees to have them fill out forms (I-9, W-4,), set up direct deposit, and enter into our system. If you sign on for benefits, you would also have a dedicated benefits representative as well. This person can go on-site or arrange virtual meetings to meet with employees, roll out your benefits, go over plans, and educate everyone on how their benefits work so that everyone is on the same page.

    During this whole process, we would also send your previous PEO a termination notice. Your past PEO may require a written notice of termination – 30-day notice is typical. We would also detail any remaining tax obligations over other final items in the termination letter so that the former PEO will comply with their responsibilities.

    Find the Right PEO for Your Business

    When you run a business, it’s imperative to find the right administrative solution for your business. Managing HR functions is a critical part of any company, but it also puts a massive burden on your shoulders. The right PEO can free you up to focus on growing your business while giving you the administrative support you deserve.

    At GMS we strive to make your business simpler, safer, and stronger. Contact GMS today to talk to one of our experts about how we can help you take control of your HR functions.