CPA.com Blog

Frank Fiorille

VP of Risk, Compliance, & Data Analytics, Paychex Inc.

Business Owners Cite Direct Deposit as their Next Payroll Upgrade

The increasing accessibility of cryptocurrency and blockchain, as well as buzz around daily pay, has many people, including your small business clients, asking what’s next for payroll? A recent survey, conducted in recognition of National Payroll Week by Paychex, Inc., polled 500 randomly selected business owners with two to 500 employees to find out what changes they plan to make to their payroll processes in the next 12 months. Though more recent innovations are dominating the payroll conversation, most business owners who are planning payroll adjustments cited direct deposit as the functionality they are most likely to incorporate in the next year (27 percent).

Direct deposit is not a new development in the payroll world, but it’s still a powerful tool for business owners to implement and a helpful one for their accountants too. The efficient payday delivery that direct deposit offers serves as a recruiting asset – especially in today’s tight labor market. Prospective and current employees alike value the convenience of not having to cash or deposit a live check. Direct deposit also has the potential to serve as a financial fitness tool, enabling employees to save automatically. From an employer standpoint, in addition to eliminating the cost of paper checks, direct deposit can reduce overall time spent on payroll, freeing HR and payroll staff to focus on other business functions. As an accountant, direct deposit helps reduce the risk of manual data errors you may encounter as you’re helping business owners work through payroll taxes.

Behind direct deposit at number one, the study revealed the following payroll priorities for business owners in the year ahead.

  • Offering direct deposit – 27 percent
  • Providing electronic paystubs – 15 percent
  • Offering smartphone access to payroll information – 11 percent
  • Extending daily pay options – 10 percent
  • Outsourcing payroll – 10 percent

Only a small portion of business owners are planning to implement some of the latest buzz-generating innovations, like using blockchain or other cryptocurrency for some payroll (5 percent) or adopting cloud-based payroll (8 percent), in the next year.

No matter where your business owner clients fall on the spectrum of implementing payroll changes, you can act as a strategic advisor in helping them understand the implications of each payroll update from a tax standpoint. You have a deeper understanding of your clients’ business needs than most, so your advice is valuable as they decide which payroll trends will and will not work for their business.

Philip Horrisberger

Director of Channel Marketing, Paychex, Inc.

How to Help Your Clients Remain Competitive in a Tightening Labor Market

When you became an accountant, you probably didn’t consider human resource advising as part of your role with clients, but more and more business owners are turning to their accountants for guidance on every part of business success, including human capital management (HCM). In a tightening labor market, the recommendations you provide your clients are all the more important. As the country moves toward full employment, employers face the challenge of differentiating their business and job opportunities to attract a limited number of qualified job seekers who have many employment options. An integrated HCM solution and comprehensive benefit packages can play a major role in helping businesses stay competitive among job candidates and keep current employees engaged.

Employees are often a company’s most important asset and a key component to business success. While you may not be able to speak about specific employment laws and regulations yourself, as a business advisor, and someone who knows the ins and outs of your client’s business, you can recommend solutions to help clients best manage their HR activities from recruitment to payroll to time and attendance tracking and more. At the start of the employee journey, an HCM solution can help HR managers find and connect with qualified job candidates and create an efficient recruitment experience for both your client and job seekers. Once a new employee is hired, they are able to complete the onboarding process and fill out and update forms through the HCM system. This process can make many administrative HR tasks easier for them, save HR managers time, and help the business track the onboarding process while ensuring all required forms are completed. Throughout each module of the HCM solution, data is collected and HR managers can glean valuable insights to adapt and improve HR activities so that they can better meet employee and business needs.

An HCM solution can make employee’s and HR manger’s lives easier and more efficient, but comprehensive benefits packages are also an important factor in attracting and retaining quality employees. The tightening labor market and potential for significant tax savings in the year ahead have created the perfect opportunity for businesses to reevaluate their benefits offerings. Though some business owners are hesitant about investing in formal benefits programs, retirement benefits are a major consideration for current and prospective employees. Not to mention, business owners also need to plan for retirement. In a recent Paychex survey, minimizing turnover was reported as the most important reason (23 percent) for offering retirement benefits, followed closely by the business owners’ individual need for the benefit (20 percent).

If your client’s business is not in a place to responsibly offer more formal benefits like retirement, or even healthcare benefits, there are ancillary benefits that may be highly valued by potential and current employees as well. Parking reimbursements, gym memberships, and commuting costs all add up. Contributing to even some of these costs to employees on a monthly basis can go a long way, as can flexible working hours, work from home options, and increased vacation, sick, or personal time.

In addition to voluntary benefits, remind your clients to also be aware of the benefits they’re required to offer by federal, state, or local law. For example, there are currently over 40 different jurisdictions at the state and local level with paid sick leave laws applicable to private employers. Jurisdictions vary in terms of the coverage, eligibility and many other provisions under these laws. Employers who are not covered by these laws should still remain aware so that they can gain an understanding of what is standard when it comes to these types of benefits and how their benefit offerings stack up to larger employers and those in different states.

Recruiting and retaining talented employees is vital to your clients’ success. You can expand your contribution to that success by advising them on the latest HR technology and benefits trends.

Philip, Director of Channel Marketing at Paychex, is re­sponsible for the programs that support lead genera­tion from the company’s primary referral sources: banks, clients, associations, and the accounting community. Philip joined Paychex in 2002.  During his time at Paychex he has had responsibility for the company’s German subsidiary, Paychex Deutschland GmbH, and manages the acquisition of books of payroll business from accounting firms ex­iting that business.

Michael Trabold

Director, Compliance Risk, Paychex

Five Key Regulatory Issues Small Businesses are Facing in 2018

From passed to proposed and everywhere in between, there are many regulatory changes and legislative reforms set to move forward in the year ahead. It can be challenging for anybody, financial advisors and compliance experts included, to keep up with where things stand, but small business owners are often understandably overwhelmed by the ever-changing regulations with which they must comply to avoid costly penalties.

Here are five hot regulatory issues your small business clients are facing in 2018:

#1 Tax Reform. The speed with which the GOP passed the first major tax overhaul in decades left businesses with little time to assess what this legislation means for them in 2018. In January, the IRS released Notice 1036, instructing employers how to appropriately withhold wages from their employees’ paychecks. The new tables reflect the increase in the standard deduction, repeal of personal exemptions, and changes in tax rates and brackets. Employers have until February 15, 2018 to implement new withholding guidance. From a business perspective, small business owners can also begin 2018 tax planning, knowing that the corporate tax rate will be streamlined to a flat 21 percent. Some small businesses will likely be interested in changing how they are structured to take advantage of tax reform’s measures to further reduce the tax burden for pass-through entities. However, pass-through entities utilizing the individual tax code will need to pay close attention to associated personal tax changes, including: rate cuts, some removed deductions (including personal exemptions and the deduction for state and local income tax), and increased standard deduction. Congress added a deduction of business income for pass-through companies of up to 20 percent, but there are complex requirements and guardrails for the application of this deduction.

#2 State Reaction to Federal Tax Reform. Those states that conform to federal standards will need to assess and react to any changes caused by the federal overhaul. Many states, especially those with higher taxes, are also scrambling to come up with laws to lessen the impact of federal changes on state taxpayers, particularly as it relates to tax and revenue impacts. Along the same lines, each jurisdiction will need to assess the impact of decoupling or following the Internal Revenue Code (IRC) on their budgets and their constituents, which may lead to withholding changes. The full impact of tax reform is still evolving, and your small business clients will rely on you to help them comply with new federal, state, and local tax codes.

#3 The Affordable Care Act (ACA). For tax year 2017, businesses that are defined as an applicable large employer (ALE), under the Employer Shared Responsibility (ESR) provision of the ACA, must provide a detailed reporting of healthcare coverage. Unlike the previous two years, there is no transition relief in 2017 for how employers offer coverage.  However, the IRS extended good faith effort relief for reporting incomplete or inaccurate returns for 2017 tax year. Good-faith transition relief does not apply to entities that do not file their returns on time. The IRS also extended the furnishing deadline for the form 1095-C to March 2, 2018, but it did not extend filing deadlines with the IRS. Additionally, in late 2017, the IRS began sending out the first notices of proposed employer shared responsibility payments for 2015 filing, letter 226-J. Employers have an opportunity to respond to this notice correcting any incorrect information, but these responses can be lengthy and complex;  some employers will need to research these notices, correct any errors in previous filing, and communicate with the IRS while also preparing for current year obligations – a huge undertaking that will undoubtedly require your help and guidance. Further, with the long-term future of the ACA unclear, some states are expected to begin proposing their own changes to health care policy, a development which could be impactful to employers in those states.

#4 Paid Leave Laws. Over 40 different states and local jurisdictions have passed paid sick leave laws applicable to private employers. And while there are fewer paid family leave laws on the books, 2018 has brought the nation’s most comprehensive paid family leave to New York State. However, a recent proposal in Congress, the Workflex in the 21st Century Act, would pre-empt the many paid leave laws at the state and local level, as well as any others expected to be introduced.

#5 Employee Verification. The 2017 changes to the Form I-9 (the Employment Eligibility Verification Form) and supporting guidance were minor compared to previous revisions, but employers will still need to ensure use of the correct form and delivery of the separate instruction pages to all new employees on their first day of employment. While documentation audits and worksite inspections seemed to level off in 2017, Immigration and Customs Enforcement has warned that it will quadruple the number of worksite inspections in the coming year, consistent with President Trump’s pre-election platform and post-election agenda regarding immigration reform.

These are just a few of the hot regulatory issues that are top-of-mind for small business owners today, and you’ve undoubtedly been hearing from your small business clients already with questions and clarifications galore. With a knowledge of these and other business regulations, you can help your small business clients understand their role in remaining compliant and avoiding costly penalties, which in turn will help their business grow.

Mike Trabold is director of compliance risk for Paychex, Inc. Paychex is a leading provider of human capital management solutions for small- to medium-sized businesses.

Frank Fiorille

VP of Risk, Compliance, & Data Analytics, Paychex Inc.

Attracting, Retaining, and Developing Millennial Employees at your Firm

In 2016, Millennials became the largest generational group in the American workforce. As with every generation, their experience in the workforce and what they want out of their jobs is unique and will continue to evolve as they grow in their careers. For firms looking to attract Millennial talent, it’s important to understand current Millennial workforce trends. A new report by Paychex takes a deep dive into Millennial wages, geographic distribution, and industry preferences, analyzing their current status, growth rates, and what this all means for businesses trying to attract, retain, and grow talent in this increasingly important employee group.

Here is a snapshot of Millennials in the workforce, and, more specifically, in the Professional and Business Services industry, today:

  • On average, Millennials make $21.80 hour ($5.79/hour less than the all-generation average), but Millennial wages are growing at a rate nearly double that of all generations (5.8 percent compared to 3.0 percent, respectively).
  • Females employees make up 45.3 percent of the Millennial full-time employee population, compared to 54.7 percent for males.
  • There is a higher percentage of full-time Millennial female employees in the Professional Business Services industry than full-time Millennial male employees, 39.7 percent and 38.6 percent, respectively.
  • Aside from the Leisure and Hospitality industry, Professional and Business Services has the highest percentage of full-time Millennial employees (39.1 percent), 1.1 percent greater than the percentage of full-time Millennial employees nationally.
  • Millennials in Professional and Business Services have the highest hourly earnings among industries ($26.05/hour), but have the lowest annual growth in wages, 5.3 percent.

Those facts can keep your firm competitive when it comes to potential salary requirements for Millennial candidates, but once you start the recruitment process, there are a few additional factors to consider. First, be proactive and effective in your recruitment effort. Millennials don’t like to drag out their job decisions. When conducting the interview, really listen to what the Millennial applicant is looking for in a workplace. While you don’t need to change your entire business model to adapt to Millennial employees, there are perks – flexible work hours, work from home/telecommuting options, casual dress days, etc. – that can make the difference to Millennial candidates in choosing a firm and remaining content and engaged there.

Once the employee is hired, offer meaningful work opportunities and foster connections. Millennials seek to be effective and impactful in their roles. As the job allows, let them work on projects that they are passionate about that also impact results. Along the same lines, provide Millennials with opportunities for development, whether a special project, exposure to other departments, or classes/training outside of the workplace. Ask them early on about their career aspirations, develop a plan to help them get there, and regularly monitor progress toward those milestones.

Each generation brings unique energy, ideas, and expectations to the workforce. A lack of understanding of the factors impacting a generational employee group can cause you to lose out on talented candidates.

Paul Davidson

Director of Product Manage- ment at Paychex, Inc

Debunking Common 401(k) Myths for Your Small Business Clients

As retirement readiness becomes a growing concern for today’s workforce, retirement plans, including 401(k)s, are an increasingly important offering when it comes to attracting and retaining top talent. In a recent survey by Paychex, small business owners reported minimizing turnover as the most important reason (23%) for offering retirement benefits, followed closely by the individual need for the benefit (20%). Yet many small businesses do not offer 401(k) plans to their employees or themselves.

There are several common myths around retirement plans, but as an accountant, you can help your clients understand their value and how they can build upon business success. Here’s the truth about eight common misconceptions that prevent small businesses from creating retirement plans:

Myth #1: Offering a 401(k) plan is too expensive.
Fact #1: The tax benefits from retirement plans help offset the cost. Tax incentives for new plans can be as high as $500 a year for three years – that’s $1,500. Furthermore, business owners can deduct 401(k) expenses and contributions, such as administrative fees, employer matching or profit sharing, on business taxes.

Myth #2: My company is too small to offer a 401(k) plan.
Fact #2: Retirement plans exist for all business sizes, including sole proprietorships – in fact, the majority of the 77,000 retirement plans that Paychex manages belong to small businesses. Business owners can start small with a plan that can grow with the business.

Myth #3: Employees can’t afford a 401(k) plan.
Fact #3: It doesn’t take much to get started. Say an employee spends $1.64 per day on a small cup of coffee, amounting to $18,000 over 30 years. That same $1.64 per day in 401(k) contributions can amount to $60,644 over 30 years. That’s the magic of compounding interest!

Myth #4: Employees aren’t interested in a 401(k).
Fact #4: According to the Federal Reserve Board’s Report on the Economic Well-Being of U.S. Households, nearly one-third of Americans have no retirement savings, but a study by MetLife found that 64 percent of employees said that a retirement plan is critical or very important. Employees are interested in solutions to help secure their families’ future and their own.

Myth #5: An IRA is enough.
Fact #5: A 401(k) plan has many advantages compared to a SIMPLE IRA. The maximum annual salary deferral is higher for 401(k) plans than that of a SIMPLE IRA and the 401(k) plan catch-up contribution over the age of 50 is double that of a SIMPLE IRA. 401(k) plans also feature profit sharing, loan availabilities, and Roth option opportunities that SIMPLE IRAs do not.

Myth #6: Matching is required.
Fact #6: Matching is not required with a 401(k) plan as it is with a SIMPLE IRA; however, the employer has the option to add matching at any time. Not only does matching help maximize the employer’s personal contributions, matching contributions are generally tax deductible

Myth #7: If “My business is my nest egg” or “I don’t plan to retire” then I don’t need a 401(k).
Fact #7: You can’t predict the future, but you can plan for it. Expecting the best and planning for the worst is the safest option, as the economy, consumer demand, health, and family needs can change at any time.

Myth #8: 401(k)s are complicated to set up, choose, and maintain.
Fact #8: Partnering with a reputable provider eases your administrative burden and can provide investment help.

Paychex ranks as the largest recordkeeper by total number of defined contribution plans, according to a recent survey by PLANSPONSOR magazine, a national publication dedicated to the pension and retirement industry. Serving 77,000 plans, Paychex has earned this honor for seven consecutive years. Paychex helps with plan design and onboarding, integrating payroll and retirement systems into the plan to ease administration; it also offers fiduciary service in partnership with Mesirow Financial, GuidedChoice, LPL Financial, and Wilshire Associates, as well as custodial and trustee services, such as plan administration, regulations, and participant best interests information.

Client-accountant discussions around employer-sponsored retirement benefits and the misconceptions above can provide a natural extension to valuable conversations around the business owner’s financial plan, offering yet another opportunity to enhance your role as trusted advisor, particularly as ongoing legislative uncertainties related to benefit offering regulations have made planning for the future more necessary than ever.

Paul Davidson is director of product management at Paychex, a leading provider of integrated human capital management solutions for payroll, HR, retirement, and insurance services.

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