The Payroll Pages February 2008

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The Payroll Pages

Payroll Fundamentals - 2/26/2008

Many of our clients are dealing with the same types of issues. We have decided to compile a few common scenarios and the most appropriate outcome to share with you. Hopefully these scenarios will help clarify some of the common payroll fundamentals.

Scenario # 1 -

The ABC Company has just hired a new employee. This employee will be working from their home office 50% of the time and from the corporate office the other 50% of the time. ABC Company is located in Cleveland and the employee resides in Strongsville. The payroll contact is not sure how to setup the city tax for this new employee.

Solution to Scenario # 1-

The rule is that city tax must be paid to the municipality where the employee is working. The employee should be setup for their city tax to have 50% withheld and submitted to Cleveland and 50% withheld and submitted to Strongsville.

Scenario # 2 -

Painting Inc pays their employees on a bi-weekly pay cycle. Sometimes their employees work overtime. During the last pay period, Janet worked 50 hours in week one of the pay period and worked 35 hours in week two of the pay period. The payroll contact is not sure how much overtime he needs to pay to Janet for the last pay period.

Solution to Scenario # 2-

The rule is that overtime is based on hours per week and it makes no difference how frequently the employee is paid. If Janet worked 50 hours in the first week she will earn 40 hours regular pay and 10 hours of overtime pay. For the second week she would earn 35 hours of regular pay. For the entire bi-weekly pay period Janet earned 75 hours of regular pay and 10 hours of overtime pay.

*Please keep in mind that a contractual agreement with your employees may require you to base overtime on a daily basis rather than a weekly basis. If this is the case then anything over 8 hours a day would be considered overtime.

Scenario # 3 -

Kyle, an employee at Burgers & More Inc. has a child support deduction that is taken out of each paycheck. Recently, the payroll contact received paperwork for a court ordered garnishment to be withheld from Kyle’s paycheck. The garnishment indicated that the amount should be for up to 25 % of Kyle’s disposable earnings. Kyle’s child support deduction is already deducting 30% of Kyle’s disposable earnings. The payroll contact is not sure how to handle this situation.

Solution to Scenario # 3-

In this situation the total amount of the garnishment and the child support can not exceed 25% of Kyle’s disposable earnings. Because the child support already exceeds that limit the garnishment should not be withheld. Within the court order for the garnishment are instructions on how to communicate that the garnishment can not be withheld due to a child support deduction that exceeds the 25% limit. This paperwork should be filled and out and submitted to the court.

Scenario # 4 -

Caribou, Caribou and Associates is hiring a new employee. That employee has expressed interest in participating in the 401K program. The new employee is a salary employee and will be working 35 hours a week. The payroll contact is not sure if the new employee is eligible to participate in the retirement program. The payroll contact also is not sure how long after employment an employee becomes eligible to participate in the 401K program.

Solution to Scenario # 4-

The payroll contact needs to look at the 401K plan document for these details. When the plan was setup the specifications for eligibility would have been established. These regulations are included in the plan document and would tell the payroll contact who is eligible to participate and when they become eligible. The plan document will also include information about if the company offers a match benefit. If the payroll contact has any additional questions the best person to contact is the 401K account representative.

If Caribou, Caribou and Associates is an Ahola client then we can automatically deduct the 401K deduction and calculate the company match. This is easily setup but will require the payroll contact to provide Ahola with the appropriate information. Ahola can also send the 401K data file directly to the provider.

If you have any questions about these scenarios or another payroll situation please call your payroll processor or Ahola’s customer service department.


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The Payroll Pages Message from the Ahola's (Pay) Roll Call Facts that Pay Pay Attention	Payroll Fundamentals - 2/26/2008 Many of our clients are dealing with the same types of issues. We have decided to compile a few common scenarios and the most appropriate outcome to share with you. Hopefully these scenarios will help clarify some of the common payroll fundamentals. Scenario # 1 - The ABC Company has just hired a new employee. This employee will be working from their home office 50% of the time and from the corporate office the other 50% of the time. ABC Company is located in Cleveland and the employee resides in Strongsville. The payroll contact is not sure how to setup the city tax for this new employee. Solution to Scenario # 1- The rule is that city tax must be paid to the municipality where the employee is working. The employee should be setup for their city tax to have 50% withheld and submitted to Cleveland and 50% withheld and submitted to Strongsville. Scenario # 2 - Painting Inc pays their employees on a bi-weekly pay cycle. Sometimes their employees work overtime. During the last pay period, Janet worked 50 hours in week one of the pay period and worked 35 hours in week two of the pay period. The payroll contact is not sure how much overtime he needs to pay to Janet for the last pay period. Solution to Scenario # 2- The rule is that overtime is based on hours per week and it makes no difference how frequently the employee is paid. If Janet worked 50 hours in the first week she will earn 40 hours regular pay and 10 hours of overtime pay. For the second week she would earn 35 hours of regular pay. For the entire bi-weekly pay period Janet earned 75 hours of regular pay and 10 hours of overtime pay. *Please keep in mind that a contractual agreement with your employees may require you to base overtime on a daily basis rather than a weekly basis. If this is the case then anything over 8 hours a day would be considered overtime. Scenario # 3 - Kyle, an employee at Burgers & More Inc. has a child support deduction that is taken out of each paycheck. Recently, the payroll contact received paperwork for a court ordered garnishment to be withheld from Kyle’s paycheck. The garnishment indicated that the amount should be for up to 25 % of Kyle’s disposable earnings. Kyle’s child support deduction is already deducting 30% of Kyle’s disposable earnings. The payroll contact is not sure how to handle this situation. Solution to Scenario # 3- In this situation the total amount of the garnishment and the child support can not exceed 25% of Kyle’s disposable earnings. Because the child support already exceeds that limit the garnishment should not be withheld. Within the court order for the garnishment are instructions on how to communicate that the garnishment can not be withheld due to a child support deduction that exceeds the 25% limit. This paperwork should be filled and out and submitted to the court. Scenario # 4 - Caribou, Caribou and Associates is hiring a new employee. That employee has expressed interest in participating in the 401K program. The new employee is a salary employee and will be working 35 hours a week. The payroll contact is not sure if the new employee is eligible to participate in the retirement program. The payroll contact also is not sure how long after employment an employee becomes eligible to participate in the 401K program. Solution to Scenario # 4- The payroll contact needs to look at the 401K plan document for these details. When the plan was setup the specifications for eligibility would have been established. These regulations are included in the plan document and would tell the payroll contact who is eligible to participate and when they become eligible. The plan document will also include information about if the company offers a match benefit. If the payroll contact has any additional questions the best person to contact is the 401K account representative. If Caribou, Caribou and Associates is an Ahola client then we can automatically deduct the 401K deduction and calculate the company match. This is easily setup but will require the payroll contact to provide Ahola with the appropriate information. Ahola can also send the 401K data file directly to the provider. If you have any questions about these scenarios or another payroll situation please call your payroll processor or Ahola’s customer service department.