Paying the EmployeePayroll Source

Review Course Fall 2011

Presented by:Mary Kazmierczak, CPP

Chapter 5-- Objectives• Pay Frequency

• Payment on Termination

• Payment MethodsCash or Check

Direct Deposit (EFT)

Electronic Paycards

– Branded vs. Non-branded

• Pay Statements

• Unclaimed Paychecks ( Escheatment)

• Wages owed deceased Employees

• Extra Pay Periods (53rd pay period)

Reminder Certification is based on Federal not State LawsContent of Chapter Five is a wonderful resource for State

Regulations on Employee Payment- Check for updates

• Good State Reference Charts:

• State by State Pay Frequency

• State by State Payment upon Termination

• State by State rules on Direct Deposit

• Paycard State Compliance issues

• State by State Pay Stub Information

• Escheatment

• State by State wages to deceased employees

Payroll Frequency & Payment on Termination

Chapter 5- Paying the Employee

Bonus $$$$

• What law governs how often employers must pay their employees ?

• True or False??

• FLSA regulates the allowable duration of time after services are performed that employees must be paid.

Bonus $$$$

• Are there separate regulations for employment separation, dependent on whether the separation is voluntary or involuntary?

• If so, what are some possible impacts to other payroll operations.

Payment MethodsChapter 5- Paying the Employee

Payment Methods

• Cash

• Check

• Direct Deposit ( Electronic Funds Transfer)

• PayCards

Show me the money!Cash or Check

• Generally all 50 states allow payment by cash or check without additional law or regulations regarding this payment option

• General regulations may require ease in tendering the negotiable payments by:

• Financial institution must be convenient / or even located in state of company’s operations

• No additional fees are imposed for tendering the payment option

Considerations for Payment via Check

• Security – – Signatures required

– Internal audit and checks & balances

• Be mindful of the impact that a voided or manual check issuance causes to other departments processes– GL

– Tax

– Benefits

Direct Deposit (EFT)Chapter 5 – Paying the Employee

Direct Deposit (EFT)• Safe and secure means of payment

• Alleviates lost or stolen checks

• Unclaimed wages(Escheatment)

• Storage of documents

• Employee time allotment for tendering payment

• Direct deposit cannot be made mandatory as part of a hiring process- must provide choice of financial institutions and check as option.

Bonus $$

• The conception that Direct Deposit is a “Green” option is only applicable when what is offered?

• Let’s elaborate on this concept of payment . .

Direct Deposit (EFT)

Federal Reserve Board- Regulation E

• NACHA– National Automated Clearing House Association

• ACH– Automated Clearing House

• State Law Regulations

• Bi-Partisan efforts between Federal and State agencies

Team DD. . .Our team will be comprised of 6 players. . .

Each team player has a specific job to make the team successful.

Explain your role. . .

ODFI

Employee

RDFI

Company

ACH

Prenote

Team DD. . .• Okay Now we all know what our roles are.

It’s Game time!

Players to the Field. . .Payroll Processed!!

Let’s go through the innings and come up with a WIN!

What player was kicked off the team, but should always be considered?

Instant Replay – Off sides call

Full Payroll Reversals vs. Single entry reversal

Regardless these requirements are mandatory

• Amount of reversal must match the amount of credit

• Must be reversed within 5 days of settlement date

• No employee authorization necessary

Instant Replay– Late Direct Deposits

• Troubleshooting

Funds must be posted by 9:00 am on paydate

• Verify routing and account numbers

• RDFI posting schedule

• Federal Holiday Impact in processing

Additional resources can be found in communications with the ODFI for internal challenges

Regardless of delay– funds should be honored without penalty to employee.. Based on voucher verification.

Direct Deposit Employee Advantages / Disadvantages

Advantages

• Immediate availability of funds on payday

• No bank interaction

• No delay in constructive receipt of pay

Disadvantages

• No Bank account establishment

• Comfort level in payment

Direct Deposit Employer Advantages / Disadvantages

Advantages

• No lost or stolen checks

• Reduction in paper flow

• Cost effective

• Ease for reconciliation

• Reduction in escheatment

Disadvantages

• Not truly “Green”

• Loss of float

• Additional processing fees

• Challenges for stopping and reversals

Pay CardsChapter 5- Paying the Employee

Paycards• Paycards are similar to debit cards

• Prefunded , host based cards providing employees access to their net pay via a bank, ATM (Automatic Teller Machine) or POS (Point of Sale) purchase.

• Payrcards are similar to direct deposit

• Funding process for the employer is same as for direct deposit

• Process subject to the same NACHA regulations

Paycards• New frontier for payment

• Many variable options in the plans

• Many competitors vying for business- ensure reputability

• Verify with legal for implications from plan

• Cardholder security

• Employee age and turnover consideration

• Understand the difference between branded vs. non- branded

Branded vs. Non-Branded

Branded

• VISA/ MC/ Discover

• Employee signature only

• ATM—PIN

• Personalized

• Parental approval < 18

Non-Branded

• Network Logo

• PIN required for all transactions

• Most reliable –safer

• Host computer authorizes

Employee & Employer Benefits

Employee

• Reduced costs

• Increased independence

• Improved credit status

• Financial safety

• Ease of use

• Replenishment if lost

• No time or geographical limitations

Employer

• Reduced costs

• Enhanced efficiency

• All employees eligible

• Increases employee productivity time

• Escheatment reduction

Implementing a program• Financial Institution agreement and offering

• Anticipation program for employees

• Establish a funding pool with the bank

• Institution establishes employee account cards

• Funding by wire or ACH

• Adjustments are done via web app

• Reversals :

• Based on card policy– talking points when researching vendor

• Bank notification for reversal and refunding

Bonus $$$• You are the payroll manager and decision maker for

a fast food establishment. The economy has driven sales down. You need to pay your employees in the most cost effective way possible and accommodating to the employees. Many of these employees do not have bank accounts.

• What means would you choose as the medium for payment?

• What additional factors need to be considered?

Escheatment• Escheatment is the unclaimed wages process governed

by State Law

• State regulated

• Length of time payment held (generally 1 yr)

• Notification process

• Wage turnover process

• Best practice is to utilize direct deposit and paycards as wage payment methods

Wages owed Deceased Employees

• Payments, payee and taxation are based on when the employee passes.

• Federal regulates the taxation

• State law regulates the payee and payment amount in accordance with the current situation.

The infamous 53rd pay period• Years affected with the 53rd pay period

• 2007 2008 2009 2010 2011 2012

• Payroll must anticipate and plan for proper processing and compliance

• Salaried employees can be adjusted

• Hourly employees must be paid all wages

• Best Practice is to maintain pay structure and schedule without deviation. .. Keeps relations good with employees good.

• Verify contracts if applicable