Payroll, tax and human resource compliance issues

John Hildebrand

“Compliance” issues are one of those subjects that most employers hope would just go away.  They are a moving target and very hard to stay up with.  In the first six months of 2012 alone there have been several state and over 30 federal law changes or updates that affect employers and employees in Colorado.  Employers are not sent notices of these changes and they are very difficult to stay up with.  We pay thousands of dollars a year for services that keep us and our client’s constantly up to date on these changes. Staying current on compliance issues is one of the most common reasons for companies deciding to outsource payroll and HR. 

   “New Hire Reporting” is one of those issues that many employers either just don’t know about or choose to ignore.  In short the law requires that all “new hires” are reported to the Family Services Registry so that they can search their database for all types of garnishments or levies, including Child Support & Alimony garnishments.  Each state is required to form an organization to search for and collect the garnishments.  As I talk to prospective clients it is interesting to see how many business owners don’t know what “New Hire Reporting“is.  Non-compliance in this has fairly big teeth – getting bitten by this one is no fun!  The business owner is the one who is actually on the hook for the full cost of the garnishment if the New Hire Report is not filed.  The owner is also responsible for calculating and submitting the garnishment ($$$) to the appropriate agency.  Calculating these can be a bit complicated, especially when the employee has more than one garnishment to account for.  When there are multiple garnishments, “first” garnishment or levy takes priority and after that has been collected in full, the second can be addressed.  First is generally determined by the date of the order.   The rules can be complicated.  For example: for a minimum wage worker, nothing can be garnished until the worker takes home in excess of $435.00 for a biweekly pay period or $214 for  in disposable or after tax income.  Of the remaining income, the maximum garnishment is 25% of disposable income. 

            Child support is handled separately from all other garnishments.  Child support is always takes precedence over other “garnishments”.   In Colorado up to 65% of wages can be garnished for child support.  The percentage can be affected by the payment status of the person who owes the garnishment.  If you are behind, the percentage may go up to the max allowable.  The rules around these are very complicated.  If you are not sure how to calculate these – GET HELP! 

            Federal Tax levies are handled by different rules.  Some items are exempt from the calculations.  For example, previous child support orders, workers comp benefit payments & unemployment benefits.  (This is a short list; there are more and they are very specific.  The actual amount that can be garnished/levied is taken from a chart that is generally fixed and based on your specific income and number of dependents. 

            All in all, the world of compliance can be confusing and the penalties around it for being “non-compliant” are pretty severe.   Our recommendation is that if you don’t know how to do these things get professional help.  As an employer, I am sure that you are aware the world of government mandated healthcare is upon us.  It is no great secret that it is going to become more complicated and there will be more penalties associated with non-compliance.   We provide our clients with a constantly updated HR law library and alert emails that notify you when there is a change to either state or federal employment laws.  There is also a very complete section relating to the upcoming changes in healthcare.  We firmly believe that having access to this type of resource is of great value. It is always better to manage your business “through the windshield, than through the rearview mirror.   Please don’t hesitate to call us if you need help.