Transcript Paying the Employee - Chicago Chapter APA

Paying the Employee
Payroll Source
Review Course Fall 2013
Presented by:
Carmela Miller, CPP
[email protected]
Chapter 5 ------ Objectives
• Pay Frequency
• Payment on Termination
• Payment Methods
– Cash or Check
– Direct Deposit
– Electronic Paycards
• Branded vs. Non-Branded
Objectives cont.
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Pay Statements
Unclaimed Paychecks (Escheatment)
Wages owed to deceased Employees
Extra Pay Periods (53rd pay period in a year)
Certification is based on Federal not State Laws
Content of Chapter 5 is a great resource for State Regulations
on Employee Payment. Always check for Updates on States
• State Reference Charts
• State by State Pay Frequency
• State by State Payment upon Termination (Another good
source for this is the APA book on States)
• State by State rules on Direct Deposit (this could always
change)
• Paycard State Compliance issues, Pay Stub Information
• Escheatment
• State by State wages to deceased employees
Chapter 5- Paying the Employee
Payroll Frequency &
Payment on Termination
5.1 Pay Frequency
• States Regulate how often employees must be
paid.
• Table 5.1 gives us a quick look at state rules
– Another great source is the State Book by APA
5.2 Termination Pay
• Different rules for Voluntary & Involuntary
• Many states require Immediate Pay for
Involuntary Terminations
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California-------- within 72 hours
Hawaii--------------Next working day
Massachusetts---Immediately
Michigan-----------Immediately
Minnesota –------Immediately or within 24hrs of demand
Nevada ------------Immediately
Oregon ------------By the end of the 1st Business Day after Discharge
Utah ---------------24 hours
Vermont ----------72 hours
West Virginia ----72 hours
Payment Methods
Direct Deposit (EFT) State Controlled
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Safe and secure means of payment
Alleviates lost or stolen checks
Minimizes Unclaimed wages (Escheatment)
Storage of Documents
Employee time allotment for tendering payment
Prenote ??
ODFI, NACHA, RDFI, ACH
Regulated by Federal Reserve Board, Consumer Credit Protection Act and EFT Act
When initiating a International ACH Transaction (IAT) add coding to the transaction to
identify it as an IAT.
• Direct Deposit cannot be made mandatory as part of a
hiring process –must provide choice of financial
instituions and check as an option.
ODFI, RDFI, NACHA, ACH
• ODFI –Originating Depository Financial Institution
– This file contains , the employee wages, their account
number and their financial institution.
• ACH – Automated Clearing House
– This is the process that receives the ODFI and
coordinates the financial settlement between the
participating financial institutions.
• NACHA – National Automated Clearing House Association
– This provides the rules that the ACH must follow
– Office of Foreign Assets Control is an agency made it necessary for NACHA
to adopt rules creating special requirements for IAT (International ACH
Transactions)
• RDFI - Receiving Depository Financial Institution
• This is the employees bank, savings &loan or credit union
See Chart on page 5-10 Table 5.3
Going Green??
• Can direct deposit totally eliminate the paper
and go Green?
– Authorization agreements must be signed, Unless
you have it set up for electronic authorizations
– Authorizations must be retained for a certain pay
period
– Employees must still be provided a paper pay stub
depending on state requirements
Chapter 5 – Paying the Employee
Payment Methods
Payment Methods
• Cash
• Check
• Direct Deposit (EFTElectronic Funds Transfer)
• Paycards
Cash or Check ???
• Generally all 50 states allow payments by cash or check without
additional law or regulations regarding this payment option.
– Ease of tendering the negotiable payments by:
• Financial Institutions must be convenient/or even located in state of
company’s operations
• No additional fees are imposed for tendering the payment option
– Security
• Signatures required
• Internal Audit and need checks and balances
Be mindful of the impact that a voided or manual check
issuance causes to other departments process
GL, Taxes, Benefits
Direct Deposit (EFT)
Advantages:
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Immediate availability of funds on Payday
No Bank Interaction
No Delay in constructive receipt of pay
No Lost/Stolen Checks
Reduction of Paper Flow
Cost Effective
Ease of Reconciliation
Reduction of Escheatment
Direct Deposit
Disadvantages:
• No Bank Account
• Comfort Level in Payment
• Incorrect Pay
• Employee changes accounts without telling Payroll
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Not truly “Green”
Loss of Float
Additional Processing Fees
Challenges for stopping payment/reversals
Direct Deposits
Late Direct Deposits:
• Troubleshooting Funds must be posted by 9:00 am on pay date
• Verify Routing and Account Numbers Prenote?
• RDFI posting schedule
• Federal Holiday Impact on 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.
Employers must keep the authorization agreement for at least
2 yrs after revocation,
Full Payroll Reversals vs.
Single entry reversals
Regardless these requirements are mandatory
• Amount of reversal must match the amount of
the credit
• Must be reversed within 5 days of settlement
date
• No employee authorization is necessary
Chapter 5 – Paying the Employee
Pay Cards
Paycards
• Paycards are similar to debit cards
• Prefunded, host based cards providing employees
access to their net pay via bank, ATM (Automatic
Teller Machine) or
POS( Point of Sale)
purchase.
• Paycards are similar to direct deposit
• Funding process for the employer is same as for
direct deposit
• Process subject to the same NACHA regulations.
Paycards cont.
• New way to pay employees
• Many variable options in the plans
• Many competitors trying for business – ensure
reputability
• Verify with legal for implications from plan
• Cardholder security
• Employee age (18 yrs)and turnover consideration
• Understand the difference between branded vs.
non-branded
Paycards
Branded vs. Non-Branded
Branded:
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Visa MC Discover
Employee Signature only, easily used if stolen
ATM – PIN
Personalized
Parental Approval < 18 yrs old
Paycards
Branded vs. Non-Branded
Non-Branded
• Network Logo
• PIN required for ALL transactions, Stolen card
only needs pin to purchase
• Most reliable – Safer
• Host computer authorizes funds are there
Paycards
Employee & Employer Benefits
Employee:
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Reduced costs
Increased independence
Improved credit status (not true with all cards)
Financial Safety
Ease of use
Replenishment if lost
No time or geographical limitations
Paycards
Employee & Employer Benefits
Employer:
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Reduced Costs
Enhanced efficiency
All employees eligible
Increases employee productivity time
Escheatment reduction
Paycard Implementation
• Financial Institution agreement and offering
• Anticipation program for employees
• Establish a funding pool with a bank
• Institution establishes employee account cards, names
• Funding by wire or ACH
• Adjustments are done via web application
Reversals:
• Based on card policy-talking points when researching
vendor
• Bank notification for reversal and refunding
• Blank checks available for employees to use
• Check to see if they do credit checks on employees
Escheatment
Escheatment is the unclaimed wages process governed by
State Laws
• State regulated
• Length of time payment held (generally 1 yr)
– New York/Oregon – 3 yrs
– North Dakota/Pennsylvania – 2 yrs.
• Notification process
• Wage turnover process
Best practice is to utilize direct deposit and paycards as wage
payment methods.
Wages Owed to Deceased Employees
Payments, Payee and Taxation are based on when the
employee passes.
• Federal Regulates Taxation
• State Laws Regulates the payee and payment amount
in accordance with the current situation.
Illinois: Maximum Payable: All unpaid wages
To Whom: Person owed for funeral
expenses, spouse or child.
Allowed Conditions to Pay: Small estate affidavit: estate
not over $15,000
Extra Pay Days
Each year we have extra pay days caused by the calendar.
• Years affected with the 53rd pay period.
2012, 2013, 2014,2015, 2016
• Payroll must anticipate and plan for proper processing and
compliance.
– Holidays
– Weekend pay date
• Salaried employees can be adjusted. Most employers don’t bother
• Hourly employees must be paid all wages. No different
Best practice is to maintain pay structure and schedule without
deviation…Keep good relations with employees.
Verify contracts if applicable.
Review Questions
1. What laws govern how often employers must
pay employees?
2. Who governs the treatment of Escheat laws?
3. What is a branded pay card?
Review Cont.
True or False
1. The Fair Labor Standards Act regulates how often
employees must be paid by their employer or how
soon they must be paid after performing services.
2. Direct Deposit is one area where the federal and state
governments share regulatory responsibility.
3. All States regulate the payment of wages owed to
deceased employees.
4. A bi-weekly salary is paid twice a month, usually the
15th and last day of the month.
5. If 250 employees consent to direct deposit, then all
employees must comply.
Review Cont.
Multiple Choices:
1. The employer prepares a automated file of
direct deposit records that indicates where its
employee’s pay is to be deposited. What is the
name of the financial institution where this file
is then sent?
a) Automated Clearing House
b) Originating Depository Financial Institution
c) NACHA
d) Receiving Depository Financial Institution
Review Cont.
2. How many years must an employee keep the
authorization agreement for direct deposit after
revocation by the employee?
a) At least two years
b) At least one year
c) There is no retention requirement
d) At least three years
Review Cont.
3. What are “escheat” laws?
a) Federal laws governing the treatment of
unclaimed wages as abandoned property.
b) State laws governing the treatment of
unclaimed wages as abandoned property.
c) State laws protecting employees from their
employer
d) State laws outlining the frequency with which
employees are paid.
Review Cont.
4. Once an employee has given authorization for
EFT and the employer creates electronic pay
transactions for deposit, where does the
employer send them?
a) ACH
b) RDFI
c) ODFI
d) NACHA
Review Cont.
5. Under the EFT system, what participating
party receives the individual transactions and
posts them to the customers’/employees’
accounts?
a) ODFI
b) ACH
c) RDFI
d) NACHA
Review Cont.
6. Which of the following laws and regulations
does not regulate EFT?
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Federal Reserve Board Regulation E
Title IX of the Consumer Credit Protection Act
Fair Labor Standards Act
Electronic Fund Transfer Act
Review Cont.
7. Which of the following agencies made it
necessary for NACHA to adopt rules creating
special requirements for International ACH
Transactions?
a) Internal Revenue Service
b) Federal Reserve Board
c) Department of State
d) Office of Foreign Assets Control
Review Cont.
8. Which of the following participants in the
direct deposit process distributes EFT
payments to the receiving financial
institutions?
a) ODFI
b) ACH
c) RDFI
d) FRB
Review Cont.
9. Which of the following is not an employee
benefit of using paycards to pay employee
wages?
a) Eliminating check cashing fees
b) Increased risk of paycheck theft
c) Protection from loss because paycard can be
replaced
d) No time or geographic limitations on funds
access
Review Cont.
10.If an employer uses prenotificationto test the
employee’s banking information before
initiating direct deposit, how long before any
actual pay is sent through the ACH network
must be prenotification be sent?
a) 6 Banking Days
b) 2 weeks
c) 3 Banking Days
d) 6 Calendar Days
Paying the Employees
Questions
Comments
Read the chapter, do the quizzes, know the
difference between ACH, ODFI, RDFI, NACHA and
IAT
Read Questions twice, know what they are asking!