Compensation, Payroll and Deductions

When considering the cost of employees, most people think of the payroll expenses but overlook the costs to recruit, hire and process new employees.

• Recruitment costs
• Workers Comp
• Pay and Bonuses
• benefits
• AND matching deductions

After an employee is hired, most people think of their payroll expense only in terms of the amounts that appears on their employee's paychecks. Some of these payroll expenses are not only deducted from the employees pay, but are matched, as required by law, and paid by the employer in addition to the normal payroll.

In addition to the take-home pay and payroll taxes, businesses provide payroll benefits, many of which are required by law.

Benefits the law requires employers to provide for employees:

• time off to vote, serve on jury and perform military service
• Provide Worker's Compensation Insurance and requirements
• Withhold FICA taxes and match them (7.65%, 7.65%)
• Pay State and Federal Unemployment Taxes for the Employee (SUTA & FUTA)
• Withhold and match State SDI - short term disability benefits in most States (1.25%, 1.25%)
• Comply with the Family and Medical Leave Act

You are not required to provide:

• Retirement Plans
• Health Plans (except in Hawaii; let's see what happens with the new Federal Health bill)
• Dental or Vision plans
• Life Insurance plans
• Paid vacations, holidays or sick leaves

Additionally, you have issues around employees involving

• Federal minimum wage http://www.dol.gov/elaws/faq/esa/flsa/001.htm
• Federal minimum wage http://www.laborlawcenter.com/t-federal-minimum-wage.aspx
• California Wages and Pay FAQs http://www.dir.ca.gov/dlse/DLSE-FAQs.htm
• breaks http://www.dir.ca.gov/dlse/FAQ_RestPeriods.htm
• lunch http://www.dir.ca.gov/dlse/FAQ_mealperiods.htm
• vacations http://www.dir.ca.gov/dlse/FAQ_vacation.htm
• overtime
• postings of rights and responsibilities
• SB 198 Safety Training
• Research the California Labor Code California labor law

Employees earn money as Salaries, Hourly Wages, Bonuses and Commissions Earned. An employer must withhold and pay money for the employee to various government agencies to which the employee owes money. This is basically a service to the employee.

Self employed individuals and independent contractors must keep track and make the same payments to these government agencies. Additionally, the employer must match some of these payments. The bottom line is that your payroll costs will be approximately 15% above the salaries, hourly wages, bonuses and commissions earned.

Formulas:

Total Income - exclusions = Gross Earnings

Gross Earnings - deductions = Net Taxable Earnings

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