Recipe for Success HIRING WORKERS. Ben Montañez and Michael Lanahan

Transcription

1 Recipe for Success HIRING WORKERS Ben Montañez and Michael Lanahan

2 First Thing s First Get an EIN! Employment ID Number every Employer needs one. It s like a Social Security Number for your business. It s free and fast register online at Already have an EIN? Have you changed your business? You may need a new one.

3 Register with the State Illinois, too. You must register with the Illinois Department of Revenue within 30 days of start-up. Do it online it s free and fast.

4 Employee or Independent Contractor? Your worker is an Employee if You direct and control what the job is and how it is performed. Most food service workers are probably Employees. You must pay employment taxes for each Employee.

5 New Hire Reporting Program The New Hire Reporting Program is part of the federal welfare reform law and now includes increased efforts to locate absent parents who are not supporting their children. Since 1997, a nationwide employer New Hire Registry has been used to locate absent parents in order to enforce child support orders.

6 Reporting New Hires In Illinois, all employers are required to report new employees to the Illinois Department of Employment Security (IDES) within 20 days of the employee's first day on the payroll and provide all the necessary information.

7 New Hire Registry (Necessary Information) Employee Data Employee name Home address Social security number Date of hire (the employee's first day of work for pay) Employer Data Name of business/employer Address of employer Federal employer identification number (EIN) Address where income withholding orders should be sent, if different from the EIN address.

8 Is Your Worker Eligible to Work in the U.S.? If Employer knowingly employs undocumented workers, she could face fines. Fines have been anywhere from $90 to nearly $395,000. In 2011, the median fine was $11,000. Fines increase with each violation. A pattern or practice of illegal hiring may result in criminal charges fines or prison.

9 Is Your Worker Eligible to Work in the U.S.? First, Employers must verify the worker s eligibility within 3 days of the hire date. Form I-9 helps with this requires worker s name, address, and documentation. Have worker complete it after the job offer, but before her first day of work.

10 Documentation Form I-9 gives examples of acceptable documentation. Key: Employee must establish both Identity (she is who she says she is) and Employment Authorization (she is allowed to work in the U.S.). Can be combined in one document or in multiple. Employer must verify that the documentation reasonably appears to be genuine.

11 Verify Next, after Employee returns the I-9 Form, verify her worker eligibility with the federal government at (Full link in handout.) This website is free and fast, and it will tell you whether your potential Employee is eligible to work. Peace of mind!

12 Note: You don t need to file the Form I-9 with the federal government. BUT you must keep it on file for 3 years after the hire date OR 1 year after Employee s termination date, whichever is later.

13 Minimum Wage

14 IL Minimum Wage Rates Categ ory of Employees Hourly Optional Rates Adults (18+ years of age) $8.25 First 90 days with employer for NON- TIPPED employees First 90 days with employer for TIPPED employees TIPPED employees after first 90 days of employment $7.75 $4.65 $4.95 Youth (under 18 years of age) Hourly $7.75 Optional Rate Tipped employees $4.65

15 Tips and Minimum Wage Employers must pay tipped employees at least 60% of the applicable minimum wage. ($8.25 x 60% = $4.95) An employer is limited to calculating 40% of an employee s tips when reaching minimum wage. If an employee s tips plus wages do not equal the minimum wage, the employer must make up the difference.

16 Tips and Taxes (employee taxes) Employers must withhold income tax, social security tax, and Medicare tax on an employee's tips. If an employee reports $20 or more of tips in a month, the tips are subject to Federal Unemployment Tax.

17 Tips and Taxes (employer taxes) Employers are responsible for the employer social security tax on wages and tips up to $113,700, and the employer Medicare tax for the whole year on all wages and tips. Tips are includable in the company s taxable income, and are deductible as a business expense.

18 Employers and Tip Pools Under Illinois law, employers may NOT participate in employee tip pools. An employer must notify its employees of any required tip pool contribution amount and may not retain any of the employees tips for any other purpose. See Morgan v. SpeakEasy, LLC, 2007 WL , (N.D. Ill. 2007) ( The Fair Labor Standards Act expressly prohibits employers from participating in employee tip pools. )

19 IL Prevailing Wage Rates Food Service Cook County Time Cook Food Service Worker Start $13.48/Hour $10.67/Hr After 3 months $13.88/Hour $11.07Hr After 6 months $14.28/Hour $11.47/Hr After 9 months $14.78/Hour $11.97/Hr After 12 months $15.18/Hour $12.37/Hr After 15 months $15.50/Hour $12.77/Hr After 18 months $15.98/Hour $13.17/Hr

20 IL Prevailing Wage Rates Food Service Cook County contd. Health and Welfare coverage must be provided for employees working 30 or more regular scheduled hours per week. Newly hired eligible employee's benefits begin on the first of the month following 90 days of employment. Employer shall pay the following per month: Employee Employee + 1 Employee/Spouse Family $83.65/Week $142.21/Week $184.04/Week $259.33/Week

21 Taxes

22 Employment Taxes If you have employees, you need to keep records of employment taxes for at least 4 years. Three main parts: 1) Federal Taxes 2) Federal Wage & Tax Statements 3) State Income Taxes

23 Federal Taxes a) Income Tax This differs with each Employee and is determined by their W-4 form. Withhold this from Employees paychecks.

24 Federal Taxes b) Social Security Withhold 6.2% from Employee s wages. Additionally, Employer must match Employee contribution 6.2% of Employee s wages. Note: Taxable wages only go up to $113, 700. If the employee earns more, neither of you have to pay Social Security tax for it.

25 Federal Taxes c) Medicare Tax Withhold 1.45% of Employee s wages. Additionally, Employer must match pay 1.45% of Employee s wages. d) Additional Medicare Tax If Employee s wages exceed $200,000 a year, you must withhold and pay another.9% of Employee s wages to Medicare.

26 Federal Taxes e) Federal Unemployment Tax (FUTA) Must pay 6% of the first $7,000 paid to each Employee in a calendar year. Not withheld from wages; Employer pays this separately.

27 Federal Wage & Tax Statements (Just Reporting not a Tax) Must report all wages paid and taxes withheld for each Employee W-4 Form shows all federal income tax withholdings. W-2 Form shows Employee wages/salary/other compensation.

28 Illinois Taxes a) State Income Tax Must withhold 5% of Employee s wages.

29 Illinois Taxes b) State Unemployment Tax Pay directly to IL government not withheld. Rate varies, depending on the business. Determine your liability online at Max rate = 8.95% Min rate =.55% Only applies to the first $12,900 of wages paid to each Employee in a calendar year. Note: These numbers change every year.

30 Insurance Unemployment Insurance Workers Compensation Insurance

31 IL Unemployment Insurance Illinois Unemployment Insurance Act Employers who are subject to this Act pay the IL Department of Employment Security, which uses the money to pay benefits to the unemployed. Most for-profit employers become subject to this Act and are liable for paying contributions as soon as they have: a) Paid $1,500 in wages in a single calendar quarter, or employed 1 or more persons for 20 weeks in a given calendar year; or b) Paid $20,000 in cash wages in 1 calendar quarter or employed 10 or more workers for 20 weeks in a given calendar year for farm work; or c) Paid $1,000 in cash wages in 1 calendar quarter for domestic work (not-applicable to food service providers)

32 IL Unemployment Insurance Employer Contribution Rates What Are Employer Contribution (Tax) Rates? State Experience Factor & Employers' UI Contribution Rates (EA-50): Rates Maximum Minimum Taxable Wage Base % 0.55% $12, % 0.55% $13, % 0.70% $12, % 0.65% $12, % 0.6% $12, % 0.8% $12,000 Only the first $12,900 of wages paid to a worker in calendar year 2013 are subject to the payment of contributions. Rates based on industry, income, worker s experience.

33 Workers Compensation Insurance Illinois law requires employers to provide workers' compensation insurance for almost everyone who is hired and whose employment is localized in Illinois. Note: Sole proprietors, business partners, corporate officers, and members of limited liability companies may exempt themselves.

34 Workers Compensation (Do s) Employers must: a) purchase workers compensation insurance or obtain permission to self-insure from the Commission; b) post a notice in the workplace. Employers can obtain this notice at and c) keep records of work-related injuries and report to the Commission those accidents involving more than three lost workdays.

35 Workers Compensation (Don ts) Employers are prohibited from doing the following: d) charging the employee for any part of the workers compensation insurance premium or benefits; and e) harass, discharge, refuse to rehire, or in any way discriminate against an employee for exercising his or her rights under the Workers Compensation Act.

36 FAQ on Workers Compensation How many employees does an employer have to have to come under the Act? If you have 1 employee, even a part-time employee, you must obtain workers' compensation insurance. There are rare exceptions; see Section 3 of the Act or consult an attorney.

37 FAQ on Workers Compensation Do employees who are family members have to be insured? YES, unless 1. they are corporate officers; or 2. they work for an agricultural enterprise that employs less than 400 working days of labor per quarter during the preceding calendar year, exclusive of working hours of the employer's spouse and other members of his or her immediate family residing with him or her. Statute: Sections 3(17)(b) and 3(19)

38 FAQ on Workers Compensation I am a new employer. How do I obtain workers compensation insurance? Employers may either buy insurance or obtain permission to self-insure. Roughly 90% of employers buy insurance. In Illinois, it is sold in the private sector.

39 Penalties for Noncompliance with Workers Compensation Insurance An employer that knowingly and willfully fails to obtain workers compensation insurance may be fined up to $500 for every day of noncompliance, with a minimum fine of $10,000. Officers can be held personally liable if the company fails to pay the penalty.

40 Let s say Michael makes $100,000 this year Withhold Federal Income Tax? X Pay Directly Social Security (6.2%) $6,200 $6,200 Medicare (1.45%) $1,450 $1,450 FUTA (6% of $7,000) X $420 IL Income Tax (5%) $5,000 X IL Unemployment (.55% %) X? TOTAL $12,650 $8,070 So, Montañez Meatloaf pays $8,070 in taxes for Michael, plus IL Unemployment tax, plus Workers Compensation Insurance.

41 Workplace Posters If you choose to hire employees, the law requires that your business prominently display posters that inform employees of their rights and your responsibilities to them under federal and state labor laws.

42 Poster Placement The posters should be posted in a place where employees normally have access and where they can easily see them, such as a break room, bathroom, or near where employees check-in.

43 State (Illinois) Posters 1. Employee Rights Under Illinois Employment Laws. (includes the info for Wage Payment and Collection Act, Child Labor Law, Minimum Wage Law, Equal Pay Act, Victims Economic Security and Safety Act and the One Day Rest in Seven Act) 2. Workers Compensation Notice 3. Unemployment Insurance Benefits Notice 4. Emergency Care for Choking 5. Smoke Free Illinois Act

44 Federal (USA) Posters 1. Equal Employment Opportunity 2. Minimum Wage - Overtime - Child Labor (#WH 1088) 3. Employee Polygraph Protection Act (#WH 1462) 4. Family Medical Leave Act (WH# 1420) 5. Federal Government Contracts (#WH 1313) 6. Federally Financed Construction (#WH 1321)

45 Background Checks? Criminal Records Can consider conviction, NOT arrest info or expunged convictions. Credit Reports Medical Records and Workers Comp School Records

46 Get organized and stay informed Start Keeping Records - From tax and labor recordkeeping requirements, through secured personnel performance and training records, you should keep records. Adopt Workplace Safety Practices - The Occupational Safety and Health Administration's Quick Start tool can tell you what applies to you. Understand Employee Benefit Plans Employee Benefit Plans must adhere to minimum standards. Learn Management Best Practices - The Small Business Administration offers free guidance on hiring, motivating, and directing employees. Apply Standards that Protect Employee Rights - The Equal Employment Opportunity Commission (EEOC) and Fair Labor Standards Act (FLSA) offers guidance on required standards.

47 Additional Resources Self-Employed

48 END