Nearly 160 million workers will benefit from the extension of the reduced payroll tax rate that has been in effect for 2011. The 4.2% rate for the employee portion of the Social Security payroll tax has been extended through February 29, 2012. On December 23rd, President Obama signed into law the Temporary Payroll Tax Cut Continuation Act of 2011 (H.R. 3765). Based on this new legislation, wages earned after December 31, 2011 and before March 1, 2012 will be subject to the 4.2% Social Security Old Age, Survivors, and Disability Insurance (OASDI) withholding rate up to the full Social Security wage base of $110,100. This reduced Social Security withholding will have no effect on employees’ future Social Security benefits. Employers will still pay the full 6.2% rate for their portion of the Social Security tax.
The House and Senate passed the measure without a formal vote by unanimous consent. Under this legislation, the payroll tax will remain at the current 4.2% rate, which began on January 1, 2011, instead of reverting to the 6.2% rate. Without congressional action, the higher rate would have returned in 2012, meaning an average $1,000 tax increase for 160 million Americans.
"Because of this agreement, every working American will keep their tax cut, about $1,000 for a typical family," Obama said in a statement after signing the bill into law. That "translates into an extra $40 or so in every paycheck."
“The agreement to extend the payroll-tax cut is a win for small businesses and our job creators can enjoy the holidays without worrying about whether or not their taxes will go up,” said Fred Baldasarro, spokesman for the U.S. Small Business Administration, in a statement. “Small-business owners want certainty and this deal ensures that we keep the wind at their backs.”
What is the ‘Recapture’ Provision of the New Law?
Under the terms negotiated by Congress, the law also includes a new “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period (the Social Security wage base for 2012 is $110,100, and $18,350 represents two months of the full-year amount). This provision imposes an additional income tax on these higher-income employees in an amount equal to 2 percent of the amount of wages they receive during the two-month period in excess of $18,350 (and not greater than $110,100).
Read the IRS News Release: Payroll Tax Cut Temporarily Extended into 2012
Read the Article on Yahoo! News: Congress Punts Hard Payroll Tax Work to 2012
Read the Article on Bloomberg Businessweek: Payroll Tax-Cut Extension Sets Up 2012 Fight Over Longer Plan
Photo Credit: Official White House Photo by Pete Souza
Twenty states have a Federal Unemployment Tax Act (FUTA) credit reduction for 2011. Employers in a credit reduction state must remember to calculate a credit reduction as an adjustment to their FUTA tax on their 2011 IRS Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Credit reduction states are states that did not repay the money they borrowed from the Federal government to pay unemployment benefits. Employers must include liabilities owed for credit reduction in calculating their fourth quarter deposit.
What is the Current FUTA Tax Rate?
The current FUTA tax rate is 6.0% on the first $7,000 paid to each employee each year. The 6.0% FUTA rate has been in effect since July 1, 2011 when the 0.2% FUTA surtax expired. Employers receive a FUTA credit of 5.4% for timely state unemployment insurance (SUI) payments, making the effective tax rate 0.6% for employers that are not in a credit reduction state.
What Factors Determine if a State is Impacted by a FUTA Credit Reduction?
Under the Federal and state unemployment insurance system, states with a high rate of unemployment and those that have difficulty meeting their benefit obligations can borrow money from the Federal Unemployment Account to pay unemployment benefits. If loans taken out during one year are not repaid by the end of the following calendar year, the FUTA credits for employers in those states are reduced, with the extra FUTA taxes paid being applied against each state’s loan balance.
Who Determines the Credit Reduction States?
The Department of Labor (DOL) determines the credit reduction states for each year. The DOL does not announce the credit reduction states until after November 10th of each year. For 2011, employers in 20 states must reduce their 5.4% credit on their IRS Form 940. If employers pay wages that are subject to the unemployment tax laws of a credit reduction state, the employers must pay additional FUTA tax.
How are FUTA Credit Reductions Calculated?
For 18 of the states that have outstanding FUTA loans, the credit is reduced by an additional 0.3% on wages up to $7,000 per employee which equates to an additional payment of $21 per employee. Because the 5.4% credit is reduced, the employer now owes more money to FUTA. Instead of the standard 5.4% credit allowed, employers in these 18 states will have a reduced credit of 5.1% for 2011 (6.0% - 0.6% = 5.4% - 0.3% = 5.1%), making their FUTA tax rate 0.9%.
For 2011, there are 2 states where the FUTA credit reduction is not 0.3%. The exceptions are Indiana where the credit reduction is 0.6% instead of 0.3% and Michigan where the credit reduction is 0.9% instead of 0.3%.
Which States are FUTA Credit Reduction States for 2011?
The following 20 states currently have outstanding Federal Unemployment Trust Fund loans. Employers in these states must reduce their 5.4% credit on Form 940.
It is important to note that the FUTA credit reduction only applies to employers who pay SUI wages to the states listed above. Employers in all other 30 states will receive the full FUTA credit of 5.4%.
Want an Easy Reference Guide for FUTA Credit Reduction States and FUTA Tax Rates by State for 2011? Download this Free Guide Below!
Two-thirds of American companies say they’ve made business mistakes this year they wish they could take back. Those mistakes, according to a new CareerBuilder survey, came in the form of bad hires, the results of which ended up costing them more than just bruised egos. The new cost of a bad hire survey reports that 69 percent of employers indicated that bad hires lowered their company’s productivity, affected worker morale and even resulted in legal issues. Forty-one percent of companies estimate that a bad hire costs more than $25,000 and one in four said it costs more than $50,000.
CareerBuilder’s recent blog article… What’s the True Cost of a Bad Hire?... discusses how hiring the wrong person is about more than just money. Here are some excerpts from that article…
While some mistakes are beyond the hiring manager’s control, there are ways to avoid hiring the wrong person. “The more thoroughly the candidates are vetted, the less likely they will be a poor match,” says Rosemary Haefner, vice president of human resources at CareerBuilder.
Haefner advises employers to allow job candidates the opportunity to meet as many employees in the department as possible – especially if they will work closely together. Also, candidates should provide ample evidence to show they have the skills and work experience required for the position.
Why Do Hiring Mistakes Happen?
When asked to give a reason for the bad hires, an estimated 34 percent of employers attributed the mistake to the fact that sometimes things just don’t work out. A rushed decision, however, topped the list of reasons companies gave for making a bad hire.
What’s the Price of a Bad Hire?
It’s more than just money. The price of a bad hire adds up in a variety of direct and indirect ways. For example, 9 percent of companies said bad hires result in legal issues and 11 percent said they result in fewer sales. The most common effects of a bad hire are:
- Lost worker productivity: 41 percent
- Lost time to recruit and train another worker: 40 percent
- Costs associated with recruiting and training another worker: 37 percent
- Negative impact on employee morale: 36 percent
- Negative impact on client solutions: 22 percent
What are the Top Six Characteristics of a Bad Hire?
When it comes to what makes someone a bad hire, employers reported several behavioral and productivity related problems:
- Failure to produce the proper quality of work: 63 percent
- Failure to work well with other employees: 63 percent
- Negative attitudes: 62 percent
- Immediate attendance problems: 56 percent
- Subject of customer complaints: 49 percent
- Failure to meet deadlines: 48 percent
How Can You Turn Bad Hires into Good Employees?
For more tips on how to avoiding hiring mistakes, check out the recent interview with Hire with Purpose author Jay Goltz. Wondering whether to fire or try to fix an employee? Get insight from this recent interview with management expert Anne Loehr, author of Managing the Unmanageable: How to Motivate Even the Most Unruly Employee.
The last article in our series… 3 Critical Steps for Creating an Efficient Employment Process… provides some best practices for crafting an effective job posting. One of the best ways to make a great first impression on future employees is to develop an effective job posting or advertisement. Many times this posting is your first contact with a job seeker so you want to put your best foot forward and portray your company in a positive light. In this article, we’ll discuss some tips, suggestions and critical elements for creating a successful job posting.
The Importance of a Job Title
One of the main differentiators that can attract more responses to your posting is to make sure the job title draws in your potential candidates. Instead of just stating the exact title of the job such as Web Developer, you might consider something more descriptive, such as “Senior Web Developer for High Growth Company in Chicago”. This gives the job seeker a considerable amount of information built into the title and can motivate them to read more.
With job postings, you have a small window of opportunity to attract and keep someone’s attention. Many candidates do a quick scan and move on if they don’t think the job title is what they are looking for. You want to stand out from the crowd and a well-developed job title is the key to attracting their attention. Take some extra time and think about what would attract you to a certain position. In the end, it may be the one element that makes a job candidate want to read more and apply.
Developing Your Company Image & Brand
It’s essential to develop a company description and image that expresses who you are as an organization. How you brand your business in your job postings is important. This is especially true for small and mid-size businesses that may not necessarily have the name recognition that larger organizations have. Some of the key elements that contribute to branding a company include:
- An overview of what the company does and the services or products you provide
- The industry your company is in
- Any special recognition your company has been awarded
- The size of the company and how many employees you have
- The job location including city and state or metro area
- Your company and workplace culture
Outlining the Job Description
A good job description should include an overview of responsibilities, requirements of the position such as skills and experience, education or special certifications and whether the position is full-time, part-time, seasonal or a freelance or internship position. Learn how to creative an effective job description in our recent blog article… 9 Elements for Developing a Good Job Description.
Instructions on How to Apply
It’s important to provide job candidates with specific steps for how to apply for the job. Do you want them to call, email or visit a website? Nowadays a lot of this is handled online either by visiting a specific recruitment website and uploading a resume or by applying through the company’s corporate website.
If you are interested in a person who pays special attention to detail, here’s a useful tip. Within your job posting, include special instructions to copy and paste a specific line such as “Attention to detail is a very important part of the job.” If the candidate includes this sentence when applying, you know they are paying attention to the details of the job posting.
Be Sure to Proofread Your Job Posting
This may seem pretty basic but be sure and proofread your job posting for spelling and grammatical errors as well as accuracy. Any errors will reflect poorly on your company and may result in less candidates applying. Be sure to read your job posting several times and have at least one other person proof the posting. Also, be sure to spell check the job posting one more time after you have completed the proofing process.
More Tips on Writing a Job Posting
Want more tips and suggestions on how to write a compelling job posting? Here are some good articles we found online….
In continuing with our recent blog articles… 3 Critical Steps for Creating an Efficient Employment Process and How to Perform a Detailed Job Analysis… the first step of the hiring process focused on the job analysis. Once the job analysis is completed, this becomes the basis for developing a concise job description which we’ll cover in this posting.
A well-written job description is critical for ensuring your employees understand the responsibilities and requirements of a particular job. It is also a key resource to help you review employee performance, hire employees, develop recruitment advertising and make sure your compensation is competitive so you can attract the most qualified candidates.
When developing a job description, it is important to be sure you do not violate disability nondiscrimination laws such as the Americans with Disabilities Act. Compliance guidance is available from the Office of Disability Employment Policy and the Job Accommodation Network (JAN). For more information on recruiting and hiring people with disabilities, please review the Recruiting & Hiring section on Disability.gov.
Here are nine core elements for developing a good, concise job description:
1. Job Summary Overview
A summary statement is a brief outline of a job's purpose and goals and should be about three or four sentences. The job description details, such as tasks and experience, will be covered in the remaining parts of the job description.
2. General Information
- Job title and classification: The job title should be concise (i.e. Web Developer). Be sure to indicate whether the job is exempt or nonexempt under the Fair Labor Standards Act.
- Worksite location
- Management/reporting responsibilities: Identify whether this position has direct reports and where this position fits on the company organizational chart
- Identify no more than 10 tasks (for example: managing accounts payable, managing payroll administration). Be as concise as possible and try to keep the task descriptions to one line each. Be sure to also include a basic statement that communicates other responsibilities that may be required within the scope of this position.
- The tasks should be organized in a logical manner. Begin each task description with an action verb such as develop, organize, manage, create, oversee or coordinate.
- When describing each task, include the benefit of the task when possible. For example: “Update marketing database to assure all client information is current”.
- Identify the skills, expertise and knowledge base necessary to perform each task listed in the job description.
- Describe any special skills that require additional training, certification, etc.
- Identify relevant past experience required.
- Include any special professional certifications that may be required.
- Include any special education requirements.
6. Work Conditions
- Work hours
- Travel requirements
- Unusual environmental conditions
- Pay range and benefits information
- Bonuses and any other incentives
8. Company Description
It’s important to include a description of the company as well. You want to sell the candidates on working for your company so it is important to make a great first impression.
A disclaimer can be typically placed at the end of the job description to provide flexibility in adding or changing job responsibilities. The following is an example of this type of disclaimer: “This job description may be changed to include new responsibilities and tasks or change existing ones as management deems necessary.”
Review Job Descriptions Regularly
It’s a good idea to review job descriptions on a regular basis as the tasks, responsibilities and requirements may change. In addition, you want to make sure you have realistic expectations about the jobs being performed.
Look for Friday’s Blog Posting on How to Create an Effective Job Posting!
We’ve interrupted our series on the 3 Critical Steps for Creating an Efficient Employment Process to let you know the IRS has released the Form W-4 for 2012. If you have employees that have gotten married, divorced or had children this year, you’ll want to remind your employees to update their W-4 form so their withholdings are correct.
The IRS regulations require employers to remind their employees to file an amended Form W-4, Employee’s Withholding Allowance Certificate, if their filing status, exemption allowances or exempt status has changed since the last filing of their W-4 form. This notice must be provided to employees by December 1st each year. The 2011 Form W-4 is still available if you need it.
Employees claiming “exempt” from withholding in 2011 and who wish to continue their exemption for 2012 must complete a new Form W-4 by February 16, 2012 to maintain their “exempt” status. An exemption is only good for one year. If a new W-4 is not received for employees claiming “exempt”, the employer must begin withholding Federal income tax as if they are single, with zero withholding allowances.
Reasons Employees Need to Change Their Withholdings
During the year, changes in an employee’s marital status, exemptions, adjustments, deductions or credits may occur which will impact what they claim on their tax return. When these changes occur, employees should provide their employers with a new W-4 form so their withholding status and number of allowances can be changed. If the changes reduce the number of allowances an employee is allowed to claim or if their marital status changes from married to single, employees must give their employer a new Form W-4 within 10 days of this change.
Generally, employees can submit a new W-4 whenever they wish to change their withholding allowances for any other reason. Here are some examples of lifestyle changes which could impact withholding allowances:
- Birth or adoption of a child
- Loss of an exemption
- Purchase of a new home
- Filing chapter 11 bankruptcy
Who is Exempt from Withholding?
If an employee claims exemption from withholding, employers will not withhold Federal income tax from their wages. The exemption applies only to income tax and not to Social Security or Medicare taxes.
Employees can claim exemption from withholding only if both of the following situations apply:
- They had a right to a refund of all Federal income tax withheld in the previous tax year because they had no tax liability
- They expect a refund of all Federal income tax withheld for the current tax year because they expect to have no tax liability
To help employees further decide whether they can claim exemption from withholding, you can direct them to Figure 1-B Exemption From Withholding on Form W-4 on page 11 of the IRS Publication 505 Tax Withholding and Estimated Tax. This guide walks them through a series of “yes” and “no” questions to help them decide whether they can claim exemption from withholding.
When Will New W-4 Forms Go Into Effect?
If the change to a W-4 form is for the current year, employers must put the new Form W-4 into effect no later than the start of the first payroll period ending on or after the 30th day after the day on which you receive the revised W-4 from your employee. If the change is for the next year, the new Form W-4 will not take effect until next year.
In our last blog article… 3 Critical Steps for Creating an Efficient Employment Process… we discussed the key tools for creating an organized hiring process for your business. These include performing a job analysis, developing a job description and creating a job posting for each of the positions in your company. In this article, we’ll discuss how to perform a detailed job analysis, which is the first step in creating an efficient employment process.
All hiring decisions and employee evaluations should be based on objective criteria. A manager needs to know each job under his or her supervision and the qualifications required to perform the job. That way they can develop objective interview questions and evaluate an employee’s performance. A well-developed job analysis will play a key role in creating a job description, which is step 2 in the process.
What to Expect During the Job Analysis Process
Performing a job analysis is a logical process which helps you collection information and evaluate and examine each job in your organization. The more information you gather, the better off you will be and the easier it will be when it comes to writing the job description. There are four critical aspects you’ll focus on during the job analysis process:
- Job Purpose: The reason for the job.
- Essential Job Functions: The job duties which are critical or fundamental to the performance of the job.
- Job Setting: The work station, conditions and location where the essential functions are performed.
- Worker Job Qualifications: The minimal skills an individual must possess to perform the essential job functions.
4 Critical Aspects to Performing a Job Analysis
It’s important to remember that a job analysis describes the job, not the person who fills it. By answering the questions below and gathering this information, it will give you a good basis for writing the job description.
1. Job Purpose
- What are the particular contributions of the job towards accomplishing the overall objectives of the company?
- If the job is a completely new position, discuss it with the department, managers and employees who are knowledgeable about the new position’s responsibilities or who will be involved in that area. You can also use some online job recruitment sites to view the way jobs are described as another helpful step.
2. Essential Job Functions
- For existing jobs, you can also obtain recommendations from employees and managers in your company as to the essential functions of the job, as well as changes that can improve efficiencies.
- What three or four activities actually constitute the job? Is each really necessary? (For example: a secretary has basic computer skills like using Word and Excel, files, answers the phone and coordinates meetings.)
- What is the relationship between each task? Is there a special sequence in which the tasks must follow?
- Do the tasks necessitate sitting, standing, climbing, lifting, carrying, operating, analyzing, coordinating, etc.?
- How many other employees are available to perform the job function? Can the performance of that job function be distributed among any other employees?
- Identify if special additional training is needed for this position.
- Be sure to discuss the details of how the employee gets the job done, as sometimes employees may perform additional functions or activities that are not in a job analysis. If these discretionary activities are undocumented, it could result in a reduction in efficiency.
- How much time is spent on the job performing each particular function? Are the tasks performed less frequently as important to success as those done more frequently?
- Would removing a function fundamentally alter the job?
- What happens if a task is not completed on time?
3. Job Setting
- Location: Where are the essential functions of the job carried out
- Organization: How is the work organized for maximum safety and efficiency? How do workers obtain necessary equipment and materials?
- Movement: What movement is required of employees to accomplish the essential functions of the job?
- Conditions: What are the physical conditions of the job setting (hot, cold, damp, inside, outside, underground, noisy, etc.)? What are the social conditions of the job (works alone, works around others, works with the public, works under close supervision, works under minimal supervision, works under deadlines, etc.)?
4. Worker Job Qualifications
- What are the physical requirements (lifting, driving, cleaning, etc.)?
- What are the skills needed for the job (computer skills, writing ability, etc.)?
- What specific training is necessary? Can it be obtained on the job?
- What previous experience, if any, can replace or be substituted for the specific training requirements?
The next step to creating an efficient employment process is to take the job analysis and use it as the basis for developing a concise, well-documented job description.
Look for Friday’s Blog Posting on How to Develop a Job Description!
The employees you hire are essential to the success of your business. They are the heart of your company. Their interaction with your customers and clients impacts the reputation of your business. And how they work together with other employees at your company is the key to a cohesive team. To ensure you are hiring and retaining the best possible people, it is important to develop a job analysis, job description and job posting for each position in your company.
A job analysis, job description and job posting are three key tools for creating an organized and efficient employment process. The good news is that they build upon each other… making it easy to develop the next critical component of the hiring process. Our upcoming blog postings will focus on how to perform a detailed job analysis, how to use the job analysis to develop a well-documented job description and how to create an effective job posting for your recruitment advertisements.
Step 1: Performing a Job Analysis
Before you begin the hiring process for a particular position, it is important to understand the qualifications and abilities required to perform the job. That way you can develop effective job interview questions that will help you to select the most qualified candidates. That’s where the job analysis comes into play.
A job analysis covers key areas such as the purpose or reason the job exists, job location or setting and qualifications in terms of skills and knowledge necessary to complete the fundamental job duties and tasks. Next week’s blog article will focus on how to perform a detailed job analysis. After the job analysis is completed, the next step is to develop your job description, which outlines a position’s responsibilities and requirements.
The following are some advantages to performing a job analysis:
- Provides essential job-related information necessary to make decisions on whether to hire additional staff
- Sharpens the focus on job functions, responsibilities and skills needed to meet the company’s business goals
- Establishes standards and requirements necessary to the hiring process
- Identifies job functions that will require additional training
Step 2: Developing a Well-Documented Job Description
A concise, well-developed job description is the key to helping business owners and HR managers create recruitment advertising, hire qualified employees, review employee performance and make sure the compensation and benefits package are competitive so you can attract the best talent. When creating a job description, be sure that you adhere to all Federal equal employment opportunity laws and applicable state discrimination laws.
Here are some benefits to developing a well-documented job description:
- Provides an opportunity to clearly communicate a job’s responsibilities and functions to employees and management
- Plays a key role in employee performance reviews
- Helps evaluate compensation levels based on job requirements and responsibilities
Once the job analysis and job description have been developed, these become the basis for creating the job posting or recruitment advertisement used to attract the most talented employees.
Step 3: Creating an Effective Job Posting
One of the most effective ways to make a great first impression on potential employees is to develop an effective job posting. Many times this posting or recruiting advertisement is your first contact with a job candidate so you want to make sure your company is portrayed in a positive light. Important components of an effective job posting include: a well-developed job title, company description, job responsibilities and qualifications and information on how to apply.
Look for Next Week’s Blog Posting on How to Perform a Detailed Job Analysis!