With each new year comes legislative changes that may affect your business, and payroll is no exception. Chances are, if you have employees, your payroll requirements will be different in 2020. Here are 9 things you can do to prepare for the changes ahead:
1. Confirm applicable minimum wage rates.
The federal minimum wage will stay at $7.25 in 2020, but 29 states and Washington, D.C. will have a minimum wage rate that’s higher than the federal minimum wage. As an employer, you need to comply with the highest applicable minimum wage. Keep in mind that some counties and cities have their own minimum wage laws, so be sure you’re up-to-date on the local minimum wage laws that apply to you.
2. Display new labor law posters.
The Department of Labor (DOL) requires employers with at least one employee to display federal and state labor law posters in plain view for employees. These posters report details on the applicable minimum wage rate and employment law notices. To ensure your business is compliant and protected, update your posters every year. If you’re a Payroll Data client, we offer E-Update Service which includes:
- Annual delivery of state and federal labor law posters.
- Updated postings sent via email for easy printing (includes every mandatory or recommended federal, state, city and county compliance change).
- Protection in the event of a government fine or penalty (up to $25,000).
To find out more or to sign up for this service, contact email@example.com.
3. Note the new Social Security wage base.
On October 10, 2019, the Social Security Administration announced that the 2020 social security wage base will increase from $132,900 to $137,700. This means that for annual salaries up to $137,700, both the employer and employee must pay a 6.2% Social Security tax.
4. Confirm workers’ compensation premiums.
For many years in a row, several states across the country have experienced a decline in the frequency of workers’ compensation claims. As a result, state officials are approving rate cuts in workers’ compensation premiums. However, your premium rate may increase, decrease, or stay the same depending on your state, business classification code and industry group. Check with your state to confirm your 2020 premium rate.
5. Implement retirement contribution limit changes.
Each year, the Treasury Department adjusts annual retirement contribution limits based on inflation. Employees can now contribute up to $19,500 to their 401(k). In addition, the total 401(k) limit, which includes employee elective deferrals and employer contributions, has increased from $56,000 to $57,000. The limit for IRA contributions remains unchanged at $6,000.
6. Note FSA increases.
On November 6, 2019, the IRS announced that employees can contribute up to $2,750 to their medical flexible spending accounts (FSAs) in 2020, which is a $50 increase from 2019. Since the announcement came later in the fall, some employers may have already locked in their employees’ FSA contribution amounts. If you’re one of those employers, contact your FSA service plan provider to see if they can accommodate changes in FSA contribution limits for 2020.
7. Adjust for commuter benefits.
This year, employees and employers can put $5 more of their pre-tax dollars into transit and parking expenses. The IRS increased the monthly limit from $265 to $270. Additionally, the combined monthly limit for transit passes and vanpooling expenses for 2020 will be $270, also up from $265. However, under the Tax Cuts and Jobs Act (TCJA), employers can no longer receive a federal tax deduction for these benefits.
8. Verify your state unemployment tax rate.
If you work with Payroll Data and you are a Wisconsin-based employer, we obtain annual rates from the state on your behalf. If you’re a client outside of Wisconsin, you’ll need to confirm your state rate and send it to your client service representative (CSR) or email it to firstname.lastname@example.org. If you’re not already a Payroll Data client, check with your state for any changes in the unemployment tax rate.
9. Stay in the know.
In addition to the changes above, there may be other new employment laws in 2020. To make sure you’re aware of new regulations that may impact your business, refer to our go-to list of payroll resources to stay on top of the latest. If you have specific questions related to new laws, we recommend consulting a legal professional.