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Payroll Basics for Seasonal Employees

Payroll Taxes

Payroll Basics For Part-time And Seasonal Employees

October 9th, 2015

Halloween, Thanksgiving and Christmas are just around the corner. For many businesses, sales from the holiday season could account for a significant part of the income for the year. This is also the time when businesses need to hire additional workers to help. As an employer, here are the payroll basics every small business needs to know.

How are independent contractors, temporary, part-time or seasonal employees different from regular, full-time employees?

Contractor & Payroll Calculation

The first critical consideration is to determine if you are hiring contractors or employees. It is easier to manage and pay independent contractors because the company does not need to deal with payroll taxes. The company just pays the contractor in full and issues a 1099-misc at the end of the year if required. The contractor handles his or her own taxes. However, if a worker is misclassified to be a contractor instead of an employee, the IRS could impose fines and the company is also responsible for all payroll taxes.

Employee & Payroll Calculation

The IRS uses several criteria to differentiate employees and independent contractors. The key consideration is often the level of “controls” the company has on the worker. For example, if a retailer hires someone to decorate the store for Christmas. The person creates the design and completes the decoration to the owner’s satisfaction within a previously agreed deadline. The person could be treated as a contractor. However, if the owner told the person to work every day from 9 to 5, at a specific desk in the store, use the store tools to decorate using methods (nail, cut, brush, etc.) defined exactly by the owner, the worker should probably be defined as an employee. Recently, Uber drivers in California have been granted class-action status to sue Uber so they can be classified as employees.

Key Employee Payroll Regulations

Next, if you are adding seasonal, temporary, or part-time employees, you should generally treat them like regular, full-time employees because all labor laws still apply. Regardless of the type of employees, the following are the same standards that you need to maintain:

  • Federal (Fair Labor Standard Act, FLSA) and State labor laws regarding minimum wage, overtime pay, discrimination, harassment, workplace health & safety standard, and others.
  • Federal and State Payroll taxes (income taxes, social security, medicare, FUTA), withholding from paychecks. The withholding rules and payroll tax rates, etc. are the same for all types of employees.
  • Employee payroll information is included in payroll reports, including Federal 941, 940, W2 and State forms. The Part-time, seasonal or temporary employees still receive W-2s at the end of the year.
  • The company needs to match social security, medicare taxes, pay State UI (employment Insurance) and other applicable payroll taxes (Employee Training Tax, ETT for California, e.g.), check with your State.
  • Obtain worker’s compensation insurance to include all employees.

There are a few tasks that may be handled differently for seasonal, part-time, or temporary employees.

  • Some fringe or soft benefits like retirement, profit-share, paid time-off, medical insurance, etc. may not be offered.
  • Part-time or full-time is not really defined in FLSA and it is typically up to the employer. However, certain regulations will consider hours worked and the part-time or full-time status. For example, ACA (Affordable Care Act) defines part-time as working less than 30 hours per week and less than 120 days per year.  Companies need to calculate the number of full time plus full-time equivalent employees to determine if it is an Applicable Large Employer (ALE)
  • If a company has more than 50 full time and full-time equivalent (FTE) employees, it is an ALE. Minimum, essential insurance coverage offer and form 1095-C are required.
  • Some States (CA, MA, OR, CT, e.g.) have sick time law, often based on hours worked. For example, starting in July, 2015, employees in California are entitled to 1 hour of paid sick leave for every 30 hours worked, provided the employees have met certain qualifying time periods. The benefit applies to all employees, including temporary employees from a staffing agency.

In summary, seasonal, part-time, or temporary employees are really not very different from the regular and full time employees with respect to labor laws and employee payroll taxes. The rights and responsibilities of an employee are typically the same with minor limitations on certain fringe benefits.

You just need to find a flexible, simple and accurate employee payroll software or online payroll service that allows you to add employees and manage all payroll tax deposits and payroll returns (941, 940, W2, e.g.) at your convenience.

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  • Timely payroll tax payments
  • Timely payroll filing and reporting

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