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Gratuity and Taxes

This month, as 2014 comes to a close,  we are taking a look back at some of the most important blog topics we have covered both in case you missed them, and to help you prepare for 2015!

“A Gratuity of 18% Will Be Charged for Parties Over 6”

According to IRS Ruling 2012-18, a tip is defined as “(1) payment must be made free from compulsion; (2) the customer must have the unrestricted right to determine the amount; (3) the payment should not be the subject of negotiation or dictated by employer policy; and (4) generally, the customer has the right to determine who receives the payment.

tips in a jar

The absence of any of these factors indicates that the payment is a service charge and not a “tip”. These service charges are considered restaurant income; if they are given to the employees, they are then considered wages and not tips.

As they are not tips, but rather wages, restaurants may not count the service charges (automatic %’s) toward the FLSA tip credit, even if they distribute the gratuities to the employees. When employees are serving parties not subject to an automatic service charge along with parties that are subject to an automatic service charge at the same time, it becomes a daunting task to determine what wages to pay the servers as they are performing both tipped and non-tipped duties, and only the tipped duties are eligible for the FLSA tip credit.

If the service charges are distributed to the employees, they become wages and therefore increase an employee’s regular rate of pay and must be factored into any overtime calculations. As if that’s not a big enough headache, restaurants must also remember to report service charges as employee’s wages not as tips on their payroll reports. They should also take these into consideration when completing their Employer’s Annual Information of Tip Income and Allocated Tips form. For income tax purposes, the service charge distributed to employees as wages should be reported as wages on the business tax return.

As you can imagine, this ruling has created a large amount of class actions alleging the improper failure to include service charges, aka mandatory gratuities, into the calculation of employee’s regular rate of pay. The easiest way for restaurants to avoid the above headaches and legal action is to simply eliminate the automatic gratuities, but provide suggested tip amounts.

HR Strategies provides their clients with guidance and assistance with these and other tricky HR matters. To learn more, contact us via the web by clicking here or give us a call today at:

770-339-0000

HR Outsourcing Services 101

For the next 6 weeks, our blog will be getting “Back to the Basics” of Human Resource as America goes back to school. We will be presenting a crash course on what companies can expect if they sign with HR Strategies and begin to use our services; a kind of HR Outsourcing 101 course, if you will. We will start with payroll, move to employee benefits, and work our way through workers’ compensation, regulatory compliance, HR consulting, and training. If you are interested in learning more about what we do, please contact us today at 770.339.0000 or here on our website: Contact Us Page

HR Outsourcing 101 Book

Why We Chose the Name HR Strategies

Final ourside sign wide

Did you know that today is Namesake Day? Have you wondered why we chose the name HR Strategies? We develop in-depth strategies for the human resource needs of small to medium sized businesses. The explanation is simple, but what we do for our clients is complex. Our clients outsource their HR hassles and responsibilities to us. Being able to function as an entire Human Resource department, we chose a name that referenced the detail and forethought in which we plan out the customized services we provide for each business. HR Strategies goes above and beyond in managing customized HR solutions for companies that are motivated to reduce costs by using HR Outsourcing. As a Professional Employer Organization (PEO), HR Strategies becomes your Payroll Processing Company and Workers’ Compensation Outsourcing, handles your Employee Benefits, provides Human Resource Consulting, works with you on Human Resources Regulatory Compliance, and provides Human Resource Training, as well as many other related HR responsibilities. Our professionals enable small business owners to focus on their core competencies, rather than focusing on running payroll, providing employee benefits, or the many other facets of human resource administration. We allow business owners to concentrate on their passion, without being distracted by countless human resources responsibilities.

Call us today to learn how we can take care of your Human Resource needs!

770-339-0000

Top 5 misconceptions about PEO’s…

…and the truth to each:

  1. Loss of Control over the business and employees when using a PEO.
    • In a PEO relationship, the client forms a co-employment relationship with the PEO in which the PEO becomes the administrative employer, or the employer of record, for tax and insurance purposes using their own FEIN, and the client remains the worksite employer. As the employer of record, the PEO is responsible for the payment of wages, management of workers’ compensation claims, regulatory paperwork, and compliance issues. The PEO is also responsible for a variety of other administrative duties involving the employees, and may provide the client and/or its worksite employees with additional insurance and benefit plans. The PEO may offer consulting on HR needs such as proper disciplinary actions and termination of employees, but the client remains responsible for directing and controlling the daily activities of the worksite employees. The client is also responsible for maintaining a safe work environment and keeping track of actual hours worked and reporting those hours to the PEO for payroll processing.
  2. PEOs only look after HR management.
    • A PEO is a Professional Employer Organization to which companies outsource a majority of their HR functions, i.e. payroll, benefits, workers’ compensation, tax administration, etc. By outsourcing these needs to the PEO, companies are freeing up time to dedicate to the nuts and bolts of their business.
  3. The PEO becomes the Company’s new partner in the business.
    • The PEO is legally a vendor. However, HR Strategies really goes above and beyond to take those extra steps to manage our client’s HR responsibilities. We work alongside our clients, rather than just doing the minimum of what is required to offer regulatory compliance, workers’ compensation administration, employee benefits, and payroll. Therefore, we act more as a partner to our clients, and because we are a smaller business, we are able to customize solutions for each individual client.
  4. A PEO will tell me how to handle MY employees.
    • The PEO may offer consulting on HR needs such as proper disciplinary actions and termination of employees, but the client remains responsible for directing and controlling the daily activities of the worksite employees.
  5. Our employees will not embrace the new arrangement.
    • The three main advantages to using a PEO are: efficiency, lower administrative costs, and improved employee benefit options. As a business these three advantages mean better productivity, morale, and increased revenue! When your employees are receiving better benefits and skilled professionals to assist them, morale increases, and therefore productivity increases!

Outsourcing your HR needs frees key personnel from the paperwork and complex issues of HR administration, therefore allowing your employees to focus on generating income. Businesses of every industry and any size can find HR Strategies helpful in allowing their company to run more smoothly. Contact us today for a free needs analysis! 770-339-0000.

Pictures from Our December 13, 2012 Training Session

We hold complimentary quarterly trainings for all of our clients! Interested in attending the next one? Call or click today for a Free Needs Analysis! 770.330.0000 Become a client and start enjoying all of the excellent benefits HR Strategies’ clients receive!

HR Strategies Regulatory Compliance

What:

It seems as though every year the Federal and State governments are adding more acts, mandates, and laws to the business of employment. As a small to mid-sized business, you probably don’t have the time to keep up with the names of all of the new ones, let alone how they can impact you as an employer. Large corporations have complete in-house HR departments and legal departments that work at not only keeping up with the new regulations, but also keeping their corporations in compliance. Are you that lucky? Or are you risking the chance of fines and work interruption?

How:

HR Strategies focuses on keeping you compliant by working as your off-site HR department, with the back-up of legal counsel from one of our strategic partners, Jackson Lewis, which is one of the largest law firms specializing in workplace law. HR Strategies team can help you reduce your risk and vulnerabilities to Federal, State, Local and Professional Regulatory changes. We maintain all of your employment related records in safe, professional, and government regulated ways.

Benefit:

We keep pace with changing governmental requirements that affect your business and help you stay compliant. By relieving your stress of whether or not you are in compliance, we give you the ability to focus on the aspects of your company for which you went into business, while we handle the behind the scenes issue of compliance.

See All HR Solutions Here

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