For example, the food safety and handling regulations, injury prevention, and labor laws that aim to keep your team and customers safe and happy—you know they’re important, but how do you keep up?

In this article, we share a complete guide to restaurant compliance and outline information restaurants must follow to stay operational. We also include a step-by-step guide to performing a restaurant health and safety risk assessment.

Not following restaurant compliance laws can land your business in hot water with local or federal authorities, so it’s best to always follow the right rules and regulations. Let’s dig in!

Remember that this information is not legal advice. When in doubt, always consult an employment attorney with your specific questions about labor law compliance and consequences.

What is restaurant compliance?

Restaurant compliance is adherence to local, state, and federal laws, regulations, and safety standards that govern how restaurant owners and operators run their businesses. It applies to all businesses—regardless of size. 

Compliance covers labor laws, payroll, food safety regulations, and more.

What is a restaurant policy?

A restaurant policy is a set of guidelines that help ensure that a business remains compliant, maintains operational standards, follows health and safety regulations, and adheres to labor laws.

The policies are often outlined in an employee handbook and distributed amongst staff to ensure that everyone knows the rules to follow throughout their employment. 

Think of a restaurant policy as a guidebook for your restaurant. It helps keep everyone on the same page and is a document that your team can refer to when they have questions about how the company operates.

Why are regulations necessary in the restaurant industry?

Laws for restaurants tend to address different elements of safety in your restaurant. There are a few reasons why ‌federal, state, and local government regulations for a restaurant might exist:

1. 1. Ensure food safety and public health: Regulators rely on the FDA’s (Food and Drug Administration) Food Code recommendations to make sure that restaurants promote safe food handling practices and prevent the spread of foodborne illnesses.
   2. Promote fair labor practices: The Department of Labor’s FLSA (Fair Labor Standards Act) ensures that restaurant owners follow federal, state, and local standards for minimum wage, overtime hours, and hiring workers under 18.
   3. Create safe work environments: Working with food can be risky, and owners have to follow OSHA safety regulations to create healthy, hazard-free work environments for their staff.
   4. Build inclusive workplaces: The EEOC educates employers and employees about workplace discrimination. It also investigates complaints of discrimination based on race, color, religion, sex (including pregnancy, gender identity, and sexual orientation), national origin, disability, age (40 or older), or genetic information.
   5. Protect the environment. Without restaurant regulations, companies would dump their waste wherever they like, harming the planet and local ecosystems. Instead, regulations mean that restaurants have to dispose of waste using proper systems and processes. 

What legal concerns should you be aware of being a manager of a restaurant?

As a manager, it’s your responsibility to follow restaurant laws and regulations accurately. Otherwise, you could land yourself in hot water with the authorities.

Legal requirements for restaurants cover many areas. Familiarize yourself with the following to avoid falling foul of local and federal restaurant laws:

• Health and safety regulations
• Employment laws and best practices
• Maintaining, obtaining, and renewing operational licenses and permits
• Filing the correct taxes 
• Environmental regulations
• Data handling and privacy
• Advertising regulations
• Accessibility compliance

Government regulations for a restaurant.

While restaurant regulations can ‌feel overwhelming, they exist to ensure restaurant owners take care of their workers, comply with food safety recommendations, and keep their licenses and certifications up to date—that means staying busy and keeping doors open. 

To avoid restaurant legal issues, keep in mind these restaurant regulations:

1. Labor compliance and restaurant employment laws. 

We know restaurant work comes with unique challenges around tip pooling, compensation, worker safety, and employee management. Indeed, operating a compliant restaurant business means knowing your responsibilities regarding:

Wage laws.

The FLSA requires non-tipped employees to be paid a minimum wage of $7.25, and tipped employees have to be paid a minimum of $2.13. That amount varies by state, though. 

For example, Alaska requires employers to pay workers the minimum state wage of $11.73. In California, you’re required to pay workers $16.00, and “fast food restaurant workers” have a minimum wage of $20.00.

Tip laws.

Employers can claim a maximum ‘tip credit’ of $5.12 from employees who make at least $30 in tips per month. They don’t deduct that amount from a worker’s tips, but ‌they do claim a percentage of tips to cover their obligation to pay minimum wage.

Overtime laws.

The FLSA requires overtime pay for hourly employees who work over 40 hours per week. Employers calculate an employee’s overtime pay rate by multiplying the employee’s hourly wage by 1.5. 

This can also vary by state, like in Nevada and Alaska, where employees can get overtime pay if they work over 8 hours in a day.

Worker safety laws.

OSHA requirements for restaurants are similar to those for other potentially hazardous workplaces. For example, OSHA requires that employers display a clearly visible poster educating employees on their rights under the OSHA Act, including the right to report a violation without fear of retaliation. 

Employers are also obligated to report serious injuries to OSHA within 8 hours of occurrence, and they have to keep reports of any workplace accidents and injuries updated and accurate. 

In the case of a workplace injury, restaurant employees may also be legally entitled to Workers’ Compensation benefits.

Anti-discrimination laws.

According to the Equal Employment Opportunity Commission (EEOC) and Title VII of the Civil Rights Act, it’s illegal for employers to make any kind of workplace decision based on race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age (40 or older), disability or genetic information. This includes employer decisions about recruiting, hiring, pay, promotions, references, and training restaurant staff.

2. Food safety and food handling regulations.

Restaurant compliance regulations are based on the FDA’s Food Code recommendations, which local, state, tribal, and federal regulators use to guide their own food safety rules to stay consistent with national food regulations.

Additionally, health and safety inspectors make restaurant inspection records available to the public. You certainly don’t want your local customers reading about your violations, so you can’t cut corners on food safety and handling.

Here’s a non-exhaustive list of regulations for reference:

1. Make sure signs are displayed where employees can see them, such as your  “All employees must wash hands” sign in the bathroom.
2. Be careful of cross-contamination. For example, it’s against health codes to use the same utensils to cut raw chicken and vegetables without sanitizing them in between.
3. Monitor your time and temperature control issues. Never leave foods out that should be refrigerated or frozen. 
4. Properly store refrigerated food. Raw and cooked vegetables should be on top in your refrigerator, with cooked meats underneath, then raw meats further down, and poultry at the very bottom.
5. Train your employees about hygiene. Staff should wear hairnets if necessary, keep their uniforms clean, and learn best practices for when and how to wash their hands.

3. Staff conduct.

Restaurants can be bustling, high-pressure environments that exacerbate inappropriate behavior, but they don’t have to be. Make sure you train, educate, and reinforce your employee conduct policies and make it clear you have a zero-tolerance policy for:

Harassment.

Any kind of discrimination that violates Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, and the Americans with Disabilities Act. 

It can include conduct such as “offensive jokes, slurs, epithets or name-calling, physical assaults or threats, intimidation, ridicule or mockery, insults or put-downs, offensive objects or pictures, and interference with work performance” or any behavior that creates an intimidating or hostile environment.

Sexual harassment.

According to the Department of Labor, sexual harassment can include “sexual harassment or unwelcome sexual advances, requests for sexual favors, and other verbal or physical harassment of a sexual nature. 

Allowing sexual harassment to fester in a restaurant environment can create a hostile, offensive work environment and seriously damage employee morale and engagement.

Alcohol sales.

Alcohol sales help restaurants bring in extra revenue. But restaurant alcohol regulations vary a great deal according to your state and county. 

For example, Kansas, Mississippi, and Tennessee are all technically “dry states” where every county has to legalize liquor licenses and the sale of alcohol, and many dry counties still exist in Arkansas, Georgia, Kansas, Kentucky, Tennessee, South Dakota, and Texas.  

4. Worker injury prevention policies.

Restaurant compliance also includes attention to safety measures to prevent workplace accidents like employee falls, cuts, and burns. To avoid worker injuries and OSHA violations, your worker injury prevention measures should cover:

• Floors and walking surfaces
• Ladder safety
• Storage rooms and walk-in coolers and freezers
• Material handling
• Equipment and appliance safety
• Chemical safety
• Electrical equipment
• Fire safety

Your injury prevention policies should also include detailed checklists for regular staff reference.

5. Cleaning policy.

While a cleaning policy sounds obvious, restaurateurs and staff don’t always know the specific cleaning violations that food safety inspectors look out for and see all the time. 

Keep a food safety and cleaning checklist somewhere your restaurant staff can review, and make sure it’s consistent with your own restaurant’s policies. 

It should include detailed cleaning and handling procedures for:

• Personal hygiene
• Proper food preparation
• Hot holding
• Cold holding
• Refrigerator, freezer, and milk cooler
• Food storage and dry storage
• Cleaning and sanitizing
• Utensils and equipment
• Large equipment
• Garbage storage and disposal 
• Pest control

Check out our handy restaurant cleaning checklist, complete with free template!

Restaurant rules and regulations for employees.

Whether you’re a floor manager, owner, operations manager, server, or busser—it’s important that everyone understands the legal implications of not following restaurant compliance—for example, trouble with local or federal law.

Here are a few ideas of restaurant rules for employees to follow:

Maintain appearance and hygiene practices.

Employees should be aware of the basic expectations regarding appearance and hygiene. For example, wearing clean work clothes, the use of hair or beard nets, regular handwashing, and what to do if they feel unwell at work or need to call in sick.

Ensure workplace safety training.

Make sure employees know how to use kitchen equipment safely, the best way to perform actions such as lifting boxes or storage, and what to do in case of an emergency, such as a fire, earthquake, or a customer falling seriously ill. 

Adhere to professional standards.

Employees should adhere to professional standards to remain compliant. For example, they should always behave politely, respectfully, and professionally toward customers and other employees.

Keep food handler licenses up to date. 

Depending on your state and county, restaurant employees may be required to have food handler licenses or even food manager certifications, which are often reserved for supervisors. Especially important for restaurant kitchen rules, make sure workers know how long their licenses are valid for. 

For example, in California, any employee who prepares, stores, or serves food must pass a food handler safety training course, complete an exam, and get a California Food Handler (CFH) card that’s valid for three years. 

Note that Riverside, San Bernardino, and San Diego counties have their own food handler card programs, though, so CFH cards aren’t valid in those areas.

Restaurant rules and regulations for customers.

Think beyond rules and regulations for restaurant staff, like managers, servers, and the kitchen staff. Customers also have a code of conduct to follow. This helps ensure that all patrons have an enjoyable dining experience. 

For example:

• Treat employees with respect and refrain from using threatening, rude, or vulgar language.
• Adhere to any reservations practices including following cancellation policies and informing the restaurant if they’re running late.
• Inform the server, manager, or kitchen staff of any allergies or dietary requirements.
• Follow any relevant dress codes, for example, formal or business casual.
• Respect smoking policies. 
• No outside food or drink unless approved (e.g., a birthday cake).

How to perform restaurant health and safety risk assessment.

Restaurant compliance requirements are easier to meet if you follow these steps to mitigate any potential restaurant hazards that could impact your levels of compliance:

• • Conduct a thorough walkthrough inspection: Look for hazards, such as slippery floors, food contamination, exposed wires or electrical equipment, chemicals, poor ventilation, or out of date training certificates.
  • Identify potential risks: Consider how employees or customers could be impacted by any potential risks.
  • Evaluate: What could impact your ability to remain compliant? What is the likelihood and severity of each hazard?
  • Take steps to mitigate: Document the hazard, risk involved, and then detail steps to reduce or mitigate any potential damage to compliance and restaurant rules and regulations.

6 tips to avoid restaurant compliance risks.

Now that we’ve talked about compliance, what can restaurant owners do about it? Let’s look at some ways you can educate yourself and your employees about compliance.

1. Talk to a lawyer.

Talking to a lawyer who specializes in business law can help you prevent non-compliance issues before they happen. Lawyers have specialties, though, and even business lawyers sometimes specialize even further in specific areas. 

From cafe health and safety advice to restaurant worker regulations, if compliance is your number one concern, it’s a good idea to research law firms and lawyers who specialize in:

• Small business law
• Employment law
• Fair trade practices
• Business litigation
• Risk and compliance law
  

1. Have clear policies in place.

Your restaurant employees should know from day one that you have clear policies regarding wages, hours, food safety, worker safety, and anti-discrimination and that they can find any information they need about company policy in their employee handbook, including restaurant safety rules. 

Don’t forget to include a disclaimer that your handbook is not an employment contract. An employee handbook is not legally binding in the same way that a contract is, and it can be updated at any time.

If you need help with your employee handbook, Homebase HR Pro has your back. When you sign up, you’ll get live access to expert advisors who can review your current policies and help write new ones. 

2. Hire the right people. 

Ideal restaurant staff don’t just have front-of-house or back-of-house experience. They know how to deal with the specific challenges that come along with working in a restaurant and understand they’re the faces customers associate most strongly with the business. 

Hiring the right restaurant employees means getting detailed with your job descriptions, applicant screening questions, and interview questions so you find competent and positive employees who understand the importance of compliance.

3. Proper onboarding and training. 

You can start onboarding before a new hire’s first day by having them read and e-sign any necessary new hire paperwork and packets as soon as you offer them the job — which, by the way, you can do when onboarding with Homebase’s mobile app. 

That way, you can spend time on your employee’s first day educating them on important matters like restaurant compliance.

Training employees on food and work safety is a lengthy process, but you can give them an overview of how everything works during their first week and make it clear they’re learning experience is a priority. 

4. Create a great work culture.

A positive work culture can have a powerful impact on employee effectiveness, and creating a safe environment free of discrimination and harassment should always be a priority. You want your employees to feel safe and respected in their workplace and not afraid to come to work. 

When you take the time to educate your workers on the restaurant compliance issues that matter, you’re telling them their growth and development matter because you’re giving them knowledge they can use in a future career in the restaurant industry.

5. Conduct regular deep cleaning.

Restaurant cleaning is a big part of standard day-to-day operations. To stay on top of all your tasks, create a master cleaning schedule that lays out exactly how often certain cleaning  should be done. 

For example, clean your floors daily, but you can clean your exhaust hoods once a week or once a month. 

Other compliance areas for weekly or monthly deep cleaning could include:

• Grease traps and exhaust fans
• Floor mats and floors
• Walls and ceilings
• Appliances and kitchen equipment, like soda fountain nozzles, meat slicers, or ice machines
• Filters
• Sinks and countertops
• Outdoor garbage
• Under and behind kitchen equipment
• Fans and lighting
  

6. Check state and local laws.

State and local laws can change from year to year, and you might feel like you can’t keep up with all the updates and regulatory agencies that expect you to have the latest information.

We created our state labor law hub for small business owners so you don’t have to do deep Google research on your own.

Keep your restaurant compliant with Homebase.

You don’t have to keep all the information we covered in this article saved on an Excel spreadsheet, and you definitely don’t have to work on compliance issues alone. 

Homebase was built to help small business owners manage HR and compliance, hiring and onboarding, timesheets, payroll, and team communication all in one place without having to outsource to professionals or juggle a bunch of complicated tools.

Best of all, Homebase HR lets you automate your restaurant compliance process, giving you more time to focus on what really matters—growing your business.

The post Restaurant Compliance: Rules, Regulations, and Laws Explained appeared first on Homebase.

Solving problems with your product or service or showcasing your unique talent is the fun side of being a small business owner. 

But running a small business involves more than just delivering a great customer experience. There are employment laws and government regulations covering everything from workplace safety to employee rights that every small business owner must know and follow.

Being out of compliance could be costly. Not only can the government fine you, but you could expose your small business to costly lawsuits. The last thing any small business owner wants is to see their business close because they weren’t in compliance with an employment law.  

Keeping your small business in compliance  

While employment laws and government regulations may feel like a nuisance – who really wants another rule to follow? – these laws and regulations exist for a reason. At one point in this country, it was okay to have young children working in factories, require people to work six days a week with no time off, and discriminate against someone because of their race or gender. 

Employment laws were enacted to change those dangerous and harmful practices and protect the health and safety of American workers. They also protect your best interests. As long as you follow the laws and regulations, you can run your business how you choose. 

5 categories of employment law and regulations  

While the U.S. Department of Labor administers and enforces more than 180 different federal laws that cover issues related to employment, the most common ones fall into five categories: 

1. Hiring practices and anti-discrimination laws
2. Employee classification and wage laws
3. Workplace safety and health regulations
4. Employee rights and protections
5. Compliance and risk management

1. Hiring practices and anti-discrimination laws

As a small business owner, you want to surround yourself with people who are passionate and see your vision. But when recruiting talent, it’s important to know the employment laws that cover hiring so you don’t say or do something in the interview process that could get you into trouble.  

Many of the employment laws that cover hiring practices also include anti-discrimination elements, which cover all workplace interactions. 

Equal Employment Opportunity laws

Equal Employment Opportunity (EEO) laws make it illegal to discriminate against a job applicant or an employee because of their: 

• Race 
• Religion 
• Sex (which includes gender identity and sexual orientation) 
• National origin 
• Age
• Disability 
• Genetics 

EEO laws also protect certain veterans and women who are pregnant. 

These laws apply to hiring, terminating, promoting, and training your team members. They also cover harassment, wages, and benefits. Because these laws can be difficult to understand, Homebase offers a few tips on the ins and outs of promoting employees and protecting pregnant employee’s rights.

In a nutshell, it is illegal to hire, fire, or promote anyone based on the categories listed above. It is also illegal to set wages and offer benefits to employees based on those categories. 

Americans with Disabilities Act

Another anti-discrimination law that is important to understand is the Americans with Disabilities Act (ADA). In addition to not discriminating against a person with a disability, you must also make reasonable accommodations for individuals with disabilities so they can perform their job duties. 

What about background checks? 

As you go through the hiring process, you may want to run a background check on potential applicants. There is no law that says you can’t do that, but there are laws that protect the applicant. You must first get permission to run a background check, which candidates can refuse. If they do refuse, you don’t have to hire them. 

Homebase offers a checklist to follow if you would like to run a criminal background check during the hiring process. 

2. Employee classification and wage laws

EEO laws make it illegal to determine wages based on the same protected categories noted above. It’s also important to understand the Fair Labor Standards Act (FLSA), which covers employee classification. 

H3: Non-exempt vs. exempt employee classification    

Employee classification laws cover the requirements related to employee wages. There are two types of employee classification – exempt and non-exempt. 

• Exempt employees are typically paid an annual salary for their services. They are exempt from federal minimum wage and overtime pay requirements, but must meet other requirements to qualify as exempt, which include being paid a fixed salary of at least $684 per week regardless of the quality or quantity of their work. 
• Non-exempt employees are typically paid an hourly rate. They are required to be paid at least the federal minimum wage or state minimum wage if it is higher. Non-exempt employees are also entitled to overtime pay of 1 ½ times their hourly rate for any work over 40 hours per week. 

For non-exempt employees, it’s important to accurately track the time that they work each week. Homebase’s online timesheets can help you stay compliant with tracking hours. 

Contract workers and freelancers 

As you are growing your team, you may consider hiring independent contractors or freelancers. These types of workers are vendors just like any other supply vendor you do business with. 

Because of that, you don’t have to follow employment law because they are not your employees – they are suppliers. However, you must still follow EEO laws when awarding their contracts. There are also tax laws to follow, specifically regarding issuing a 1099 for any payment made to a contract worker or freelancer over $600 in a calendar year. 

3. Workplace safety and health regulations

Keeping your team safe while they are on the job is your responsibility as a small business owner. Workplace safety and health laws and regulations mostly fall under the Occupational Safety and Health Administration (OSHA) standards, which include:

• Recording serious work-related injuries and illnesses. As a small business owner, you must record any injury or illness that occurred when employees were working. Injuries or illnesses include fatalities, loss of consciousness, broken bones or teeth, and needle sticks for people in medical professions. Records must be kept for 10 years. 
• Reporting severe injuries. OSHA requires business owners to report any worker fatality or hospitalization due to a work-related injury within eight hours of the incident. 
• Identifying hazardous materials. Business owners must conduct periodic inspections to identify and assess the risk of any potential hazardous material. 
• Employee training and safety programs. OSHA requires business owners to provide training to employees who face hazards on the job. 

4. Employee rights and protection laws 

Many employee rights laws are covered under the EEO laws. These include the right to not be harassed or discriminated against based on the protected categories we noted above. Employees also have the right to receive equal pay for work, reasonable accommodations for medical conditions or religious beliefs, and have their medical information kept confidential. Other employee rights laws include:

Family and Medical Leave Act

The Family and Medical Leave Act (FMLA) entitles employees to take up to 12 weeks of unpaid leave for defined reasons, which include the birth or adoption of a child, to get treatment for or recover from a serious illness, and to care for a sick relative. 

There are specific rules that govern FMLA, and only small business owners that employ 50 or more employees are required to follow FMLA requirements. 

Whistleblower protection laws

As a small business owner, under the whistleblower protection laws, it is illegal to retaliate against an employee who submits a complaint to government agencies including OSHA, the Wage and Hour Division, and the Office of Federal Contract Compliance Programs. 

Non-compete and non-disclosure agreements

Non-compete clauses can be a critical element of your relationship with your team members, especially subject matter experts. A non-compete clause is a contractual term between a business owner (employer) and an employee that blocks that employee from working for a competing employer or starting a competing business within a certain geographical area and for a certain period of time after employment ends. 

If you choose to have non-compete clauses with your team, we recommend hiring an employment attorney. 

5. Compliance and risk management requirements

As a small business owner, you should inform your employees about your policies, procedures, and expectations. Your employees should also know their rights and protections under state and federal law. 

This information should be consolidated into a written document like an employee handbook. While employee handbooks are not required by law, they’re a simple and effective way to communicate critical information. They are also great tools to share information that is required under the laws we’ve outlined in this article, which helps you stay compliant. 

To mitigate risk for any employment law violation, it’s a good idea to host regular training with your team on the different employment laws. Your human resources team should keep current with all government laws and regulations. 

When in doubt on anything, seek legal counsel and professional guidance. Not knowing or understanding the law is not an excuse in the eyes of government regulators! 

Homebase makes staying compliant easy

From support with drafting job descriptions to tracking time and managing payroll, Homebase supports small business owners with staying compliant with employment laws and regulations. Make your work easier. See how you can get started with Homebase. 

Hiring your first employee? Check out our New Hire Training Checklist and Onboarding Guide. 

Get your new business up and running with Homebase.

The post Protect Your Small Business: Employment Laws You Should Know appeared first on Homebase.

Taxes can be daunting, confusing, and stressful. Understanding them—and what your personal tax obligations are—helps to alleviate all of those negative feelings. Let’s break down the topic of payroll taxes so that you can confidently manage this part of your business. 

Payroll Taxes 101: What are they?

Payroll tax is a specific amount of money that employees and employers pay to the government for each paycheck earned from salaries, wages, or tips. 

Think of payroll taxes as a part of each paycheck that goes to the government to fund a specific public benefit. They’re not just one tax, but a collection of specific line items that are deducted to fund programs at the local, state, and federal levels. 

Both you (the employer) and the employee contribute to payroll taxes. As an employer, you’re responsible for withholding a part of the employee’s paychecks to cover their share, and need to file and pay your share directly to the government. 

Setting up a payroll tax system is a critical step for all new businesses that employ workers. Not only is it a legal obligation for employers, it’s also critical to ensuring that your employees are paid the right amount of money for each pay cycle. 

Do I need to pay payroll tax? 

If your business has employees, then you need to pay payroll taxes. It’s really that simple. 

Any business that staffs full- or part-time employees is responsible for deducting payroll taxes from their paychecks, and paying an employer’s share to the government. Paying these taxes isn’t optional’ it’s a legal requirement to operate your business in the United States, and avoid penalties. 

We’ll also re-iterate that payroll taxes exist at the federal, state, and local levels. Make sure that you’re aware of your tax obligations for each geographic area in which you operate. If you’re not sure about what you need to deduct and pay, we recommend consulting a professional accountant, or using a payroll software. 

Which of my employees is considered a “taxable worker”? 

Taxable worker is a non-formal term that’s used to describe any employee from whom you need to withhold taxes (and for whom you need to pay employer payroll taxes). 

As mentioned above, any employees that are formally under an employment contract—whether full-time or part-time—are considered to be taxable workers. That means you need to deduct income tax and pay your share. 

Non-taxable workers include independent contracts, unpaid interns and co-op students, or interns and co-op students receiving stipends. You don’t have to withhold any payroll taxes for these folks. They’ll need to report any money received under these terms as part of their personal income, and are responsible for paying their own share of taxes. 

Don’t forget! Payroll taxes also apply to any cash bonuses you give to your employees. This is considered supplemental income, and is also subject to federal income tax. Depending on where you operate, there might also be state and local tax implications to account fot.

What are the specific payroll taxes I need to know about? 

We know. There’s a lot to digest when you’re setting up payroll taxes for the first time. Don’t worry: there are tools and resources available to help make this process easier. We’ll get to those later in the article. 

If you’re feeling unsure about what taxes you need to cover, it helps to break things down by each level of government. Here’s a list of state, local, and federal taxes you may have to pay. 

State and local payroll taxes 

Every state has different types of payroll taxes with differing rates. Take a look at the U.S. Small Business Administration website for resources about your specific local and state tax obligations. 

In general, these are the state and local payroll taxes you need to know: 

• State income tax: Many states require withholding of state income tax from employees’ wages, similar to federal income tax withholding. Rates and regulations vary by state.
• State unemployment insurance (SUI): Employers pay SUI taxes to fund state unemployment benefits. Rates can differ based on the employer’s unemployment claim history and the state’s unemployment insurance fund status. Check out the U.S. Department of Labor website for more information. 
• State disability insurance (SDI): In some states, employers must contribute to a disability insurance program that provides short-term benefits to eligible workers who are unable to work due to non-work-related illness or injury.
• Local taxes: Some localities impose additional payroll taxes on employers, which can fund local services or benefits. These taxes can vary widely by city or county. Consult with your local government, business association, and chamber of commerce. 

Depending on the state, there may be additional taxes related to worker’s compensation, paid family leave, or health care. Always check with official sources online, or consult with an expert tax account. 

Federal payroll tax 

The IRS also imposed federal payroll tax on all businesses operating in the United States. Here’s a roundup of the four main types of federal payroll taxes. 

• Federal income tax: Employers must withhold federal income tax from employees’ wages based on information provided by employees on their Form W-4.
• Social security tax: Part of the Federal Insurance Contributions Act (FICA), this tax is paid by both employees and employers. It’s 6.2% of wages up to a certain limit set by the IRS each year.
• Medicare tax: Also under FICA, both employees and employers pay a Medicare tax of 1.45% on all wages, with an additional 0.9% Medicare surtax for wages exceeding a certain threshold for high earners.
• Federal Unemployment Tax Act (FUTA) tax: Employers pay this tax without deducting it from employee wages. The FUTA tax rate is 6% on the first $7,000 of each employee’s earnings per year, but tax credits for state unemployment taxes paid can reduce the effective rate to 0.6%.

These are all of the taxes you need to be aware of. Now let’s talk about forms (we know: you’re excited). 

Forms. There are always forms. Which payroll forms do I need to know?

Governments love their tax forms. Unsurprisingly, you probably don’t (and neither do we). But it’s still important to have a general idea of which forms you need for each type of payroll tax so that you keep on the government’s good side. 

We’ll keep this section brief because, well, forms are boring. 

• Form W-4 (Employee’s Withholding Certificate): Used by employees to determine the amount of federal income tax to withhold from their paychecks. Employers may also provide this form to new hires during the onboarding process.
• Form W-2 (Wage and Tax Statement): Issued annually by employers to report wages paid and taxes withheld for each employee to the IRS and the employee. Copies are sent to employees and the Social Security Administration by January 31st of each year.
• Form 941 (Employer’s Quarterly Federal Tax Return): Used to report income taxes, Social Security tax, and Medicare tax withheld from employees’ paychecks, as well as the employer’s portion of Social Security and Medicare taxes. 
• Form 940 (Employer’s Annual Federal Unemployment (FUTA) Tax Return): Filed annually to report the amount of FUTA tax the employer has paid on behalf of their employees.
• Form W-9 (Request for Taxpayer Identification Number and Certification): Used to request the taxpayer identification number (TIN) of a contractor or other payee, which is needed for reporting purposes. These forms are often provided by freelancers or contractors to the employer before starting work.
• Form 1099-NEC (Nonemployee Compensation): Used to report payments of $600 or more to independent contractors or other non-employees for services performed.
• State-Specific Forms: Depending on the state, there may be additional forms required for state income tax withholding and state unemployment insurance contributions. Employers can contact the state agency directly for forms and filing instructions.

Each of these forms can be accessed using the links above. Sure, employers can fill these out and submit them manually, but we’d recommend the use of payroll software to automate this process. 

How do I calculate payroll taxes?

Once you’ve identified the different types of payroll taxes you have to deduct and pay, the final steps are calculating those deductions and sending that money to the government. 

Let’s say you’re based in California and need to calculate payroll taxes for an employee making $55,000 per year. Here’s the process. 

• • Determine gross pay: This is the total amount your employee earns before any deductions. In this example, $55,000 is the gross pay.
  • Calculate federal income tax: Use the IRS withholding tables and the employee’s W-4 form to find out how much federal income tax to withhold. The amount varies based on the employee’s income, tax filing status, and any additional withholdings they request.
  • Calculate social security and Medicare taxes (FICA):
    • Social security tax: 6.2% of gross pay up to the wage base limit ($168,600 in 2024). For $55,000, it’s 6.2% of $55,000 = $3,410.
    • Medicare tax: 1.45% of all gross pay. For $55,000, it’s 1.45% of $55,000 = $797.50.
  • Calculate federal unemployment tax (FUTA):
    • FUTA is 6% of the first $7,000 of each employee’s earnings but can be reduced to 0.6% with credits. For one employee, it’s 0.6% of $7,000 = $42 per year.
  • Calculate state taxes: This includes state income tax and State Unemployment Insurance (SUI). Rates vary by state. In California, the state income tax rate ranges from 1% to 12.3% depending on the income bracket. For simplification, let’s assume a mid-range rate of 6% for our example: 6% of $55,000 = $3,300 for state income tax.
  • Calculate any local taxes: Some locations have local payroll taxes, but we’ll skip this for our example as it varies widely.
  • Add up total withholdings: Add federal income tax, FICA taxes, and state taxes to get total withholdings. Employers don’t withhold FUTA from employees’ wages.

Here’s the math for this example: 

Gross pay: $55,000

Federal income tax: Variable based on W-4 (let’s say $5,000 for this example)

Social security tax: $3,410

Medicare tax: $797.50

State income tax (estimated at 6%): $3,300

Total withholdings (excluding FUTA, which is employer-paid): $12,507.50

Once you’ve figured out that calculation, you then need to send the tax withholdings to the appropriate tax agencies. Typically, these deductions are split evenly between each of an employee’s paychecks. 

My brain hurts. I need some help! 

Our brains hurt, too. (We did include ‘ugh’ in the title.) But don’t reach for the Advil yet though—we have a secret weapon up our sleeves. 

Payroll software, like the one we offer at Homebase, can automate every step that we’ve outlined in this article. That’s right. It can identify which taxes you need to pay, how much you need to deduct, fill out all of those forms, and submit them to the proper tax agencies. 

Here’s how it works. When you run payroll, Homebase calculates taxes and paychecks, sends direct deposits to your team, and automatically pays and files your payroll taxes. All you have to do is set up the software (we can help with that), add your employees to payroll, and get them working. 

Ready to ease some of that brain ache? Get started with Homebase now.

The post Payroll Taxes for Dummies (Ugh, Taxes) appeared first on Homebase.

This is even more complex if you’re a small business owner juggling tasks like payroll and employee scheduling without a dedicated accounting team. If only there was a simpler way!

In this article, we’ll provide you with everything you need to know about state payroll taxes 2024/25. We’ll help you navigate the complexities of paying payroll taxes and we’ll also help you understand how a tool Homebase can make everything far easier to juggle.

What is state payroll tax?

State payroll taxes include income tax, unemployment tax, and local taxes in some states and cities. Income taxes are paid by employees, and unemployment taxes are paid by business owners.

Some states don’t have an income tax, but all states have an unemployment tax and a few states and cities also have local payroll taxes. For more info, we’ve covered everything you need to know about state payroll taxes previously.

But here’s a short summary of the elements that make up state payroll taxes.

State income tax

State income tax rates are not uniform across the U.S. Nine states—Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming—do not tax regular income. Employees in these states won’t have state income tax deducted from their paychecks.

Another nine states—Colorado, Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah—impose a flat tax rate. The application of this rate varies by state, so consult your state’s tax rules for specifics.

The remaining states, along with Washington D.C., have progressive tax rates based on income levels. Tax brackets range from three to twelve. Always verify current rates and brackets with your state.

State unemployment tax

All states collect unemployment tax to fund benefits for qualifying jobless individuals under the Federal Unemployment Tax Act (FUTA) and State Unemployment Tax Act (SUTA). Business rates are determined by various factors including business tenure and former employee claims. These rates are subject to annual changes.

Local taxes

Local payroll taxes may apply depending on your state or city. Examples include Oregon’s statewide transit tax and local taxes like California’s Employment Training Tax (ETT) and State Disability Insurance (SDI), with the former paid by employers and the latter by employees. To avoid unexpected liabilities, confirm applicable local taxes with relevant government agencies before processing payroll.

Payroll taxes by state: A closer look

Here’s what you need to know state-by-state when it comes to payroll tax differences. Note these are up to date as of Jan. 31, 2024. Please check official state and local sources for the most up-to-date information.

States with no income tax

In states without an income tax, employers’ payroll tasks are streamlined to federal obligations and any applicable state-specific taxes such as unemployment insurance. Here’s what employers in these states need to focus on:

• Federal payroll taxes: All employers must comply with federal tax obligations, including withholding Social Security and Medicare taxes under FICA.
• State unemployment insurance tax: Employers need to contribute to their state’s unemployment insurance fund, with rates and policies varying by state.

This applies in:

• Alaska
• Florida
• Nevada
• South Dakota
• Texas (known as the Texas Unemployment Tax)
• Washington (includes workers’ compensation insurance)
• Wyoming

States with flat income tax rates

Employers in states with flat income tax rates should withhold state income tax at the uniform rate provided by the state. Additionally, they must handle unemployment insurance and federal payroll taxes:

• Colorado
• Illinois
• Indiana (employers also need to manage county tax rates)
• Massachusetts
• Michigan
• North Carolina
• Pennsylvania (local tax considerations may also apply)
• Utah
• Kentucky

States with progressive income tax

For states with progressive income tax systems, employers must regularly update withholding tables to align with the varying tax brackets and rates. Employers are also responsible for state unemployment tax and federal payroll taxes. The list below includes states with progressive income tax systems, but it’s essential for employers to check for any state-specific regulations that may affect payroll:

• Alabama
• Arizona
• Arkansas
• California
• Connecticut
• Delaware
• Georgia
• Hawaii
• Idaho
• Iowa
• Kansas
• Louisiana
• Maine
• Maryland
• Minnesota
• Mississippi
• Missouri
• Montana
• Nebraska
• New Jersey
• New Mexico
• New York
• North Dakota
• Ohio
• Oklahoma
• Oregon
• Rhode Island
• South Carolina
• Vermont
• Virginia
• Washington D.C.
• West Virginia
• Wisconsin

Other states

Some states have unique tax rules that employers must be aware of:

• New Hampshire: No state income tax is withheld, but taxes on dividend and interest income are applicable.
• Tennessee: Similar to New Hampshire, with the addition of the state tax on dividend and interest income. Employers should also handle federal payroll and unemployment taxes.

Reporting and Filing Requirements

As a business owner, you’ll need to adhere to various reporting and filing requirements to ensure compliance with payroll taxes:

• Federal Compliance: Annually file W-2 forms reporting wages and taxes withheld for each employee. Use Form W-3 to summarize these W-2s when submitting to the Social Security Administration. Quarterly, file Form 941 or annually Form 944 to report wages paid, and taxes collected for income, Social Security, and Medicare.
• State-Specific Reports: Depending on the state, you may be required to file additional quarterly reports. For instance, California businesses must submit DE 9 and DE 9C forms for unemployment insurance and state disability insurance contributions.
• Unemployment Insurance: Most states require quarterly filings to report wages and pay state unemployment insurance tax. The form names and specific requirements vary by state.
• New Hire Reporting: States also mandate reporting of new hires to track child support obligations.
• Local Taxes: Some localities require separate filings for taxes such as local income, school district, or other municipal taxes.
• Deadlines and Forms: Each state and locality may have different deadlines and forms. It is essential to consult your state’s Department of Revenue and Employment website or a tax professional for the correct forms and filing schedules.

State payroll taxes made simpler

As we’ve covered, making sure your business is compliant with federal, state, and local law can be complex when it comes to payroll tax. Homebase offers features that can simplify payroll tax compliance:

1. Automated Payroll Processing: Homebase converts timesheets into hours and wages, calculates taxes, and ensures correct payments to employees and tax authorities​​.
2. Tax Filing: Homebase automatically processes tax filings, issues 1099s and W-2s, and submits new hire reporting, helping you meet federal and state requirements​​.
3. Error Reduction: By syncing time tracking with payroll, Homebase helps avoid mistakes in hours, breaks, overtime, and PTO calculations​​.
4. Streamlined Data Management: Employees can self-onboard and e-sign their payroll forms, centralizing tax and bank information​​.
5. Compliance Support: Homebase assists in setting up state-specific breaks and overtime rules and stores time card records to comply with FLSA rules​​.

Understanding payroll taxes by state is essential for your business’s compliance and financial health. It’s not just about understanding the tax rates but also about knowing how to properly withhold, report, and remit these taxes. A tool like Homebase can simplify these complex processes, allowing you to focus on growing your business.

The post Payroll Taxes by State (2024/25) appeared first on Homebase.

Accidentally paying your people the wrong wage can leave your business open to costly fines and lawsuits — and you’ll risk dissatisfied staff and a bad reputation.

Our ultimate guide will tell you everything you need to know about Ohio minimum wage 2024. We’ll show you how to stay on top of minimum wage changes so you can avoid nasty surprises and feel confident you’re paying your people properly. 

Understanding Ohio minimum wage for tipped and non-tipped employees 

According to the Ohio Department of Commerce, the current minimum wage across Ohio for non-tipped employees is $10.45 per hour, as of January 1, 2024. That’s an $0.35 increase from 2023’s minimum wage rate. The minimum wage applies to employees of businesses with annual gross receipts of more than $385,000 per year.

This is a little different for “tipped employees” — classified as workers who regularly earn more than $30 per month in tips, like servers, bartenders, and hairdressers. The minimum hourly wage for tipped workers in Ohio is $5.25 in 2024 (up from $5.05 last year).

Though tipped employees can be paid a lower cash wage, employers need to make sure that their workers’ tips and base pay add up to an hourly average of at least $10.45 across the pay period. If not, employers are responsible for topping up their paycheck. 

That means it’s extra important for small business owners in service or other tipped industries to keep track of tips as well as wages. Payroll tools like Homebase can make the process simple with tip shortage calculation functions that automatically supplement workers’ wages when they fall short on tips. 

Exceptions to Ohio minimum wage 2024 

All businesses with gross receipts of over $385,000 per year must pay Ohio’s minimum wage. However, SMBs who make less have an exemption under Ohio law: they can pay the current federal minimum wage of $7.25 per hour instead. 

There are also exemptions for different categories of employees. 

Some key exemptions include: 

• Employees under the age of 16
• People employed as babysitters or live-in companions, if their duties are performed in the employer’s home and don’t include housekeeping
• Workers within family-owned and operated businesses who are family members of the owner
• People who voluntarily provide charitable services in hospitals or health institutions for free
• Staff at children’s camps or recreational areas that are run by non-profit organizations

A sub-minimum wage rate may also be paid in cases where this will avoid hardship and loss of employment opportunities for those with mental or physical disabilities, but this must comply with the regulations of the Director of the Ohio Department of Commerce. 

Minimum wage changes

On January 1, 2024, Ohio’s minimum wage increased to $10.45 hourly for non-tipped employees and $5.25 per hour for tipped employees, according to the Ohio Department of Commerce.

The exemption threshold for businesses will also be higher: the new minimum wage only applies to employees of companies who gross more than $385,000 per year.  

The law behind this pay increase is a 2006 Constitutional Amendment in Ohio that ties the state minimum wage to the Consumer Price Index for the previous year. That means that wages rise annually based on inflation.

There are also initiatives in certain cities in Ohio encouraging employers to pay wages higher than the current minimum. For example, the City of Cleveland has partnered with One Fair Wage to offer certain businesses, like restaurants and coffee shops, a grant to pay their staff more.

Overtime pay requirements 

On top of the base minimum wage, Ohio employers must pay overtime — at 1.5 times the regular hourly rate — to staff for any hours over 40 they work in a single week.

There is an exception to this for businesses with less than $150,000 in gross receipts. 

As all small businesses know, overtime costs can creep up rapidly — especially if your company relies on shift work. 

Let’s say your restaurant rosters staff on a 2-2-3 schedule, where some weeks, teams will work 5 12-hour shifts in a week. 

That’s a total of 60 hours worked in the week (5 days x 12 hours each day). 

The first 40 hours are paid at the regular rate of $10.45 per hour, totaling $418.00. But the remaining 20 hours are calculated at time-and-a-half, which amounts to $15.67 per hour in Ohio. You’ll end up paying $313.50 in overtime, and $731.50 for this 40-hour week. 

To avoid mounting costs, you’ll want to either take a different approach to employee scheduling or plan for these labor costs. 

As well as planned shift work, small business owners need to stay on top of unexpected overtime costs due to last-minute schedule changes or cover.

Posting & Recordkeeping Requirements

In addition to paying the legal minimum and overtime wages, Ohio employers must comply with specific posting and recordkeeping rules. 

At each workplace or job site, businesses are required to display the most recent official Ohio Minimum Wage poster published by the Ohio Department of Commerce’s Division of Industrial Compliance — this changes each year with updates to the minimum wage.

Employers must also keep clear payroll records for at least three years, showing the name, address, occupation, and rate of pay for each individual employee, as well as a full record of their hours worked per day and week and how much they were paid for each pay period. 

Failing to meet these documentation standards can trigger fines and investigations, so it’s crucial that small businesses choose the right system to keep track of payroll. 

Tips to comply with Ohio minimum wage 

Staying compliant with evolving Ohio labor laws and minimum wage rules takes effort as a small business owner. But non-compliance means risking financial penalties, lawsuits, damage to your reputation, and dissatisfied employees. 

Here’s how to steer clear of violations and make minimum wage compliance a priority: 

• At the end of the year, note new minimum wage rates that will come into effect in January. Set calendar reminders so you don’t forget. 

• Download and post the latest official Ohio Minimum Wage poster before January 1 each year to clearly communicate legal rates to employees — and comply with the law.

• Before minimum wage increases take effect, update your payroll systems, timekeeping tools, and accounting software. Tools like Homebase can alert you when there’s a change and automatically update your payroll based on relevant labor laws. 

• Review all staff classifications to make sure you’re correctly applying minimum wage rates based on factors like employee age, tipped status, and hours worked.

• Maintain thorough payroll records showing hours worked, rate of pay, and overtime earnings for every employee as proof of compliance.

• As well as tracking hours, track tips earned by servers, hosts, hair stylists, and other tipped employees. Ensure their tips reliably combine with lower base pay to meet or exceed the full minimum wage.

Feel confident you’re compliant with Homebase

Managing minimum wage can get complicated with so many changes at play. For small business owners who are already time-stretched, staying on top of all the different regulations can feel overwhelming. 

But you don’t have to go it alone. Homebase helps small businesses like yours simplify payroll and compliance.

Here’s how: 

Automatic payroll calculations: Homebase calculates hours, breaks, overtime, and PTO when your employees clock in and clock out. That all gets synced with payroll to help you avoid mistakes.

Detailed records: Homebase tracks hours worked, pay rates, and overtime details for every employee. Detailed wage statements provide protection in case of an audit or lawsuit.

Proactive compliance alerts: Homebase sends timely notifications of upcoming minimum wage and regulation changes so you always stay current — and if you have any questions, you can talk to an HR pro to straighten things out. 

With Homebase as your payroll and compliance partner, you can feel sure you’re paying your people fairly and accurately. 

The post Ohio Minimum Wage Laws explained For Small Businesses appeared first on Homebase.

Whatever the reason, a bank or investor is going to want to make sure that you’re a legit business. The best way to prove this to them? A certificate of good standing. We know there are so many administrative hoops to navigate as a business but this is one you’re going to want to jump through. But, how do you get a certificate of good standing?

In this article, we explain what a certificate of good standing is, who needs one, why you need one, and the steps to get one. Basically, everything you need to know to apply for a certificate of good standing. You’re gonna want to read on.

What is a certificate of good standing?

A certificate of good standing is an official document issued by a state government office or agency. Its main goal is to validate that a business entity—a corporation or LLC—has met all statutory requirements, paid its taxes, and is legally authorized to conduct business transactions in the state. A certificate of good standing has a bunch of different names depending on the state in which it’s issued. It can sometimes be referred to as:

• Letter of good standing
• Certificate of existence
• Good standing certificate
• Certificate of authentication
• Certificate of status
• Certificate of authorization

No matter the name, it sends a message that your business is the real deal and that you’re compliant with state laws.

Who can get a certificate of good standing?

If you’re a registered business entity, you can get a certificate of good standing. This is because you actually have to register with your state. Once you do, the government tracks your compliance with state regulations and can keep track of whether your business is active or not. 

That typically means the following entities can apply for a certificate:

• Limited liability companies (LLCs)
• Partnerships
• Limited partnerships (LP)
• Limited liability partnerships (LLPs)
• Limited liability limited partnerships (LLLPs)
• Corporations
  

Banks may sometimes specifically ask for a ‘bank letter of good standing’, which is essentially the same as this certificate.

Do I need a certificate of good standing?

You don’t need a certificate of good standing out of the gate, but at some point in time you’re going to want one if you’ve dreams of growing your business.

If you’re wondering whether you need a certificate of good standing, consider these common scenarios.

Here are some reasons why you’re going to want a certificate of good standing for your business:

1. Opening a business account

You need a business bank account if you’ve got employees on payroll and business expenses that need to get paid. Banks want to make sure that a business is who they say they are before allowing them to become a customer. Having that certificate of good standing can immediately legitimize you in a bank’s eyes.

2. Applying for a business loan

Lenders, investors and banks want to be really sure that you don’t have a bunch of outstanding debt in terms of other loans or taxes before considering your business for a loan. They need to protect their investment and someone who has a history of paying their bills and is financially sound is more likely to continue that trend.

3. Registering to do business in a different state

One day soon, you may find your business is booming. If you’ve got ambitions of expanding your business out of state—or out of country—someday, you’re going to need that certificate of good standing to submit to the new Secretary of State’s office. 

4. Buying property or larger equipment for your business

If you plan on investing in property or larger equipment—let’s say work trucks for a moving company—a seller is going to need proof that your business is real and that it has the financial resources to make these large purchases.

5. Receiving government contracts 

When a government outsources to smaller businesses, they need to do their due diligence that the business they’re offering a contract to isn’t going to cut and run with their funds. For example, if a construction company bids for a government contract to build housing, having a certificate of good standing is a non-negotiable.

6. Maintaining a trust factor

In its simplest form, a certificate of good standing is a testament that your business is trustworthy. It means you’re financially responsible and compliant with state laws. You get that seal of approval from your state, helping clients and investors trust you.

We’ve looked at the ‘who’ and the ‘when’, now let’s dive into how to get a certificate of good standing.

How to get a certificate of good standing

It isn’t difficult to get a certificate of good standing, but there are some key steps you need to follow to make it easy on you.

Step 1: Are you compliant and up to date?

Before applying, make sure your business is up to date with all compliance requirements. Have you filed your annual reports? Paid your taxes? Fulfilled any specific state obligations for your particular business? You want to apply with a clean slate. Being behind on any of these items is just going to delay the process.

Step 2: Get all of the required information together

Time to hunt down all of the information you need for the application. This can include the legal name of the business, identification numbers—like the Employer Identification Number or EIN, the date of formation or registration, and details about the registered agent. Each state is going to have its own requirements, which leads us to the next step.

Step 3: Research state-specific procedures

Different states have different procedures for getting a certificate of good standing. It could be the Secretary of State’s office, a Department of Revenue, or some other government agency. Visit the official website of the state’s Secretary of State or other agency to figure out the specific requirements and guidelines. 

Some states may have online application portals, others may require applications to be submitted by mail, in person, or through an authorized service provider. Knowing this information ahead of time is going to save you a lot of time and headaches.

Step 4: Complete the application form

Now is the time to pour yourself a tea and hunker down to fill out the application form. This can be tedious but it’s important. Any errors or missing information means you may have to start over or wait longer than you would like.

Step 5: Pay any required fees

Most states charge a fee for issuing a certificate of good standing. Online portal payments will be pretty easy. Make sure you’ve got the correct amount if you’re mailing in a money order or check.

Step 6: Submit the application

Once the application is complete, double-checking all of the information and fees, submit it to the appropriate state authority however they specify—online, by mail, or in person. Online forms are easiest but make sure you don’t rush through them. Upload the documents you need carefully and make a secure payment. If you’re sending it through the mail, or standing in a long government building line, to submit your forms, triple-check that you’ve got all documents in the envelope or in your hand.

Step 7: Time to wait

This is when the waiting game begins. Depending on how you submitted, your processing time could range from a few days to a few weeks. Keep an eye on your email—or regular mail—for your certificate of good standing to come in.

Again, how to get a certificate of good standing for your business isn’t a very complicated process, it’s just a process you want to get right. Once it’s done, it opens up opportunities for you to expand your business, stay compliant, and have that extra element of trust on your side.

If you aren’t in dire need of a certificate of good standing, now is the time to set yourself up for success when you are ready to take that step. Use a payroll software that helps you keep track of taxes owed—and keeps an official record of everything. You can also brush up on your state laws and build systems to be on top of it.

If you are ready to go, now you have the steps you need to take to check this big item off of your business to-do list.

Homebase can help you stay compliant in your state

With a payroll tool that keeps you on top of your taxes owed and HR support to help with compliance, Homebase can make sure you are ready to apply for a certificate of good standing.

Learn more

The post How To Get a Certificate of Good Standing in 7 Simple Steps appeared first on Homebase.

As a business owner, a firm grasp on the nuances of state and federal holiday pay laws is a must. Let’s go through some of the most common questions about holiday pay, then we’ll take a look at a payroll tool that makes managing holiday pay a whole lot simpler.‍ 

What is holiday pay?

Holiday pay is a form of employee compensation that businesses can choose to offer during federally observed holidays. If an employee chooses to take the day off, holiday pay can be fully paid time off or partially paid time off. If an employee chooses to work instead of observing the holiday, holiday pay can take the form of an increased hourly rate or a bonus. 

What are the federal holidays in the United States? 

So, what are the official federal holidays in the United States? As per the Office of Personnel Management (OPM), the US observes 11 legally recognized federal holidays, also called bank holidays, each year.  

In 2024, these 11 holidays are:

• New Year’s Day – Monday, January 1
• Martin Luther King, Jr. Day – Monday, January 15
• George Washington’s Birthday – Monday, February 19
• Memorial Day – Monday, May 27
• Juneteenth National Independence Day – Wednesday, June 19
• Independence Day – Thursday, July 4
• Labor Day – Monday, September 2
• Columbus Day – Monday, October 14
• Veterans Day – Monday, November 11
• Thanksgiving Day – Thursday, November 28
• Christmas Day – Wednesday, December 25

The US also celebrates Inauguration Day on 20th January every four years (unless the 20th of January falls on a Sunday, in which case Inauguration Day is celebrated the following Monday).

If a federal holiday falls on a Saturday, employees are allowed to observe it the preceding Friday. If a federal holiday falls on a Sunday, employees are allowed to observe it the following Monday. And if a federal holiday falls on a day when an employee is not scheduled to work, they can observe it on the scheduled workday immediately before the actual holiday. 

Time off during federal holidays: how it works 

So now that we’ve covered the official federal holidays in the US, let’s talk about federal holiday pay laws. Are companies required to give employees these holidays off from work, and must the employees be paid? The answer depends on whether an employer is a federal employer or a private sector employer. 

Federal employers

Public employers must offer their employees the 11 paid federal holidays each year (12 if it’s an Inauguration year). On a federally recognized holiday, all non-essential federal government offices shut their doors, the stock market stops trading, and all federal employees are paid—even if they aren’t working that day. 

Private sector employers

It’s a different case for private sector employers. Under the Fair Labor Standards Act (FLSA), it’s not a requirement for private-sector employees to be paid for time not worked. And if they work on a federal holiday, private sector workers aren’t entitled to higher-than-usual pay. (Though if they work overtime, they’re of course entitled to overtime pay.) 

Holiday pay laws in the United States 

For federal employees, paid holiday time off is required for all 11 federal holidays.

Paid holiday time in the American private sector, while not mandated, exists as an agreement between an employer and an employee. While offering holiday pay isn’t required by federal law, many companies offer some amount of holiday pay as a perk.

In one form or another, many businesses make the choice to offer holiday pay—usually for federally recognized holidays. They might make the observed holiday a paid day off, or they might choose to offer employees time-and-a-half for working that day.

Is holiday pay required by law?

In short: no. Offering holiday pay is not required by law in the private sector, but many companies choose to offer it. 

What about holiday pay for US state and regional holidays?

Across the country, other recognized holidays are marked in certain states. Take Arizona, for instance, which recognizes the second Sunday in May as a holiday for Mothers’ Day. Or Florida, where the second Monday in October is recognized as Farmers Day.

Similarly, different regional holidays are observed in particular regions and are peculiar only to them. For example, a group of six states—California, Arizona, Colorado, New Mexico, Texas, and Utah—have designated March 31 to commemorate Cesar Chavez Day, celebrating the late activist’s leadership over the nation’s first successful farm workers’ union. 

As with federal holiday pay laws, it’s only state government offices and schools that must close their doors on state-recognized holidays. In the private sector, the decision to recognize a state holiday will be on a company-by-company basis.

What are the holiday pay rules for religious holidays?

When it comes to religious observance, federal law says that companies with 15 or more people must give “reasonable accommodation” to their employees for the celebration of religious holidays (like Good Friday). In this case, you can offer your employees paid or unpaid time off for religious holidays, or floating holidays to use at their discretion.

Federal employers, to protect the separation of church and state, are only allowed to give employees a religious holiday as PTO if the employee can offer a legitimate reason for doing so.

Creating your own holiday pay rules 

Whatever holidays you choose to observe at your small business, they must be clearly outlined in your employment contracts and your employee handbook. As part of your onboarding process, every employee should be familiar with the rules and understand them.

In your time-off request policy, clearly communicate to all your employees:

• Which holidays they’ll have off
• Whether they will be paid for that time off
• Whether they’ll get additional compensation (i.e. time and a half) for working on a holiday

It’s important to adhere to your policy to keep morale high and avoid any sense of favoritism. Plus, failing to do so could lead to an employment lawsuit. 

Why do companies offer holiday pay? 

There are some very good reasons to consider offering holiday pay at your small business. A perk like holiday pay can significantly enhance your benefits package and your company brand, helping you attract and retain top talent. Let’s face it: most people wouldn’t want to work for a company that doesn’t provide any paid time off.

Holiday pay is a proven boost to morale. It helps you build and maintain a satisfied, productive, and motivated workforce. Plus, offering time and a half can be a great incentive to your employees to work on federal holidays, ensuring you don’t have to deal with understaffing and scheduling issues. Remember, there’s no faster road to employee burnout than if they’re understaffed during a rush season. 

How much is holiday pay?

So, how much is holiday pay when it’s offered? There are four general options when it comes to handling federal holidays:

• Time off without pay: Your employees can take time off for holidays if they want, but it must be taken as unpaid leave (as long as you comply with overtime laws). Or, your employees can use their regular PTO allowance or a floating holiday to cover their time off. 
• Time off with holiday pay: Your employees can take a day off work without any pay deductions. They are paid the same rate as any other day when they went to work.
• Work and receive the same pay: Your employees don’t get the day off, and they are paid the same rate as any other working day. 
• Work and receive extra pay: Your employees can choose whether they work on the holiday. If they choose to go to work, you can offer them a bonus or a higher rate of pay (usually time and a half) as compensation for working that day. 

Oftentimes, there’s a link between paid holidays and industry. While workers in tech, finance, and manufacturing are more likely to have paid holidays, it’s less likely for employees in leisure and hospitality to have paid holidays. Unfortunately, the limited or lack of paid time off in these industries may contribute to their high turnover rate. 

Setting your holiday pay policy 

When drafting a holiday pay policy for your small business, start by doing market research to see what your competitors are offering. At the very least you should match them, but if you want an advantage, you could consider designating an additional holiday.

Then, once you’ve defined your criteria, it’s essential that you document everything in a holiday pay policy.

Make sure you cover the following points in your holiday pay policy:

• Which federal holidays you designate as paid holidays
• Which employees are eligible: exempt (salaried), hourly, full time, part time
• How you calculate holiday pay: bonuses, time and a half
• If you offer any floating holidays, and whether they must be taken before year-end
• Your time-off request process, including how much notice employees need to give
• What happens if a paid holiday falls on a weekend
• What happens if an employee accrues overtime while working on a paid holiday

Above all, make sure your policy is clear and specific and that employees always have easy access to it—in both your employee contracts and in your employee handbook. That way, everyone will understand how it works and what employees’ rights and obligations are.

And if you have different policies for full-time workers part-time staff, make sure you clearly define the terms for both categories of workers.

Offering part-time and hourly employees holiday pay 

Whether hourly or part-time employees get holiday pay is up to employers. As with full-time employees, there is no federal law governing holiday pay for these kinds of workers. What you offer depends 100% on what internal policies you choose. 

Something to think about as an employer as you’re making this decision? By nature of their jobs, many hourly employees are required to work on federal holidays.

Take a 24/7 job like a healthcare worker in a hospital or care facility, a front desk hospitality worker, or a restaurant worker. To offer vital customer service, these hourly workers are very often sacrificing time with their families and friends.

Offering holiday pay to your hourly employees is a gesture that can go a long way in keeping employee morale and loyalty high, showing them that they’re valued by you and that your business cares about the people who keep it running.

Manage holiday pay with Homebase

Whether you’re required to provide holiday pay or simply want to offer it as a benefit to your team, a tool like Homebase makes figuring out holiday pay a whole lot easier.

The Homebase payroll tool makes it simple to keep track of regular hours, overtime hours, and holiday pay premiums. From PTO policies to time-off approvals, Homebase lets you streamline everything:

• Automatically add PTO to timesheets to easily incorporate in payroll
• Set up PTO policies to track employees’ accruals and balances
• Get a complete view of time off across your team and business
• Get more control over time-off requests by setting black out dates, request limits, and advance notice policies
• Get added visibility into your budget through advanced scheduling and alerts
• Forecast labor costs and overtime automatically when building your schedule

Manage holiday pay the smart way. No complicated calculations needed. Get started with Homebase today.

The post What Every Small Business Needs to Know About Holiday Pay Laws in the United States appeared first on Homebase.

But the good news? Calculating your FTE is fairly straightforward, and once you get the hang of it, you’ll find that it can make small business budgeting and resource allocation much easier. It can even help you qualify for certain tax credits and small business health programs. 

That’s why we’re here to clarify what FTE is and how it works for small businesses in the simplest way possible. We’ll also show you how to calculate it step-by-step with concrete, easy-to-understand examples.

What is FTE (full-time equivalent)?

A full-time equivalent (FTE) measures the number of hours an employee works in relation to a full-time position. It’s important to know that the Internal Revenue Service (IRS) considers any employee who works an average of 30 hours per week or 130 hours per month full-time.

It’s important to note that FTEs aren’t the amount of full-time employees you have, although it may seem that way. Rather, your FTE count shows you how much every team member works based on a full-time schedule. You’ll still have an FTE count even if you employ all or mostly part-time employees. 

You can calculate FTEs based on the average number of hours team members work per week. The FTE formula looks like this:

FTE = The number of hours your employee worked/Standard full-time hours in your organization

As a basic example, let’s say that one of your small business team members works 30 hours per week. You’d calculate it like this:

• FTE = 30/30

FTE = 1

An FTE of 1 shows us that the employee in question is working 100% of a full-time schedule. Your full-time employees will always get an FTE of 1 when you calculate it based on IRS guidelines.

How does FTE work with part-time employees? 

You can calculate FTE for part-time staff the same way you do for full-time staff. So, for instance, let’s say that you have a team member who only works 15 hours per week:

• FTE = 15/30

FTE = 0.5

The FTE for this employee is 0.5. Looking at it another way, they work 50% of a full-time schedule.

Why do small businesses need to calculate FTE?

The main reason — but not the only reason —  that small business owners need to calculate their FTE is to determine the kind of health benefits they can offer. 

Under the Affordable Care Act (ACA), employers are obligated to offer their employees group health insurance if they had a total of 50 FTEs in the previous year. So, even if they have a mixture of part-time and full-time workers, they still have to offer this kind of coverage to stay compliant with the ACA. 

Still, there are a few other reasons why it’s a good idea to stay on top of FTE count:

• The ACA’s Small Business Health Options Program — If you have fewer than 50 FTEs, your business might be eligible for special insurance coverage through this program. 
• Specific tax credits — For example, according to the IRS, a business with fewer than 25 FTEs qualifies for the small business health care tax credit as long as it also:
  • Pays less than $56,000 in average wages per year for each FTE employee.
  • Offers a qualified health plan through the Small Business Health Options Program Marketplace.
  • Covers at least 50% of the employee-only option for each employee.
• Compliance with labor laws — There are certain federal regulations that apply to businesses of particular sizes, like the Americans with Disabilities Act, which prohibits employers from discriminating against employees with disabilities at any time of their employment.
• Staffing and labor costs — Your FTE count can give you a more accurate assessment of current staffing gaps so you can hire new team members and allocate resources more effectively.

Pro tip: If you want answers to all your FTE-related questions, you can contact a live HR expert with Homebase HR Pro tool. They’ll be happy to answer them, as well as queries about taxes, regulations, and labor laws. They can even review your current policies and procedures. 

How do you calculate FTE?

It’s possible to calculate FTE count manually with a few simple steps and tools like paper and a pencil or an Excel spreadsheet. Let’s break down how to do just that.

1. List all employees and how many hours they each work

If you’re unsure which of your team members count as employees for the purposes of this calculation, we’re talking about any of your workers — even friends and family — that receive W-2s. Freelancers and contractors don’t count, nor do you as a business owner, unless you’re paying yourself wages and receive a W-2.

First, write down how many hours each of your employees works per week on average, not taking overtime or breaks into account.

Here’s how that might look:

You can save a lot of time and simplify this step using Homebase’s free time tracking and timesheet tools, which automatically update employee hours as soon as team members track their time within the Homebase mobile app. Plus, you’ll feel confident in knowing that your hourly totals are always accurate.

2. Identify your number of full-time and part-time employees

Remember that the IRS defines any employee who works 30 hours per week or more as full-time. So, if you’re determining FTE for compliance and healthcare eligibility purposes, keep that in mind for your calculations. 

Let’s use the same example from before:

Note: If your business considers 40 hours per week full-time, you can make a separate FTE calculation with that in mind. While you won’t use that FTE count to figure out if you’re obliged to offer group health insurance, it may help you with budgeting, labor costing, and hiring.

3. Calculate your FTE

First, you’ll add the part-time workers’ Tom, Malik, and Eileen’s total hours together. Then, divide by 30:

• 21 + 15 + 25 = 61
• 61/30 = 2.03

You’ll round this figure down to the nearest whole number. Now, you know the FTE count for your part-time employees, which is 2. 

Now, you’ll add this total to your number of full-time employees, which is also 2.

So, within the framework of this example, your full FTE count would be 4. In this case, you’re not required to offer group health insurance according to the ACA, but you may still be eligible for specific tax credits for small businesses.

A real-life FTE example

Let’s say that you run a gourmet market that has a full-time staff of 15 full-time employees and 40 part-time employees. 

Your part-time employees work about 20 hours a week keeping your shelves stocked, working as cashiers, and keeping your store clean. Your full-time employees run specific departments, work with suppliers, manage the part-time staff, and report sales numbers to the owner.

You add up your part-time employees’ weekly hours and come up with a total of 345 because some of them work over 20.

• 345/30 = 11.5 (rounded up to 12)

Then, add that to your number of full-time employees.

• 12 + 15 = 27

Your FTE count is 27.

But what does it look like if your staff fluctuates throughout the year because you sometimes rely on seasonal workers? 

If your seasonal staff members work 120 days or fewer during the taxable year, they don’t count as FTEs, according to the IRS.

Homebase makes it easy to stay compliant

Now that you’ve seen what calculating FTE looks like in action and can apply it to your own small business, you likely realize that it’s not as intimidating as it seems. That’s great news for you, because once you grow more confident in determining your FTE count for compliance and tax purposes, you’ll find it much easier to apply it to your budgeting and staffing practices. 

We’ve also shown you that it’s completely possible to calculate FTE on your own. However, without help from software, you should double and even triple-check your math or seek out another pair of eyes to ensure everything’s accurate. 

That’s why we recommend using a small business management platform like Homebase to make the entire process easier. Our free scheduling, time tracking, and timesheet tools work together to ensure that your employee hours are always updated and accurate, and even account for breaks, overtime, and PTO. 

And when you upgrade to include HR Pro in your plan, you’ll get access to a team of HR experts who can answer any questions you have about employment law, taxes, and state and federal regulations. All in all, you’ll never have to feel like you’re going it alone again.

The post FTE For Small Businesses: Why It Matters and How to Calculate It appeared first on Homebase.

In the U.S., tips are a crucial part of servers’ income, which is why their minimum wage is $2.13 an hour rather than the federal minimum of $7.25 (in many states). This wage gap explains why our servers go above and beyond to deliver exceptional customer service and highlights the importance of American tipping culture.

As tipping options continue to pop up in new places like fast-food restaurants, stadiums, and even retail stores, business owners and managers must figure out how to properly track, report, and withhold taxes for this additional income. We’ll walk you through the entire process. After all, no one likes a surprise at tax time.

What are tips? 

Tips are those extra bucks that customers voluntarily give service workers as a token of appreciation for a job well done. Any business can prompt its customers for a tip, and more and more businesses are doing so. Tips are most commonly expected in restaurants, hotels, beauty salons, taxis, and food delivery.

There are a few ways that businesses can handle and distribute tips. Typically, customers leave service providers (like servers or hairstylists) a percentage of their bill as a tip. While the percentage varies by industry, these tips are generally given directly to that employee. However, some businesses like restaurants require servers to tip out a percentage to share with those who don’t get tips. Think cooks, dishwashers, and hosts—they usually receive a portion of cash from a shared tipping pool. Pooled tips can come from individual employees, communal tips jars, POS tips (like at fast-food chains or coffee shops), and event gratuities given to catering companies. 

Managers have the flexibility to determine how tips are incorporated into their team’s compensation. Restaurants may include tips in regular paychecks, while bars might distribute cash after shifts. Collaborative settings like hotels may periodically pay out pooled tips as bonus payments. However, these methods often require labor-intensive manual calculations. That’s why tech-savvy establishments opt for automated payroll systems to simplify and streamline the entire process.

Are tips taxable?

The short answer is that yes, tips are taxable—and don’t let anyone tell you otherwise. It doesn’t matter if tips are given in cash or included on a credit card transaction, anyone who makes over $20 in tips (in a calendar month) has to report the income to their employer.

From there, it’s on the employer to report the additional income and withhold relevant taxes. Why? Well like it or not, the IRS considers tips taxable income—yes, even cash tips. And just like any other form of income, those snoopy folks at the IRS want to know about it so they can take their cut. 

If you’ve been in the service industry for a while, you’ve probably overheard people chatting about how they don’t report their tips. They assume that the IRS won’t bother auditing individuals with lower earnings. However, that’s a very real—and very dangerous—misconception. If you have a few team members operating under this assumption, they could be in for a rude awakening if or when the IRS catches wind.

We’re talking about owing back taxes and interest, facing fines, and even dealing with potential legal consequences. What’s worse? Your business might also be held liable since it’s your responsibility to accurately report their additional income, withhold relevant taxes, and ensure those taxes are duly paid. 

Worried your team’s tipping culture isn’t up to code? Don’t stress—grab a pen, and we’ll walk you through the process.

How do you pay tax on tips? 

It’s on management to accurately report and withhold tax on tips. That means it’s important to fully understand your responsibilities and establish a process that makes it easy for your team to track and report their tips. Add these steps to your payroll process to ensure everyone is on the same page when it comes to managing their tip taxes.

Step 1: Set up payroll

To start, ensure everyone on your team is properly set up in your payroll system. This includes providing them with an Employer Identification Number, setting up payroll (ensuring they’ve signed direct deposit, W-4, W-9, and I-9 forms), and establishing a payroll schedule.

Step 2: Implement an easy tip reporting method

Make sure your team knows to keep track of their tips. If your POS or payroll system doesn’t have a tip reporting feature, your team can use this form to record their tips.

Keep in mind that restaurant employees (who earn tips as part of their wages), might be paid less than the standard minimum wage depending on the state’s tip credit regulations. If you manage a team of servers that earn less than the federal minimum wage, they’ll need to report their tips daily to ensure they’re accurately compensated.

Step 3: Use tip reports to determine taxes to withhold

Calculate owed taxes, including Medicare, social security, and federal income tax based on your employees’ wages and tip reports.

Don’t forget to pay the employer’s portion of social security and Medicare taxes.

Step 4: Report uncollected taxes (if applicable) 

Do you have a member of your team whose wages don’t cover all of these taxes? Prioritize withholding federal income tax first, followed by social security, Medicare, and taxes on reported tips. 

Adjust the uncollected amount on their employment tax return.

Report uncollected social security and Medicare taxes on the employee’s W-2.

Step 5: Allocate and report tips

If your team’s total tips equal less than eight percent of gross receipts, distribute the difference among employees who received tips. Base this on their share of gross receipts, total hours worked, or a specific written agreement.

Report these tips on form W-2 in the allocated tips box for each employee.

Step 6: Keep an eye on employee reporting

To help you accurately calculate payroll and relevant taxes, make sure your team continues to report all of their tips.

Remember to keep all tip records in case anyone gets audited.

Handling tips can be overwhelming. When you take charge of the process, you’ll reduce stress and make tax season more manageable. Of course, if your hands are already full with countless other managerial tasks, it never hurts to bring in reinforcements.

With Homebase, you can say goodbye to tedious tax forms and manual calculations. Our payroll system automates everything — from calculating wages and tips to processing taxes and making payments to your employees, state, and the IRS. 

Make tax time easier. Simplify tip tracking and tax management with Homebase Payroll. Try it for free, today.

The post Dollars and Sense: How to Report and Withhold Tax on Tips appeared first on Homebase.

But have you ever sat down and defined part-time vs. full-time work at your business? What it means to be full-time vs. part-time, the distribution of each across your teams, and if this distribution best serve your goals?

It’s an easy exercise with the potential for a huge payoff. It can make it clearer which employment laws apply to you (and can benefit you and your employees), help you build better teams, and be a more efficient, profitable operation overall.

Let’s start by looking at the legal definitions of the two types of work—or, more accurately, a lack thereof. 

What is Considered a Part-Time Job? 

While there’s no concrete definition of part-time work in the US, what separates part-time work from full-time work largely comes down to the number of working hours. 

Here’s what three governing bodies have to say on the matter:

• • US Department of Labor (DOL): “The Fair Labor Standards Act (FLSA) does not define full-time employment or part-time employment. This is a matter generally to be determined by the employer.”
  • US Bureau of Labor Statistics (BLS): “Full-time workers are those who usually work 35 or more hours per week. Part-time workers are those who usually work fewer than 35 hours per week.”
  • Internal Revenue Service (IRS): “For purposes of the employer shared responsibility provisions, a full-time employee is, for a calendar month, an employee employed on average at least 30 hours of service per week, or 130 hours of service per month.”

In terms of authority, you may want to listen to the DOL and IRS more than the BLS. 

That’s because the BLS’s definitions of full time and part time come from the Current Population Survey (CPS) and are for statistical purposes only. This means their definitions, while useful in letting you know how part-time work is currently being defined by real US employers, aren’t legal definitions. 

With all of this in mind, we can loosely define a part-time job in the US as:

• A job with fewer than 30 working hours per week, or 130 hours per month, unless otherwise defined by the employer.

Types of Part-Time Jobs

There are many jobs that can be fulfilled on a part-time basis. Some of the most common include:

• Retail positions (cashier, sales associate)
• Customer service representative
• Receptionist or front desk positions
• Administrative assistant
• Data entry clerk
• Food service jobs (waiter/waitress, barista)
• Tutor or teaching assistant
• Freelance or gig work (writing, graphic design, programming)
• Library assistant or clerk
• Call center operator
• Personal assistant or secretary
• Event staff or coordinator
• Childcare provider or babysitter
• Fitness instructor or personal trainer
• Home health aide or caregiver
• Receptionist or front desk positions
• Telemarketer
• Research assistant
• Delivery driver

What is a Full-Time Job? 

Like with part-time work, there’s no one legal definition of full-time work in the US.

However, building on our loose definition of part-time work as 30 or fewer working hours per week, we can loosely define a full-time job in the US as:

• A job with 31-40 working hours per week (often closer to 40), or as defined by the employer.

Types of full-time jobs

Some jobs that are more typically filled on a full-time basis include:

• Software developer or programmer
• Registered nurse or healthcare professional
• Accountant or financial analyst
• Marketing manager or specialist
• Human resources manager or specialist
• Project manager
• Sales representative or sales manager
• Teacher or educator
• Engineer (civil, mechanical, electrical, etc.)
• Operations manager
• Customer service manager
• IT (Information Technology) specialist or administrator
• Lawyer or legal assistant
• Managerial roles in retail, hospitality, or other industries
• Financial advisor or planner
• Scientist or researcher
• Social worker
• Electrician or plumber
• Police officer or law enforcement professional
• Architect
• Graphic designer or art director

Pros and Cons of Part-Time Jobs 

Pros of part-time jobs

• Flexibility: Having part-time workers makes scheduling easier. You can adjust staffing levels based on our business needs, and more easily find fill-ins if someone calls in sick.
• Cost savings: Pay, benefits, and other employee costs are often lower with part-time employees than with full-time ones. 
• Diverse skill sets: The less committed nature of part-time work makes bringing in new people easier, which can be a blessing if you need specialized expertise for specific tasks.
• Adaptability: As demand wavers, you can easily increase and decrease your team’s capacity with part-time workers.
• Increased productivity: Working fewer hours, part-time workers can bring more energy to their jobs.
• Access to a larger labor pool: You can tap into a broader pool of available workers, such as students, retirees, and those seeking supplemental income for part-time positions.
• Risk mitigation: Less commitment means less risk during uncertain times.

Cons of part-time jobs

• Reduced continuity: Part-time workers, given their different schedules, may not have the same level of commitment and continuity as your full-time team members. This could potentially impact your team’s cohesion.
• Training costs: Dealing with constant turnover among part-time employees may result in higher training costs, as new hires might need more frequent onboarding.
• Less employee engagement: Part-time workers might not feel as connected to your company culture, leading to lower levels of engagement and loyalty.
• Possible communication challenges: Juggling the varying schedules of part-time workers might introduce some communication and coordination challenges.
• Potential for burnout: Part-time workers may have other obligations outside of their job with you, which might mean burnout from burning the candle at both ends.

Pros and Cons of Full-Time Jobs 

Pros of full-time jobs

• Consistency and stability: The peace of having stable, full-time employees might be worth more than what you’d save bringing in part-time workers. 
• Higher commitment: Expect higher levels of commitment to your company, goals, and long-term success.
• Career development: Full-time workers are more likely to develop and advance within your company.
• Investment in training: It’s easier to invest when you know someone’s going to be around for a while.
• Better team integration: Familiarity and consistency lends to team bonding, and a bonded team means a more productive, happy team. 

Cons of full-time jobs

• Higher costs: Going full-time often means more benefits like health insurance and retirement plans, bumping up your overall labor costs.
• Reduced flexibility: Full-time workers might not have the same wiggle room in their schedules, making it trickier to quickly adapt when workloads change or someone calls in sick.
• Potential for burnout: Longer hours means more of a risk of burnout, especially over extended periods of time.
• Limited access to specialized skills: Bringing in a part-time worker for a specific skill or task is a lot easier (and often more affordable).
• Less adaptability: If something changes at your company, reorganizing a full-time workforce is often more challenging. 

Payments and Benefits 

Hours worked is one way in which part-time and full-time employees differ; another is how they are paid and the benefits they receive. 

Part-time payment and benefits

There’s no law stating how part-time employees must be paid. That said, the most common way to pay part-time employees is by the hour. 

A time clock begins when part-time employees clock in for work at the beginning of the day, pauses when they go for break or lunch, resumes afterward, and ends whenever they leave for the day. The total time worked during this time is what their paychecks are based on.

If you pay employees by the hour, you must at least pay them your state’s legal minimum wage. If your state doesn’t have a minimum wage, you must at least pay them the federal minimum wage of $7.25 an hour.

In cases where part-time work exceeds 40 hours per week (remember, there is no stated legal boundary separating part-time from full-time work), you also have to pay overtime. According to the Department of Labor, overtime pay is “not less than time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.

For example, if you normally pay someone $10 an hour, you would need to pay them at least $15 an hour for overtime. 

Keep in mind that overtime only applies to non-exempt workers, who are both hourly and salaried workers that:

• Earn less than $684 per week or $35,568 annually
• Perform job duties outside of the exempt professions

Other than being paid hourly, part-time workers may receive a fixed salary or a predetermined amount for completing a specific project or task

There can also be combinations of payment methods. For example, someone may be paid by the hour and earn a commission on sales they make. 

Do part-time employees get benefits? 

US law doesn’t cover the provision of benefits to part-time employees.

This means that, as long as you follow all minimum federal, state, and local requirements, you have control over which part-time employees get which benefits, if any. 

Full-time payment and benefits

Beyond what’s required in the Fair Labor Standards Act (FLSA), the US government doesn’t mandate how full-time employees are to be paid.

While full-time employees can be paid hourly, they most commonly receive a fixed salary. This is most often a lump sum paid monthly, or bi-monthly, based on an assumed, ongoing 40-hour-per-week commitment. 

The same rules outlined above around overtime apply to full-time work: If a non-exempt full-time employee works more than 40 hours per week, that employee is entitled to overtime pay.

Do full-time employees get benefits? 

Largely speaking, you’re not required by law to give full-time employees benefits, which can include: 

• Health insurance
• Retirement plans (e.g., 401(k))
• Paid time off (vacation, holidays, sick leave)
• Life insurance
• Disability insurance
• Flexible spending accounts (FSAs)
• Health savings accounts (HSAs)
• Employee assistance programs (EAPs)
• Educational assistance/tuition reimbursement
• Wellness programs
• Flexible work arrangements
• Employee discounts

Sometimes, you are required to provide benefits. Consider these examples (read more about each of these acts in the section below):

• The Affordable Care Act (ACA) requires applicable large employers (those with 50 or more full-time equivalent employees) to offer affordable health insurance that meets certain minimum essential coverage standards.
• The Family and Medical Leave Act (FMLA) requires covered employers to provide eligible employees with unpaid, job-protected leave for specified family and medical reasons. However, this is leave without pay.

It also depends on where you’re located in the country, as there are state and local regulations relating to benefits. For example, in Massachusetts, employees who work for employers having 11 or more employees may earn and use up to 40 hours of paid sick time per calendar year.

Outside of these situations, which benefits you provide—and to whom—is largely up to you. 

Full-Time and Part-Time Employment Law

For your own research, we recommend reading these pieces of legislation on the topic of full- vs. part-time jobs. 

Fair Labor Standards Act (FLSA)

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.

The Affordable Care Act (ACA) 

The “Affordable Care Act” (ACA) is the name for the comprehensive health care reform law (passed in 2010) and its amendments. The law addresses health insurance coverage, health care costs, and preventive care.

Employee Retirement Income Security Act (ERISA)

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.

The Family and Medical Leave Act (FMLA)

The FMLA entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave.

The post The Delicate Art of Choosing Part-Time vs. Full-Time Workers appeared first on Homebase.