9 Payroll Questions Your Employees Will Ask You
HR managers wear many hats, including “Resident Question Fielder.” Employees have questions and typically the same kinds of questions come up. So how can you answer these questions efficiently and proactively?
In this three-part series, we’re going to explore typical payroll and HR questions employees ask and how you can answer them without skipping a beat. We’ll also talk to our own HR manager, Tracy Maranto-Phillips, about employee questions she regularly receives and how she proactively manages them. In part one of our three-part series, we’ve included the answers to 9 payroll questions your employees will ask you and how you can easily answer them.
1. What’s the Difference Between Gross and Net Income?
Gross income is the amount of money earned before expenses, deductions, and taxes have been applied. Net income is the amount of money employees take home in their paychecks after expenses, deductions, and taxes have been applied.
2. Why is the Amount on My Final Pay Stub Different Than What is Listed on My W-2?
This is a question that comes up frequently, especially during year-end processing. The main reasons why the amounts between a final pay stub of the year and a Form W-2 are:
The employee’s earnings included non-taxable income items like a vehicle allowance.
The employee participated in a company-sponsored retirement plan like a 401(k).
The employee participated in a company health insurance plan that is a pre-tax deduction.
Check out our blog for a more detailed overview of W-2s and a quick reference sheet you can give to employees.
3. When are W-2s Available?
According to IRS guidelines, Forms W-2 must be postmarked to employees by January 31. While it’s common for W-2s to be distributed before this date, communicate to your employees that they will have theirs by January 31 just in case you need the extra time.
4. What’s the Difference Between Forms W-4 and I-9?
A Form W-4, also known as the Employee’s Withholding Allowance Certificate, is used to determine how much federal tax to withhold from an employee’s wages. This will vary depending on factors like whether an employee is single or married and if an employee has dependents they can claim.
An I-9 is an Employment Eligibility Verification form used to determine if an employee is legally allowed to work in the United States. In order for an employee to complete a Form I-9, they must provide personal identification and employment eligibility documents like proof of citizenship or a USCIS number.
5. Why is My Take-Home Pay Different Than My Annual Salary?
This question can come up with first-time or entry-level employees who aren’t familiar with the anatomy of a paycheck. The difference in amounts is attributed to the amount of taxes being deducted and various other payroll deductions that apply.
When this question arises, explain to your employee that their take-home pay will be specific to the tax forms they filled out during their onboarding period. Employees can also check out websites that offer take-home pay estimates or the IRS withholding calculator if they want to adjust their withholding.
6. What Do the Withholdings on My Paycheck Mean?
There are two basic categories of paycheck withholdings: taxes and deductions. For taxes, employees will potentially see the following types of taxes withheld:
Federal Income Tax
The amount of federal taxes withheld will vary depending on the income tax bracket each employee falls into. Currently, the tax rates range from 10% to 37% and the applicable bracket depends on an employee’s taxable income and filing status.
It’s important to remind employees there are no personal exemptions for the 2018 tax year. Furthermore, the standard deduction amounts have changed for 2018:
FILING STATUS | STANDARD DEDUCTION |
|---|---|
Single | $12,000 |
Married Filing Jointly or Qualifying Widow(er) | $24,000 |
Married Filing Separately | $12,000 |
Head of Household | $18,000 |
Social Security and Medicare Taxes
These taxes make up the Federal Insurance Contributions Act (FICA) taxes and are used to fund government income and health programs for older Americans. The thought behind these taxes is employees pay into them now so they can use these benefits once they’re older.
The current rates are 6.2% in Social Security taxes on wages up to $132,900 and 1.45% for Medicare taxes. Employers pay matching percentages on behalf of their employees. For highly compensated employees, there is an additional 0.9% Medicare tax that applies and employers do not match this amount. Those threshold amounts are $200,000 for single taxpayers and $250,000 for married taxpayers.
State and Local Taxes
Most states collect an additional tax on earned wages. Rates can vary widely from state to state.
Deductions
There are several types of deductions that could be withheld from your employees’ paychecks. The most common types are:
- Retirement Plans: If an employee pays into a company-sponsored retirement plan, this will be reflected on their paycheck stub.
- Health Insurance Payments: Another common deduction is health insurance. The rate will vary depending on whether an employee is paying for themselves, a spouse, or their entire family.
7. What’s the Difference Between an Exempt and Nonexempt Employee?
- The employee must earn no less than $455 per week or $23,660 per year.
- The employee’s primary duty must be considered exempt (executive, administrative, professional, etc.).
- The employee must be compensated on a salary or fee basis.
If an employee does not meet these requirements, they are nonexempt. They must be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.
8. If Payday is on a Holiday, When Do I Get Paid?
- If you process payroll normally, employees will receive their paychecks after the holiday.
- If you process payroll early, employees will receive their paychecks before the holiday.
If a holiday falls on a Sunday, banks are closed the following Monday. If a holiday falls on a Saturday, banks are open the previous Friday.
9. What’s the Difference Between Overtime and Holiday Pay?
The Fair Labor Standards Act (FLSA) does require overtime payment to nonexempt employees for hours worked over 40 during a workweek. Overtime pay is compensated at one-and-a-half times the regular rate of pay.
Conversely, FLSA does not require payment for time not worked, such as holidays. Holiday pay is typically a matter of agreement between an employer and an employee. If an employee is asked to work a holiday, that day is treated like any other workday. The employer may choose to either pay their employee the same rate they would normally be paid or they can choose to pay the employee holiday pay, which is also compensated at one-and-half times the regular rate.
How to Proactively Manage Employee Questions
It’s all good and well that we’ve compiled the answers to some typical payroll questions for you, but how can you more proactively manage them? Let’s face it, for every employee question that arises, you have to stop what you’re doing and search for the answer. This type of transactional process takes you away from other responsibilities.
Using a human capital management solution that offers self-service features makes it much easier to answer employee questions in the following ways:
- Employee data is housed in a centralized database, simplifying information retrieval easy reducing your time spent searching for answers.
- Online document management allows you to upload important information, empowering employees to answer their own questions.
- An online company newsfeed provides a resource for you to effectively communicate with employees so they are always in the loop.
- 24/7 access to self-service allows employees to access relevant data whenever they want or need, further improving company efficiency.
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For more updates on state unemployment wage base changes, visit our SUTA Wage Bases page.
For more updates on state unemployment wage base changes, visit our SUTA Wage Bases page.
For more updates on state unemployment wage base changes, visit our SUTA Wage Bases page.
