While the purpose of any business is to provide products or services, the very act of being an employer opens the door to major risks and severe liabilities that many companies are ill prepared to handle. These are often referred to as the risks associated with “the business of employment.”
Overcoming the obstacles of being an employer can be even more formidable than any business’s bottom line and is often an unforeseen contributor to many business failures. It is important to protect your business and its assets by understanding, minimizing, and mitigating all risk factors.
Here are just a few of the high-risk liability categories employers must navigate:
The collection and reporting of taxes as required by acts of congress, i.e., Federal Insurance Contributions Act tax (FICA), State Unemployment Tax Act (SUTA), Federal Unemployment Tax Act (FUTA), and others.
1) Income Taxes
Collection, transmittal, and reporting of income taxes withheld from an employee paycheck to the federal, state, and local jurisdictions must be done with precision and exactness. Once collected, it is no longer a company asset and must be protected, transmitted, and reported as designated by law.
2) Social Security Employment Taxes
Each employee contributes 7.65% of the paycheck, matched by an employer contribution of 7.65%, or 15.3% of wages to the federal government. These taxes must also be protected, transmitted, and reported as designated by law.
3) State Unemployment Taxes
One of the more complicated taxes to administer by an employer is state unemployment. The reason for the complexity is that each employer and each state have different rates to make the system self-sustainable. Employers with high turnover or seasonal employment have higher rates and pay more taxes. Managing this risk requires knowledge, experience, and attention to detail.
4) Federal Unemployment Taxes
A tax by the federal government to support the state unemployment systems, which must be paid and filed quarterly by employers.
5) Tax Credits and Exemptions
Failure to apply for or properly administer credits or exemptions can mean an economic burden, risking a costly loss of revenue.
Employee Rights, Safety, and Security
With origins in worker exploitation during the Industrial Revolution, a century-and-a-half of governmental acts, and government agencies such as OSHA, the rules and practices created to protect employees are riddled with risks for employers.
1) Workplace Safety
Every employee has the right, and each employer is required by law, to maintain a secure and safe workplace environment. Heavy fines and penalties can be levied for noncompliance of mandated workplace standards. Lack of understanding is not an excuse that is accepted. Every job has some inherent risk associated with the work performed, which must be considered in training and education. Protecting employees from harassment by management, or even by other employees, is seen as the employer’s responsibility. This broadens the category of workplace safety and puts companies at great risk for legal actions.
Pay rules are continually modified, placing higher burdens on employers almost annually. Minimum work age, minimum pay, timekeeping requirements, overtime calculations, when and how an employee must be paid, and equal pay for equal work are just a few of the employee-income liabilities that employers face. And the rules vary by location and type of work.
3) Payroll Protection
An employee must continue to receive income if injured on the job or terminated as part of a layoff and not for cause. Two parallel systems, State Unemployment and Workers’ Compensation insurance, fund the system. Both are designed to be paid for by the employer. Failure to understand and manage these risks can cause costly and irreparable harm to a business.
Now more than ever, the business of employment should be managed by professionals who have the expertise to oversee a company’s employee administration and bring everything into compliance. The liabilities and risks employers face are only getting more complicated. Fortunately, there is an industry created to minimize these risks for small-to medium-size businesses that can’t afford to have the required large staff of HR professionals to manage that risk. An IRS Certified Professional Employer Organization (CPEO) such as Employer Advantage provides the professionals in each of the disciplines necessary – Human Resources, Payroll, Health and Benefits, Workplace Safety – to substantially minimize the risks, while saving companies time and money.
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About Employer Advantage
A New Path to HR Bliss – Trusted for more than 30 years, Employer Advantage frees you from the administrative and compliance burdens of having employees so you can focus on your business success. Versatile enough for companies of all sizes, our unique service combines comprehensive management of your employee administration and compliance with the latest software solutions, tailored to meet your individual needs and company culture. Our full-service management of Human Resources, payroll, health and benefits, workplace safety, and more enhance your profitability while reducing the costs and risks associated with employment law compliance. We provide your employees with top-notch assistance and benefits that help you increase productivity, save time and money, and attract and retain a talented workforce. And for small and mid-sized businesses, we bring you economy of scale with access to Fortune-500-level benefits, specialty assistance, and savings that would not be possible to attain on your own. Headquartered in the Midwest and serving more than 500 companies and 10,000 worksite employees throughout the country, Employer Advantage is an IRS-Certified Professional Employer Organization (PEO) (CPEO). Experienced, certified, and trusted. www.EmployerAdvantage.com