Business Perspective: ADP
How wage compliance can help boost your firm’s service offerings
| April 2020 Footnote
Editor's note: Updated April 1, 2020
New decade — new payroll expenses? Many business owners were caught by surprise when the calendar flipped to 2020. Legislation effective Jan. 1 meant that more than half of U.S. states have now increased their minimum wage. And, as more states progress toward an unofficial $15/hour goal, some are taking larger strides getting there than others.
While the increased minimum wage may not seem like much of a change by itself, when combined with the new Fair Labor Standards Act overtime exemption ruling (which also went into effect Jan. 1), business owners may be surprised to learn previously exempt employees are now required to be paid overtime.
These new laws and others poised to follow can create new opportunities to expand beyond traditional accounting services by advising clients how to properly navigate the changes. With the right tools at your disposal, it becomes easy to understand the changes and provide billable services that can benefit your clients in a big way.
Staying apprised of recent legislation impacting payroll can require a lot of unbillable time. This is where ADP’s Accountant ConnectSM platform can become an accountant’s secret weapon. Originally introduced as a resource to make it easy to access all your ADP® client payroll data and reports in one place, ADP continues to add powerful new tools to keep you abreast of changes and help you ensure clients remain in compliance.
Federal and state compliance notifications
Accountant Connect’s Resource tab delivers easy access to state-by-state minimum wage requirements, as well as state tax rates. Compliance notifications on the Accountant Connect dashboard provide access to other vital information needed to educate clients.
The 2020 change to the annual wage threshold provides a perfect example of how important this information can be. In September 2019, the U.S. Department of Labor issued a final ruling on the salary threshold for “white-collar” exemptions. Under this ruling, salaried employees must earn at least $35,568
per year to be considered exempt from overtime compared to the 15-year-old standard of $23,660
per year. When you evaluate what that looks like as an hourly wage, the dramatic increase becomes apparent.
When evaluating the cost of overtime in comparison to hiring a new employee, ADP’s Compensation Benchmarking tool allows users to research local market wages for a given industry and position, including the average amount of overtime for that role.
With the new overtime exemption policy affecting millions of employees, benchmarking data can help business owners determine if it would be less costly to hire another employee or pay existing staff overtime wages.
For example, if a company’s nine employees are all currently paid $17.09, they still fall below the new overtime exemption wage limit. If those same employees also met all other requirements to be nonexempt, the business could find itself paying overtime for the first time. The question then becomes at what point would it make more sense financially for the business owner to hire another employee instead of paying overtime to the current team? In this very basic wages-only scenario, if all nine employees were worked more than three hours of overtime in a week, it would be more cost-effective to hire a new employee instead.
As the accounting industry continues its evolution, accountants are required to shift their role to strategic adviser. Accountant Connect gives accountants access to the data, tools and resources they need to succeed. And the best part? It’s completely free and easy to set up. Get started today.
This article originally appeared in Insightful Accountant.
Contact: Jeff Stebbins, VP, ADP Minnesota
Address: 8100 Cedar Ave S., Bloomington, MN 55425