HR LAW: 6 EMPLOYER PAY LAWS

HR LAW: 6 Employer Pay Laws

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HR LAW: 6 Employer Pay LawsHere are 6 Brief descriptions of 6 pay laws for all employers. HR LAW: 6 Employer Pay Laws

1)Consumer Credit Protection Act of 1968 – consist of various title: Title I Truth in Lending Act; Title II Extortionate Credit Transactions; Title III Restrictions on Wage Garnishments; Title IV National Commission on Consumer Finance. HR specifically focuses on Wage Garnishments.  The restrictions on wage garnishment guard employees from discharge by their employers because their wages have been garnished for any one debt.  The Department of Labor’s Wage and Hour Division enforces this Law. 

When an employer is served with an employee’s wage garnishment, the employer must work in connection with the agency to ensure the proper amount is being taken out per week (usually given through mail or fax).  Usually a notice with a certain percentage of the wage is sent to the employer. The amount and percentage will be different for each case, depending on what the garnishment is for.  Some garnishments are child support, student loans, taxes and unpaid court costs.  When an employer receives a garnishment from any federal agency, they must garnish the employee’s wage.  Employers must correctly calculate the amount to withhold, and must make the deductions until the garnishment expires.  Because each state law is different, check with your state for more specifics.

2) Equal Pay Act of 1963 is an amendment to the Fair Labor Standards Act (FLSA). Another known name for the act is the Gender Pay Act. It specifically prohibits wage discrimination based on gender.  It requires that men and women be given equal pay for equal work.  However, The Equal Pay Act permits differences in wages if the payment is based on seniority, merit, quantity and quality of production, or a differential because of any factor other than gender.  To establish a case, an employee must show that the opposite gender is receiving different wages.  The employee must then show that these other employees of opposite gender perform substantially equal work on jobs requiring equal skill, effort and responsibility.  The third step is the employee must prove that the opposite gender employee(s) perform(s) the job under similar work conditions. The Equal Pay Act is enforced by the Wage and Hour Division of the DOL (Department of Labor).

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3) Federal Insurance Contributions Act of 1935 (FICA) (Social Security) – US Federal payroll tax imposed on employers and employees to fund Social Security and Medicare. “The law requires employers to withhold taxes from employee earnings to fund the Social Security and Medicare programs. These are called Federal Insurance Contributions Act (FICA) taxes. Employers also pay a tax equal to the amount withheld from employee earnings. The self-employed pay Self-Employed Contributions Act (SECA) taxes on net earnings. SECA taxes also fund Social Security and Medicare. The self-employed pay both the employee and the employer share of SECA. But the law permits them to deduct half of the self-employment tax as a business expense.” Sourced from the SSA

*Employers must stay updated on new cost of living adjustments (COLA) and increases to these payroll taxes.

*Social Security Tax – For 2016 Social Security Taxes: Employees and Employers each pay 6.2% of earnings up to $118,500.  Self Employed pay the whole 12.4% of earnings up to $118,500.

*Medicare Tax – For 2016 Medicare Taxes: Employees and Employers each pay 1.45% of all earnings. Self Employed pay  the whole 2.9% on all earnings, but can be offset by income tax provisions.

*High Earners – High Earners also pay an extra 0.9% in Medicare Taxes on earnings above the threshold. (Check with the IRS for specifics)

*Work Credits:  Employees earn credits toward Social Security benefits. The number of credits needed to be eligible for Social Security benefits depends on the employee’s age and the type of benefit for which they are applying. They can earn a maximum of four credits each year. Most people need 40 credits to qualify for retirement benefits. In 2016: $1,260 earns 1 credit.

 4) Lilly Ledbetter Fair Pay Act of 2007 & 2009 – “On January 29, 2009, President Obama signed the Lilly Ledbetter Fair Pay Act of 2009 (“Act”), which supersedes the Supreme Court’s decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc., 550 U.S. 618 (2007). Ledbetter had required a compensation discrimination charge to be filed within 180 days of a discriminatory pay-setting decision (or 300 days in jurisdictions that have a local or state law prohibiting the same form of compensation discrimination). The Act restores the pre-Ledbetter position of the EEOC that each paycheck that delivers discriminatory compensation is a wrong actionable under the federal EEO statutes, regardless of when the discrimination began. As noted in the Act, it recognizes the “reality of wage discrimination” and restores “bedrock principles of American law.” Under the Act, an individual subjected to compensation discrimination under Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, or the Americans with Disabilities Act of 1990 may file a charge within 180 (or 300) days of any of the following:

*when a discriminatory compensation decision or other discriminatory practice affecting compensation is adopted;

*when the individual becomes subject to a discriminatory compensation decision or other discriminatory practice affecting compensation; or

*when the individual’s compensation is affected by the application of a discriminatory compensation decision or other discriminatory practice, including each time the individual receives compensation that is based in whole or part on such compensation decision or other practice.

The Act has a retroactive effective date of May 28, 2007, and applies to all claims of discriminatory compensation pending on or after that date.” This section Sourced from the US EEOC

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 5) Hiring Incentives to Restore Employment Act of 2010 (HIRE) – Enacted on March 18, 2010; the act provides a tax credit for new hires and equipment write-offs. The act tried to restore some of the jobs lost during the recession.  The equipment write-off also doubled to $250,000 for 2010. 

The tax incentive for hiring an unemployed worker: (1) payroll tax exemption of the employers share of Social Security taxes on wages paid to those worker s (after 3/18/10). (2) employer tax credit of up to $1000 per worker.

The new employee must meet these criteria: (1) Hired between 2/3/10 and 1/1/11. (2) Newly hired was unemployed during the 60 days prior to their hire date OR worked fewer than 40 hours for someone else during that period.

6) Sarbanes -Oxley Act of 2002 – Also known as public company accounting reform. The act mandates that publicly traded companies have better internal controls.  Companies must develop controls for financial reporting. Also, Independent auditors must attest to internal controls. “On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, which he characterized as “the most far reaching reforms of American business practices since the time of Franklin Delano Roosevelt.” The Act mandated a number of reforms to enhance corporate responsibility, enhance financial disclosures and combat corporate and accounting fraud, and created the “Public Company Accounting Oversight Board,” also known as the PCAOB, to oversee the activities of the auditing profession.” (Sourced from the US SEC) HR LAW: 6 Employer Pay Laws


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