Payroll FAQ

Q: How does the IRS distinguish between an employee and a contract labor individual?

A: The level of supervision and other indicators make this distinction. To read federal publication 1779: Click Here and California EDD publication DE38: Click Here. It’s very important that people be properly classified to avoid fines and/or assessment of back payroll taxes at a later date.

Q: If I'm going to fire an employee, when am I required to pay them for hours they've worked?

A: Immediately, at the time of termination, the employee must be paid in full including any accrued Vacation time.

 

Q: What if I'm going to fire an employee in the evening when Digits is closed?

A: If you must fire an employee outside of our normal business hours, withhold 10% of their gross pay and that will be sufficient to cover the mandatory payroll taxes. If you make this calculation yourself, you'll need to fax or email us the calculation so we can include it in the employee's year end W-2 and we'll remit the appropriate payroll taxes.

Q: If an employee quits, when am I required to pay them for hours they've worked?

A: Within 72 hours of quitting if they give no notice. If they give at least 72 hours prior notice of their intention to quit, and quits on the day given in the notice, must be paid all of their wages, including accrued vacation, at the time of quitting.

Q: How often should I pay my employees?

A: Wages must be paid at least twice during each calendar month on the days designated in advance as regular paydays and must be paid within 7 calendar days of the end of the payroll period within which the wages were earned. Executive, administrative and professional employees may be paid once a month.

Q: How can I save money on payroll processing fees paid to Digits?

A: Our fees for payroll processing are quoted for the payroll "run" or check date. Therefore if you prefer to save money on our fees, you may elect to pay your employees once every 2 weeks instead of once a week.

Q: What are the benefits to my business of paying my employees weekly?

A: More frequent payroll processing (ex: weekly) is easier on the cash flow of the business since the net payroll paid to the employees is broken up into smaller increments throughout the month.

Q: Am I required to have workers' compensation insurance on my employees?

A: Yes. In California, you are required by law to maintain workers' compensation insurance if you have employees other than yourself and your spouse. Coverage can be obtained by calling your insurance agent or through State Compensation Insurance Fund: Click Here. Rates vary widely between carriers. Call us if you would like feedback on whether the quote you've obtained sounds reasonable for the risk involved.

Q: Am I required to have workers' compensation insurance on my household employees?

A: Yes. Contact your homeowner's insurance carrier and have the employee payroll added to your policy.

Q: Who are household employees?

A: Nannies, housekeepers, home health care workers, etc. are household employees and must have payroll taxes withheld from their payroll checks. See EDD publication DE 8829. Click Here

Q: Which forms does a new employee need to complete?

A: W-4, Direct Deposit form (if offered by employer) and I-9 (if used by employer). These forms are available on Links page of our website.

Q: In addition to the forms listed above, what other information do I need to give to Digits for a new employee?

A: We'll need their Department, Rate of Pay, Start Date, and Benefit Information.

Q: Am I required to display posters in my workplace?

A: Yes. Federal and State labor law posters and workers' compensation posters must be displayed I the workplace in an area where visible by employees. You may purchase them for about $43/year at HR Direct: Click Here or they may be printed for free at CA.gov: Click Here

Q: Should time cards be kept in employee's possession until the end of the pay period?

A: No. The employer should have access to the employee's time card throughout the pay period so that their hours may be submitted for payroll processing even if the employee is off sick when time cards hours need to be reported to Digits for processing. The employer is obligated by the Dept. of Industrial Relations to pay the employee on the established payday regardless of whether the employee submits a time card for the pay period.

Q: When do I need to pay over-time?

A: If an employee works more than 8 hours and up to 12 hours in any workday or more than 40 hours in any workweek, and for the first 8 hours worked on the 7th consecutive day they must be paid 1½ times the employee’s regular rate of pay. Double time must be paid for over 12 hours in any workday and for all hours in excess of 8 hours on the 7th consecutive day in a workweek. Exemptions to this rule can occur if an Alternative Workweek Schedule has been adopted.

Q: What is the current minimum wage?

A: Effective January 1, 2016, the minimum wage in California is $10.00 per hour.

Q: What are the requirements for meal period and rest periods in an 8-hour workday?

A: Employees are to take a 30-minute meal period and a 10-minute rest period per 4 hours of work.

Q: Am I required to provide vacation time?

A: No. California employers are not required to provide employees with either paid or unpaid vacation time. However, if an employer does have an established policy to provide paid vacation time, then it must be accrued as it is earned and any unused vacation time must be paid to the employee upon termination, regardless of the reason for the termination. Additional information regarding vacation pay is found at http://www.dir.ca.gov/dlse/FAQ_Vacation.htm

Q: Am I required to provide sick leave, holiday pay or other benefits such as medical insurance, retirement plans?

A: The Sick Leave Law dated July 1, 2015, requires all employers to pay a minimum of sick leave to all employees. Contact us for a consultation and selection of the best method for your business.

Q: When are payroll taxes due?

A: The dollar amount of your payroll determines the frequency & due date for the payment of federal & state payroll taxes. Some business will pay payroll taxes on the 15th of the following month. Others will pay payroll taxes 3 days after the payroll check date. Always read the "Check Register" report provided by Digits which will list any payroll tax payments resulting from the current payroll run. Note: You may elect to have us pay all payroll taxes 3 days after the payroll check date if you prefer, for cash flow purposes.