Massachusetts Paid Family Medical Leave

What is Paid Family Medical Leave?

Paid Family Medical Leave establishes a system for paid family and medical leave benefits for employees, independent contractors, and self-employed persons who work in the State of Massachusetts. Effective January 1st, 2021, employees can take up to twelve weeks of family leave to care for a family member and up to twenty weeks for your own illness during a benefit year. The maximum combined amount of paid family and medical leave an employee can take is capped at twenty-six weeks per benefit year.

What circumstances are covered Individuals able to take leave?

Covered employees are able to take Paid Medical Leave to deal with their own serious medical conditions. Separately, individuals covered by Paid Family Leave have the option to take leave for the following reasons:

  • To care for a family member who has a serious health condition (not until July 1, 2021)
  • To bond with your child during the first twelve months after the child’s birth or the first twelve months after the placement of the child with you for adoption or foster care
  • To deal with any qualifying exigency arising out of the fact that a family member is on active duty or has been notified of an impending call or order to active duty in the Armed Forces
  • To care for a family member who is a covered service member with a serious injury or illness incurred or aggravated in the line of duty

How is Paid Family Leave funded and collected?

Both employees and employers contribute to the Paid Family Medical Leave fund by collection and payment of payroll contributions. Note: Employers should begin collecting this tax by July 1st, 2019.

The contribution rate is equal to 0.63% of the maximum taxable earnings ($132,900.00).  Contribution rates will be determined each year based on the projected benefit costs for each benefit year. The Massachusetts Government website features a handy visual aid and breakdown of how contribution rates can be split between employee and employer.

Employees can be deducted up to 40% of the total medical leave contribution required for an individual AND up to 100% of the total family leave contribution required for an individual.

All employers who employ one or more individuals OR issue 1099s to more than 50% of your workforce are subject to Paid Family Medical Leave guidelines and must submit a quarterly file of contributions on behalf of covered individuals.

If you employ less than 25 employees or covered individuals, you are required to submit the employee contribution per law guidelines but are not required to pay the employer portion of the contribution. On the other hand, if you employ more than 25 employees, you must submit employee contributions and pay the employer share of the contribution.

The average number of employees will be determined by counting all full-time, part-time, seasonal and temporary employees for each pay period and dividing by the number of pay periods in the previous calendar year.

Exemptions: If you currently provide or contribute to a private family and medical leave plan, you can apply for exemptions under the state offered plan.

Note: StratEx has worked with our tax system partners (Symmetry and MasterTax) to ensure that this accrues systematically and that we have an efficient solution for filing.

Employee Notice

Employees are required to provide 30 days notice to their employers detailing the anticipated start date of their leave, the anticipated length of their leave, type of leave, and the individuals expected return date. However, if for reasons beyond an employee’s control notice cannot be provided, the law still applies, and leave must be provided.

Employer Notice

Employers must conspicuously post on each of its premises a notice of benefits available under this law. The notice must be posted in English and in each language other than English that is the primary language of five or more employees of self-employed individuals of that work place.

The Massachusetts government website also included some frequently asked employer and employee questions. We know this law is complex, so feel free to reach out to your StratEx HR Consultant for questions!

Overcoming Unconscious Bias in the Workplace

Close your eyes and imagine the following scenario in your head: You’re listening to a news report regarding a high-speed chase on your local freeway. Who do you picture as the culprit of these offenses? Do you immediately assume they are a man or a woman? What is their race or ethnicity? What about the police officer who caught them?

If you pictured a specific gender, race, or socioeconomic background, you just applied unconscious bias. Whether we like to believe it or not, we all suffer from some scale of this cognitive process. In a time where companies are looking to diversify their workplace (and employees are demanding it), a manager or employer’s unconscious bias can become a large liability.

What is an unconscious bias?

Unconscious bias is defined as a prejudice, quick, or unsupported judgement in favor or against one thing, person, or group as compared to another, in a manner that is usually considered unethical. As a result, certain people or groups can unfairly benefit or be penalized. From early childhood, our brains are hardwired to make unconscious decisions, as we are often forced to act and think quickly in a complex world. This means our unconscious thoughts and actions have a direct link.

How can it affect your workplace?

Understanding the definition of unconscious bias can help us better understand how these judgements can negatively impact a workplace, and also make us more self-aware so that we can combat our biases with thoughtful behavior.

Interviewing: If your company mainly uses word of mouth or referrals to find new talent, this can limit the diversity of your candidate field. This is because employees naturally tend to provide recommendations to friends and peers who look and act like them. If your workforce already lacks diversity, this may amplify the problem. Further, if your management has not received proper training on interviewing best practices, their unconscious bias regarding a candidate’s name, credentials, education, and activities may affect their hiring decisions. For example, African-American candidates have reported that they have removed portions of their resumes to remove evidence of their race including their full name to make them appear “whiter”.

Progressive Discipline/Performance Review: Objectivity is the foundation of a credible review process. Psychologists have found that 61% of an employee’s rating is based on the judgement of the rater, rather than the ratee’s performance. When utilizing judgement compared to real data and the results of the employee being reviewed, favoritism and unfair treatment become commonplace. This unconscious bias can lead to employees feeling disengaged and under appreciated.

Promotions: Many times, unconscious bias can be disguised as common sense. Some examples include the notion that older employees are not great with computers, or certain job criteria would be performed at a more efficient rate by a man compared to a woman. However, this way of thinking  could eliminate qualified and talented employees from receiving the chance to perform at a higher level.

There are additional areas that can be impacted using unconscious bias in the workplace, however the above areas will present the highest level of liability to your company, as bias can be perceived as discrimination. When these judgements go unchecked, the culture of your organization will suffer, leading to dissatisfaction with management, toxic work relationships, and an increase in turnover.  

Ways to Combat Unconscious Bias

The first step in changing your culture and understanding your liability to unconscious bias is to diagnose the current state of the workplace. Ensure your policies and procedures foster an inclusive work environment. Also, seek out ways to diversify your workforce at all levels. This isn’t an easy task, and often you will need to create a business case to persuade senior management to set aside budget for this cause. Note: These initiatives can only be successful when there is buy in from senior management.

Recruit from diverse sources: Look for candidates outside your normal recruitment process. Your company can introduce “name blind” and “gender blind” recruiting policies by removing certain fields on candidate applications to prevent initial spot judgement. You should also ensure your application tool looks for objective factors.

Provide active & engaging training: Talking at managers and employees with a PowerPoint presentation is not going to move the needle in understanding our own biases and how they affect the workplace. In fact, companies that only utilized traditional training saw a decrease in diversity, according to the Harvard Business Review. We recommend creating trainings that are interactive and provide real life examples. Allowing a manager to see biases unfold via an interactive training can help them develop a habit of becoming aware of their own biases.

Focus on Job Competencies: Ensure managers are well versed in the job competencies associated with each position they oversee. These job-specific areas such as knowledge, skills, and abilities needed to be successful in a position should be the point of focus when interviewing, hiring, and promoting individuals in your organization.

Mentorship Programs: Look outside ordinary training programs to find ways to connect with employees. The National Human Services Assembly states that implementing mentoring programs promotes diversity by giving every employee a chance to grow professionally. This benefits both manager and employee, as mentoring encourages managers to interact with employees they may have biases against. Creating a mentoring program allows employers to invest in employees’ success.

In order to foster a culture of diversity and remain legally compliant, ensure you deploy all these tools throughout the entire organization from your line level employees to your corporate team. Raising awareness of unconscious bias in a top-down approach provides employees the opportunity to review their own biases and work on ways to eliminate these biases in a more open and honest manner. If you have any questions or want to discuss this topic further, please reach out to your HR Consultant.


California Meal & Rest Break Law: How eStratEx Timekeeping Guides Compliance

California Meal & Rest Break Law: How eStratEx Timekeeping Guides Compliance

California has some of the most precise and stringent employment laws in the United States. Though this benefits the masses, it puts employers in the restaurant industry at risk of getting sued for violation of laws they may not know exist. This is stifling for businesses, as one complaint can easily snowball into countless lawsuits and massive debt.

One law in particular that restaurant owners must comply with is the California Meal & Rest Break Law. This regulation requires that all employees that work for five hours or more must be provided an uninterrupted 30-minute break. In addition, employees who work shifts longer than three and a half hours are entitled to a 10-minute rest break for every four hours worked. If the employee is not provided a reasonable opportunity to take these breaks, the employee is entitled to a premium of one hour’s pay as reimbursement.

If this law is misinterpreted or ignored, hefty lawsuits can ensue. In 2016 alone, nearly $40 million was awarded to over 45,000 restaurant workers in California. Alternatively, manual tracking can take a large chunk out of your day and become quite literally impossible to maintain in the long-term. To save you the stress of keeping track of every individual employee, StratEx has the option to turn on Meal Break Feedback.

Why StratEx Does Things Differently?

Nearly all alternative HR platforms will track an employee’s break time and prevent an employee from punching back in if their break has been less than 30 minutes. However, this ‘solution’ does not alone satisfy compliance with California Law, as it is unclear if the employee was relieved of all duty. If the employee disagrees with their reported break time, they have no easy way of contesting it. This likely results in uncomfortable manager confrontation, potentially leading to turnover or legal action.

StratEx has enabled a more thorough response system so that there is clarity and assurance that the break is appropriately managed. Further, we track all responses so that if a lawsuit did occur, you have the appropriate documentation to combat it.

How StratEx Guides Compliance

When an employee works five hours or more, StratEx prompts the employee upon clock out to declare whether they received their 30-minute meal break as well as their 10-minute allotted rest break(s). If the employee checks “no”, the system will then ask the employee for a short explanation of why they feel the break was not provided. Once the response has been recorded on their timesheet, StratEx will automatically create the appropriate penalty payment, and clearly denote the explanation on that employee’s timesheet. The payment and comments are disputable and editable from the manager’s perspective if for any reason the information produced is incorrect

What is the employer’s responsibility?

It is important to educate your staff on their rights and the significance of abiding by the company break policy. Additionally, StratEx provides employees with the ability to learn more if they are unaware of the current laws in place. When asked whether or not the employee had received the appropriate breaks, they have the option of clicking a Question Mark icon. This enables a pop-up explanation that provides clarity to what exactly the law states. This facet, along with continuing internal awareness, can better prepare you and your staff and help keep you compliant.

StratEx’s Meal Break Feedback tool combined with employee/employer knowledge, allows you to guard against compliance risk, as well as relieve you of the stresses of tracking and evaluating proper breaks.

For more information or to set up Meal Break Feedback in eStratEx, contact your StratEx representative or request a demo today!

Restaurant Basics: What is the Tip Credit?

Restaurant owners are constantly making costly decisions involving their business and employees. With the Department of Labor’s recent decision to  abandon the 80/20 Rule, we thought it may be helpful to bring it back to basics and break down the pros and cons of employers taking a tip credit from their employees.

What is a tip credit?

The Fair Labor Standards Act (FLSA) allows employers to take a tip credit from their minimum wage obligation for tipped employees equal to the difference between the required cash wage and the federal minimum wage. Currently, the maximum tip credit under Federal Law equates to $5.12 per hour. The minimum cash wage the employer can then pay their tipped employee is $2.13 per hour.

Please note, there are many state and local requirements that differ from the above Federal requirements. Some states do not allow an employer to take a tip credit at all. Reach out to your HR Consultant if you have any questions regarding these amounts.

When can a tip credit be taken?

Legally, employers can only take a tip credit if they are properly communicating the amount of the cash wage the employer will pay the tipped employees, along with the tip credit amount the employer is taking from the minimum wage obligation. Additionally, all tips received by the tipped employee are to be retained by the employee, except in situations where a valid tip pool arrangement is in place.

Remember, the tip credit is only allowed when employees are making at least the required minimum wage in tips. If an employee does not make enough in tips that pay period, the employer will need to pay the difference, ensuring they are paid the minimum wage. This is often times referred to as “make up to minimum”.

Who are tipped employees?

The FLSA defines a tipped employee as someone who customarily and regularly receives at least $30 in tips per month from paying customers. Most commonly, these employees are servers, bussers, runners, and/or bartenders.

Remember, managers and supervisors are never eligible for tip pools!

How is the overtime rate calculated with a tip credit?

Calculating a tipped employee’s overtime rate is often done incorrectly due to misinterpretation of the overtime calculation. It is important to understand and clarify the accurate way to calculate this overtime rate when employers are taking a tip credit from the minimum wage obligation.

To keep it simple, overtime is calculated on the full minimum wage, and not the cash wage payment. Here’s the calculation:

(State or Federal Minimum Wage x 1.5) – Applied Tip Credit = Overtime Hourly Rate

And here’s a worked example using the federal minimum wage:

($7.25 x 1.5) = $10.88 – $5.12 = $5.76/hour, which is the compliant overtime hourly rate for a tipped employee.

As you can see, this can be quite time consuming to do manually. For restaurant clients using StratEx’s payroll, no need to worry, our system can automate this calculation compliantly, and save you the hassle.

What is the 80/20 Rule anyway?

Previously, courts would look into the amount of time employees spent completing non-tipped duties to determine if an employer is eligible to utilize a tip credit. These duties include clearing and cleaning tables, rolling silverware, preparing salads, and sweeping floors. If that time exceeded 20% of an employee’s workweek, the employer would NOT be able to take a tip credit and the employee would be eligible for the full minimum wage. Given the recent guidance from the Wage and Hour Division, as highlighted above, employers no longer have to worry about adhering to the 80/20 Rule. Restaurants can rest assured they are in compliance when taking a tip credit from an eligible tipped employee, as long as said employee is performing tasks and duties related to the tipped occupation (regardless of whether those tasks are directly related to serving guests).

The Pro’s & Con’s of a tip credit

Employers can reap financial benefits when they legally administer a tip credit. Not only are employers able to lower their payroll costs, but also their Medicare and Social Security payroll taxes may be lowered, leaving restaurant owners with more money in their bottom line.

According to new government data, reported by Restaurant Business Online in October of 2018, the restaurant industry is facing a shortage of labor and has lost 18,200 jobs. Additionally, with a record low unemployment rate, employees have more negotiating power and leverage to seek out employers who are willing to pay above the minimum wage. Restaurants who are looking for a competitive advantage may consider paying closer to or above the minimum wage and decide against taking a tip credit, to help increase their talent pool in such a tight labor market.

Adding to my colleague, Krystal Hentges’s, recent blog post regarding engaging back-of-house employees, it may be beneficial for restaurants to consider including their kitchen staff in a tip pool to boost engagement and productivity. As a result of a Field Assistance Bulletin published in 2018,employers are permitted to include traditionally non-tipped employees (like cooks and dishwashers) in a tip pooling arrangement provided employers are not taking a tip credit, and are paying the full minimum wage to all employees. As a reminder, under no circumstances can managers or supervisor be included in a tip pooling/tip sharing arrangement.

If your restaurant has a tip pooling arrangement in place, the best practice is to have your StratEx HR Consultant review this policy to ensure the validity and compliance with local, state, and federal law. Not only is having a clearly defined policy important, but also having all eligible participants acknowledge their understanding of such policy is a key factor for compliance. Please keep in mind, some states prohibit tip pooling with back-of-house employees and further place restrictions on tip pooling policies.

Ultimately, restaurant employers should consider these factors, in addition to the administrative burdens, when evaluating whether it makes sense to take a tip credit from those eligible tipped employees.

It is important that restaurants are aware that taking a tip credit can pose risk under the Fair Labor Standards Act and they should consult their Human Resources department and/or reach out to their designated StratEx HR Consultant for guidance on compliance!

How to Retain BOH (Back of the House) Restaurant Employees

While the front of house is the face of a restaurant, back of house (BOH) employees contribute to the restaurant’s heart and soul. Oftentimes, though, these employees are overlooked unless an issue arises. In a recruiting market that is hard pressed to find reliable and experienced BOH staff, we are taking a deeper dive into how restaurants can invest more in BOH employees and break down some of the common barriers that restrict communication or cause employees to seek other opportunities.

1. Create a culture of inclusion, not just diversity, in your BOH team.

Many BOH teams are diverse from an ethnic or racial makeup, but there is a significant lack of inclusion from a linguistic, cultural, or gendered perspective. Think about the makeup of your restaurant’s team…

  • What is the preferred language of the majority of your line level employees in BOH?
  • Do you have a manager that speaks that language (if other than English) on your BOH team, or the management team in general for that matter?
  • What is the gender makeup of your BOH team?

These simple questions can help you recognize if there are unintentional barriers that prevent your employees from feeling like an integral part of your team. Being aware of the discrepancies between management and line level staff is the first step to making a change.

Management should be advocates for line level staff, and in part that means understanding the struggles your team faces. For example, reprimanding an employee for not calling off in an appropriate manner for a shift, might lead to frustration if they couldn’t understand the written policy because it was only available in English. Similarly, if your daily banter includes gendered “locker room talk,” female line cooks might feel they are not in an environment where women are respected. Once you identify areas for improvement, you can work to ensure a level playing field for all employees.

2. Promote work life balance initiatives for your BOH team.

On prep teams especially, we often see employees who work multiple jobs or consistently work overtime. Employees who are tired or overworked are more likely to injure themselves or experience other side effects of burnout. For employees with longer tenure, the cost of offering five days of vacation per year, for example, will potentially cost less than the payout of a worker’s compensation claim.

Survey your management teams to see what perks or benefits employees might appreciate, and then follow through. When employees see that you are willing to invest in them as people, not just as worker bees, then you might notice a happier environment buzzing in the back.

3. Offer leadership development programs.

The intention of such a program would be two-fold. First, the technical skill-set that leads to a chef being recognized and promoted to their leadership position does not always include managerial soft skills (cue Hell’s Kitchen clip with Gordon Ramsay berating a new chef). Soft skills are the je ne sais quoi that allow a manager to connect with and coach employees, deal with sticky personnel situations that may arise, and ultimately protect the restaurant from liability. However, these skills can also be learned with some assistance and continued coaching. Partner with your StratEx HR Consultant to create a training program that is engaging and relatable for your BOH leaders.

Additionally, this program could be expanded to help loyal, long-term employees grow beyond a prep or line cook role into a leadership role. Chances are that there is at least one prep cook in your BOH for multiple years who never calls off, works multiple jobs, and whom all the staff respect. Why not invest further in that individual? Let them know that there is an opportunity that would allow them to focus their energies at one restaurant, and turn that respect into teamwork. This is also a great potential solution to the challenges of representation that were previously addressed.

4. Acknowledge the importance of mental health.

This is often the silent disability that we do not recognize in any workplace until employees reach a breaking point. Chances are that there is at least one prep cook in your BOH who has been there for multiple years, never calls off, works multiple jobs, and all the staff respect. Hands down, looking at the past year, mental health represents the largest number of ADA situations I have encountered with my clients. In restaurants especially, the long, late hours and fast paced environment can lead to a high stress atmosphere. This stress can lead to or exacerbate any number of problems: alcoholism, drug addiction, depression, and anxiety, to name a few. The biggest struggle I see facing management is how to discuss these issues in an open, productive way without crossing the line and getting too involved in employees’ personal lives. In a recent Wall Street Journal article, chefs share how they have been able to cope with these struggles personally, as well as provide resources for their employees to tackle these illnesses in a healthy manner rather than turning to substance abuse or ignoring their feelings.

Employee Assistance Programs are also an amazing way to contribute to your employees’ lives without asking anything additional of them. EAPs provide free anonymous counseling services, along with helpful resources for a variety of other health and work/life balance items. This benefit typically costs a few dollars per employee for the entire year!! If you do not have this type of program set up, I highly recommend looking into it. Oftentimes, you can negotiate this to being included with carriers that you already use for other benefits as well.

5. Eliminating harassment.

I think we’ve all read enough horror stories over the past year in relation to how the #MeToo movement has affected the restaurant world. Mario Batali, Ken Friedman, John Besh, the list goes on and on. So while sexual harassment based on a male taking advantage of female is definitely a pervasive issue in the restaurant world, I also want to draw attention to types of harassment that do not get enough attention in the BOH, such as harassment based on sexual orientation or pregnancy. The culture of machismo can also be extended to isolate employees who do not fit traditional gender identities, or to intimidate those dealing with temporary physical restrictions from staying around.

The two must-haves when it comes to creating a proactive defense are to have a written handbook policy and conduct an annual mandatory supervisor training on the topics. However, the expulsion of harassment and discrimination goes beyond a proactive defense. Employees can recognize the difference between a company trying to cover their risk versus actually caring about a complaint that they have. In order to give an employee who is reporting a complaint, full freedom of expression, consider utilizing your HRC as a third-party investigator or adding HR Rescue to your services. While we will not give employees false pretenses about their complaints remaining completely confidential, they might feel more comfortable speaking initially about an emotionally charged situation with someone that they do not have to see on a daily basis. You also then have a neutral third party to back up any action that you ultimately see fit to course correct.

While these items are directed at the BOH, you will see the positive trickle effect of these actions on the rest of your restaurant. Maybe even use your BOH as a test kitchen for some of these initiatives to see if they are worth adding to the restaurant menu. Either way, you do not want to be the restaurant group that misses out on jumping forward with the times!

If you are interested in exploring any of these points further, please reach out to your StratEx HR Consultant to launch a spring initiative. Or if you are not yet familiar with our HR offerings, let your sales representative know if you are interested in a risk evaluation or HR project work.

Become a WOTC Wiz: How Your Restaurant can benefit from Work Opportunity Tax Credits

For many individuals, life’s  unexpected challenges can bring forth obstacles to finding  quality jobs and making a living. Certain job seekers in particular,  including veterans, residents of low-income areas, recipients of TANF aid and ex-felons, face difficulty  securing gainful employment. Furthermore, studies have found that these segments of the population experience prejudice when applying for jobs. One example is that a whopping 27.3% of ex-felons are unable to find work, approximately five times the rate of the general public.

In an effort to minimize and reverse this trend, the federal government has created a program called the Work Opportunity Tax Credit (WOTC), which incentivizes employers to hire disadvantaged workers in exchange for a sizeable tax credit.

What is “WOTC”?

The WOTC program was founded in 1996 by the Small Business Protection Job Act and has since helped businesses claim over $1 billion in tax savings each year. The government utilizes the WOTC program to reduce the federal tax liability of employers who hire from “targeted groups” that commonly face significant obstacles to employment. Through this program, qualifying employers can earn a tax credit equal to 25-40% of the eligible employee’s first-year wages, reducing  the total amount of money owed to the IRS.

How much can employers earn?

The amount of your credit is based on which category group your eligible employee falls under, the amount of qualified wages earned, and the number of hours the employee works.

The maximum tax credit per new hire is $9,600, which applies to a disabled veteran who has been unemployed for six months. On the lower end of the spectrum, an employer may claim 25% of a new hire’s first year’s wages for a credit of as much as $1,500.

A reasonable expectation is that 12-15% of a restaurant’s workforce would be WOTC eligible. So, as an example, if you hire 50 new employees in a calendar year, you could receive up to $16,800 in tax credit that can then be re-allocated to other aspects of your business, or used to improve your bottom line.

In addition to the tax credit, other potential benefits of the WOTC program are increased retention rates and higher workforce engagement. For example, let’s say Greg, a 29-year-old disabled veteran, is looking for work. He has been unemployed for several months and has been living off of government assistance. When he gets a job as a fry cook, he is once again able to be self-sufficient and support his family. Greg is grateful to the restaurant for giving him a chance, and remains with the company longer as a result.

Further, hiring WOTC-eligible employees can diversify your workforce, improve company morale, and lower the cost associated with frequent turnover. One study found that 91% of workers with disabilities rated average or better, and performed on par with their peers without disability.

How do employers participate?

There are many programs available that offer WOTC screenings to determine employee eligibility through a series of questions. The programs will work directly with the government and generate reports on a quarterly basis that outline total tax credits received.

How can StratEx help?

StratEx can help you navigate WOTC to save money, without compromising your time. We have partnered with Hiretech to make WOTC screenings as seamless as possible, by preventing the administrative burden from falling on you and your managers. The employee screening questionnaire is integrated with our New Hire module, and prompts the employee to answer a series of questions to determine their WOTC eligibility.

Once they have completed the questionnaire, their information displays on the dashboard for managers or HR users to review. If your employee fits the WOTC criteria, our system sends the information to Hiretech who works directly with the WOTC state agency to get you your tax credit.

For more details on WOTC, or to setup the WOTC Integration, reach out to your StratEx Representative! Or Request a Demo



What is Workers Compensation Insurance?

In today’s world within the restaurant industry, it’s important to have Workers Compensation Insurance. It’s state-regulated and in the restaurant industry, it protects both you and your employee – your employee for insurance that covers on the job injuries and you from on the fines and penalties associated with not having this type of insurance in place.

Workers Compensation insurance protects both employers and the employees in the case of an on the job injury. This insurance covers not only the employee’s medical bills (in the case of an accident on the job), but often times, lost wages and legal expenses associated with the specific case. It can also protect employers from costly lawsuits from employees as a result of on the job injuries.

Employees are assigned classification codes based on the industry they work in and the job duties that they perform. Employers will typically purchase a yearlong policy and pay insurance premiums to the carrier on an ongoing basis.

Q: What is Workers Compensation Insurance?
A: Workers Compensation insurance protects both employers and the employees in the case of an on the job injury. This insurance covers not only the employee’s medical bills (in the case of an accident on the job), but often times, lost wages and legal expenses associated with the specific case. It can also protect employers from costly lawsuits from employees as a result of on the job injuries.

Employees are assigned classification codes based on the industry they work in and the job duties that they perform. Employers will typically purchase a yearlong policy and pay insurance premiums to the carrier on an ongoing basis.

Q: What types of losses does Workers Compensation insurance cover?
A: Workers Compensation insurance typically covers the following: Injuries or loss of limbs, repetitive motion injuries work site accidents, medical treatment, rehab needed to return to work, lost wages (2/3 employees salary), death and liability insurance for company lawsuits filed by employees.

Q: Who is required to have Workers Compensation insurance?
A: Workers compensation requirements vary depending on the state, but in general employers are responsible for providing coverage to employees, depending on the type of business and work employees are performing – this is determined by the Department of Labor. In most states,

Workers Compensation insurance is required for companies with one or more employees. Only a handful of states do not require employers to carry this type of coverage. In general, the requirements for Workers Compensation vary by the state and the industry – certain industries are exempt, some have specific codes, and some states require that you buy this through the specific state workers compensation fund.

Q: Why do you need it?
A: Coverage is necessary, almost every state requires it per the Department of Labor. Health or medical insurance does not include on the job-related injuries or illness that may occur, this is completely separate. States that require it have very hefty penalties for those that don’t have this type of insurance. The insurance policy protects both the employer and the employee.

Q: How are premiums calculated?
A: Premiums are calculated based off of the industry you are in, the amount in which your employees are paid, the number of employees, where the employees work, and the daily activities that employees perform. Employees are assigned Risk Classification Codes based on this information. Employers are given an Experience Modification Rate based on the tenure of the company, number of employees, and number of past claims. The Workers Compensation rates are applied, and your total annual Payroll Amounts are used to calculate the premium amounts.

Here’s a quick refresher:

  • Risk Classification Codes: Assigned based on the industry and job duties of employees
  • Experience Modification Rate (EMR): Determines whether or not employees should pay more or less based on number and type of work. New businesses start with 1.0, and the number may be raised or lowered if there are additional claims in a period of three years.
  • Payroll: Total annual amounts for Payroll are used to calculate Workers Compensation premium. This is often based on a projected amount, since you don’t always know what your total will be for the year.

Calculation of the premium = Classification Code * EMR * Payroll (per $100)

Q: How is Workers Compensation typically administered?
A: There are a number of parties who can help administer or manage Workers Compensation policies on behalf of the employer. This can include: Payroll Software companies, Accounting Software companies, Private Insurance Carrier, Insurance Broker, PEO, State Funds, or those that a self-insured.

Q: What are some the difficulties associated with handling Workers Compensation policies and payments?
A: Workers Compensation insurance policies typically involve large payments that can cause serious cash flow payments for business. Payments are based off an estimate of wages and premiums are based on payroll amounts that are estimated, not actual wages. This can account for a large upfront payment. If the estimate Is off, employers are required to pay the difference in one payment.

If the employer chooses to participate in a Pay-As-You-Go policy, they can set up a plan in which they pay premiums based on actual amounts and minimize the up-front cost. However, with these types of plans, because payment must be sent in on a pay period basis, there is an often an additional level of administrative work required on an ongoing basis.

Additionally, it can be extremely difficult and frustrating to navigate the specific Workers Compensation state regulations, premiums and policies. The industry is changing on an ongoing basis, which makes it hard for employers to understand and know how to correctly pay and keep employee insured.

Q: What do you need in order to administer Workers Compensation Insurance?

  • A policy based on risk assessment
  • Understanding and assignment of correct classification codes to employees
  • Premium rate based on company, state, and industry
  • Cash flow for payment and ongoing payment sent to the insurance company
  • Payroll amounts to calculate payments
  • Reports for ongoing audit

Q: Why Pay-As-You-Go Workers Compensation?
Regular way: Policies are typically 1 year, and a deposit is paid upfront based on projected payroll amounts.

  • Pay a large up-front premium or entire premium at the start of the policy – you may get a discount on this amount
  • You have to pay based off a rough estimate for payroll for the year
  • Terms are limited for payment frequency
  • Hand checks and payment sent via mail
  • Auditing can be a pain – you have to determine at the end of the year what is underpaid vs. overpaid

Pay-As-You-Go: Policies are based on premiums per pay period, payment is sent to the carrier on an ongoing basis.

  • These policies can help restaurants better manage coverage, save on cost, and avoid the risk of having to pay large amounts during year-end audits.
  • No up-front premium is needed
  • Pay a portion each time you run payroll, which spreads out the cost and the cash flow
  • Visibility into total costs – payments are ongoing
  • Risk Reduction – Payments based on actual amounts, so you won’t run the risk of having large surprise payments at year-end audits.

Q: Why is it helpful to integrate Workers Compensation with Payroll software?
A: When employers integrate Payroll with their Workers Compensation policies, the premiums are calculated once payroll is posted. Premiums are calculated, deducted and payments are sent on time to insurance carriers. This eliminates the administrative burden associated with Workers Compensation and allows business to save on time and free up their cash flow.

What Restaurants Need to Know About Tip Pooling

It goes without saying that the restaurant industry thrives on tips. Although tip payouts are not required, it is a widely accepted norm in the U.S. that guests leave the server a percentage based on their total bill. Therefore, it’s no secret most servers in the restaurant industry rely greatly on tips as a part of their income. Of the approximately 4.3 million employees that rely on tips, 60% are servers and bartenders.

All tips that are paid out must also be tracked and reported accurately, which can be a stressful process for many restaurant owners to manage. With many state and federal regulations on tip payouts and wages that often go unreported, this can be a tough arena to navigate.

To help manage the tip payouts in an efficient way, many employers decide to adopt a Tip Pooling or Tip sharing policy, but with ever-changing laws, these policies can be difficult to unpack. For those enforcing a policy, here’s a breakdown on the basics:

What qualifies as a tip and who is considered a tipped employee?

  • Tip: this is a sum of money given to the employee that is an addition to the service provided. Common tip payments include cash and credit card payments.
  • Tipped employees: are qualified as those who earn at least $30 in tips each month. The IRS requires employees to report out on any tips of more than $20.

How is Tip Pooling defined?
Tip Pooling is the process by which tips are divided to pay out restaurant staff. Restaurants typically develop a policy for these types of calculations and payouts for the front of house employees within the restaurant. Employers can enforce a tip-pooling policy for employees that receive tips on a regular basis, as long as the employer is paying them at least minimum wage.

How are Tip Pools calculated?
Tip Pools are most often calculated by compiling the total tips employees receive, or from the total sales, the servers or bartenders receive in a given shift.

  • Tip-based calculation: when tips are pooled and reallocated to include additional roles like hosts, bussers, and back waiters.
  • Sales-based calculation: roles that earn tips are expected to earn a certain number of tips in relation to their sales. They must tip in according to their sales, not their tips earned. If they get exemplary tips, they get to keep the extra. If they get smaller tips, they might end up owing money to the Tip Pool.

What are the common ways in which Tips are paid out?

  • Hours worked: allocates a tip shortfall by spreading it across tipped employees based on their percentage of hours worked.
  • Percentage: This is calculated as a percentage of employee hours worked.
  • Equally: In this case, tips are pooled equally.
  • Pooling Points: Employees are assigned points based on their role and given higher levels of points or lower levels of based on the total number of tips (I.e. a server has more points than a cook).

What is the benefit to employers and employees?

  • The benefit to employers: Tip sharing helps address the gap in pay between front-of-house (servers/bartenders/bussers/hosts) and back-of-house employees (chefs/dishwashers/cooks). Closing the pay gap could potentially lower the employee turnover rate in restaurants and additionally, employers can subsidize wages that would not typically receive tips.
  • The benefit to employees: this helps foster an environment of support since back-of-house workers are included. With tip policies in place, all employees receive at least some share of tips.

What are the requirements by law?
The FLSA requires that employers pay employees at least the federal minimum wage, which is $7.25 per hour. Employers are also allowed to use $5.12 per hour of tips against the total minimum wage, which is often called a Tip Credit. That means that restaurants can pay employees as low as $2.13 per hour. If the tip amounts don’t net out to the minimum wage on the state level, the restaurant needs to pay out the difference.

Employers must also not retain tips paid to employees, however, employees must report their tips received, which is often done using a point-of-sale system.

There are hefty penalties for violations of the law.

What are the recent changes to the law as of 2018?
Employers that do not use the tip credit are able to adopt Tip Pooling policies that include back-of-house employees.

Now, if the employer decides to have a Tip Sharing policy or a Tip Pooling policy – they can require that back of house employees be included. Essentially, the law eliminates the prior restrictions for employers, not using the tip credit, from requiring Tip Pooling with employees who are not regularly tipped. For those that are receiving Tips on a regular basis, this has caused some backlash (i.e. Server/Bartender vs. Cook/Dishwasher positions).

Who ultimately do tips belong to?
Tips ultimately belong to the employee, not the employer. Employees cannot be required to give tips to the manager or supervisors, but employers will typically pay employees less than minimum wage under the assumption that the employee will receive some tips on shifts, if eligible.

Why does this matter?
Employers continue to look for accurate, more frequent and direct ways of paying tips to employees. They also would like to reduce the need to have large sums of cash on hand.