2021 Payroll Updates That May Affect Your Restaurant

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Payroll for Restaurants is no longer just about cutting checks for hours worked. It’s evolved into understanding and maintaining payroll compliancy with both Federal & State mandates. Law changes and enactments regarding PPP, Loan Forgiveness, Safe and Sick time, Overtime, Paid Time Off, etc. have created a world of litigation and increased labor costs. It’s imperative to remain up to date with the upcoming changes to make sure your restaurant is set up for success in 2021!

WHAT PAYROLL CHANGES ARE ON THE HORIZON FOR 2021?

  • Colorado: Colorado has implemented Emergency Paid Leave that begins on January 1st, 2021. Colorado employees that work for an employer with 15 or more employees will accrue 1 hour of Paid Leave for every 30 hours worked, up to a maximum of 48 hours of Paid Leave that they can use immediately.
    • Employers with 15 or fewer employees will be required to comply with this law at the beginning of 2022.
  • Connecticut: Connecticut has implemented Paid Family Medical Leave. This plan is 100% funded by the employees where 0.5% of an employee’s gross wages will be deducted from each paycheck in order to fund their leave plan, beginning January 1st, 2021. Employees cannot use their leave until 2022.
  • Maine: Maine has implemented Paid Sick Leave that begins on January 1st, 2021. Maine employees that work for an employer with 11 or more employees will accrue 1 hour of Paid Leave for every 30 hours worked, up to a maximum of 40 hours of Paid Leave; however, the employee must wait 120 days to utilize their accrued Paid Leave.
  • Federal:
    • Form W4: There is a new form W4 which is the Employee’s Withholding Certificate; it informs an employer of how much money to withhold from an employee’s paycheck for federal income taxes.
    • Social Security Threshold: The social security threshold changes every year and was bumped up from $137,700 to$142,800, so employees will pay an employer2% on wages up to the maximum of $142,800. The payroll tax that funds Social Security is set at 12.4% on eligible wages up to the cap; Employees pay 6.2% and employers pay the other 6.2%.

WHAT ARE THE 2021 MINIMUM WAGE INCREASES TO DATE?

Across the country there are 20 states that are increasing their minimum wage – check here for a full list of national minimum wage increases.

As minimum wages continue to rise, there’s still a chance that more states will enact a higher minimum wage, even after the 1st of the year. Make sure you’re paying attention to your state, and city as they update wages. So far, the most notable (largest jumps) increases include:

  • Colorado: The state as a whole is jumping from $12.00 to $12.32, but in Denver specifically the minimum wage will increase in 2021 from $12.85 to $14.77. Denver restaurants need to make sure they’re paying attention their labor dollars with this huge jump.
  • Washington: In Seattle, businesses with 500 or fewer employees with medical benefits is jumping up from $13.50 to $15.00. That same threshold 500 or fewer employees without medical benefits is rising from $15.75 to $16.69. Large businesses in Seattle with 501 or more employees is also jumping up to $16.69.

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DO MINIMUM WAGE INCREASES IMPACT EXEMPT SALARIED EMPLOYEES?

There are a few states that have the minimum salary for exempt employees based on their minimum wage. For example, Alaska and California based their minimum salary for exempt employees, and it is 2 times the state minimum wage for 40 hours.

Let’s take, for example, California: They have 2 state minimum wages – One minimum wage for employers with fewer than 26 employees at $13.00/hour, and then a different minimum wage for employers with 25 or more employees at $14.00/hour.

For an exempt employee, an employer would have to pay double the minimum wage amount. I.E., if you have 26 or more employees, you’d have to pay your exempt employees $28.00 an hour for 40 hours a week or $1,120.00 a week, which turns into a $58,240 annual salary.

Another odd example is Maine. They base the Minimum salary for exempt employees on 3,000 times the hourly minimum wage. Their minimum wage is $12.15 in 2021, so you multiply $12.15 by 3,000 and we get $36,450 a year.

What does all this mean? Restaurants need to be aware that there are going to be adjustments on your hourly employees, and in certain states, you may actually have to be making increases on your salaried managers as well to hit that minimum wage.

WHAT IS THE CURRENT MINIMUM SALARY SET BY THE DEPARTMENT OF LABOR FOR AN EXEMPT EMPLOYEE THAT MUST BE PAID?

The Department of Labor set a final rule at the beginning of 2020; They changed it from $455 a week to $684 a week. So, if the state doesn’t have a higher minimum salary, an exempt employee must be paid $684/week or $35,568/year.

WHAT IS AN EXEMPT EMPLOYEE AND WHAT EXACTLY ARE THEY EXEMPT FROM?

When an employee is “exempt,” they’re exempt from overtime. So, an employee would need to qualify for one of the Department of Labor’s exemptions under what’s called an Administrative Exemption, a Professional Exemption, or an Executive Exemption; if you qualify for one of these exemptions, you would not need to be paid overtime, but you would need to be paid the minimum salary rate for an exempt employee.

An example of an Administrative Exemption would be if the employee’s primary duty is the performance of office or non-manual work directly related to the management or general operations of the employer.

An example of a Professional Exemption would be if the employee’s primary duty is the performance of work that requires advanced knowledge, such as an accountant or a CPA, etc.

An example of an Executive Exemption would be if the employee’s primary duty is in a managerial position; someone who can hire, and fire people, and they help manage the business.

ARE THERE ANY STATES THAT HAVE HIGHER SALARY LEVELS FOR EXEMPT EMPLOYEES THAT ARE SET BY THE DEPARTMENT OF LABOR?

There are a few states that have higher minimum salary levels for exempt employees than what’s currently set by the Department of Labor, and those levels are based on an entirely different calculation than a minimum wage calculation. Alaska, California, Colorado, and Washington are a few to note. Reach out to RASI Compliance with any questions on minimum salary levels for exempt employees by state.

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