1. Watch for new minimum wage rules
While the federal minimum wage rate is unchanged for 2019 ($7.25 per hour), state and local rates apply if they are higher than the federal rate. About 20 states have increased rates effective January 1, 2019.
2. Get new employment posters
Employers are required to display posters reporting applicable minimum wage rates and certain other information. Check with DOL, OSHA, and your state labor department for free posters. You can also purchase all the required posters for your location from Amazon, Staples, etc.
3. Note new Social Security wage base
The Social Security tax, which is part of FICA, applies to taxable compensation up to a set limit. The employer and the employee pay 6.2% of Social Security tax up to the wage base limit. For 2019, this limit is $132,000; it was $128,400 in 2018.
4. Implement employee elective deferrals
If your business offers a qualified retirement plan with salary reduction contributions (elective deferrals by employees), such as a 401(k) or SIMPLE IRA, the limits for 2019 have increased over 2018 amounts.
5. Implement new FSA limits
The amount of compensation that employees can commit to medical flexible spending accounts (FSAs) in 2019 is increased to $2,700 (up from $2,650 in 2018). However, the limit for dependent care FSAs is $5,000, which is a fixed amount that’s not adjusted annually for inflation.
6. Consider medical coverage options
While there is a question of whether the Affordable Care Act remains viable, for the moment the employer mandate for companies with 50 or more full-time and full-time equivalent employees is still in place. Smaller employers can choose to provide coverage and should note changes for 2019:
- Health savings account limits have increased.
- Qualified small employer health reimbursement arrangements (QSEHRAs) have increased contribution amounts.
Also, look for increased offerings of coverage through Association Health Plans. These are plans in the group market that can be offered to members (including sole proprietors) of chambers of commerce and trade associations.
7. Check for other employee benefits
If you offer transportation benefits to employees—free parking, transit passes, or van pooling—the amount that can be received tax free is $270 per month in 2019 (up from $265 per month in 2018). But you can’t deduct this benefit. The IRS has provided guidance to employers on how to figure the nondeductible portion of their lease payments if they include free parking for employees.
8. Note any state unemployment tax changes
Check with your state on whether you have any changes in your unemployment tax rate. Changes can result from:
- Law changes (e.g., increased state unemployment tax base amounts in Oregon and Washington)
- Your claims experience
9. Review workers compensation costs
Your premium rate may be higher, lower, or unchanged for 2019. Check with your state to determine what you have to pay, and for whom. For example, an S corporation owner may be able to opt out of coverage.
10. Note new employment laws
Your state or municipality may have other new rules for 2019 in addition to those listed above. For example, an Oregon Equal Pay Law, effective January 1, 2019, prohibits employers from paying employees different amounts for the same or comparable work. A California law requires employers with 5 or more employees to provide at least 2 hours of sexual harassment training to all supervisors (and 1 hour to non-supervisors) by the end of the 2019, and once every 2 years after that.
Keeping up with law changes related to payroll can be daunting. Work with your CPA or payroll service to adapt to tax law changes. And consult with an employment law attorney if you have questions about federal, state, or local law changes.