With each year comes legislative changes that could affect your payroll. To ensure your payroll is accurate and that you remain compliant, it’s important to keep up with the latest federal, state and local requirements. In case you missed them, here’s a roundup of the major changes impacting the payroll world in 2021.
1. Paycheck Protection Program (PPP) loans
As you may have heard, Congress approved a $900 billion COVID relief package, which includes $284.45 billion in additional funding for the Paycheck Protection Program (PPP). PPP loans are forgiven if funds are used for eligible expenses, including payroll, rent or mortgage interest, utilities, and personal protection equipment and supplies. To learn more about eligibility details and to apply through our partners at Adesso capital, visit their PPP overview page.
2. Minimum wage rates
Federal minimum wage will stay at $7.25 in 2021. However, many states have increased their rates to a level that’s higher than the federal minimum wage rate (here’s where each state stands). Employers must comply with the highest applicable minimum wage — whether that’s the federal, state, county or city level — so be sure you’re aware of the laws that apply to you.
3. Labor law posters
The Department of Labor (DOL) requires employers with at least one employee to display federal and state labor law posters in plain view for employees. Ensuring you update your posters annually is step one. But, with more employees working remotely these days, it’s also a good idea to distribute postings via alternative methods like an employee portal or email.
To help you stay on top of your poster requirements, we recommend leveraging a service that (at a minimum) provides you with updated labor law posters. There are also subscription-based services, such as the E-Update Service we offer our clients, which includes:
- Annual delivery of state and federal labor law posters
- Updated postings sent via email for easy printing and distribution (includes every mandatory or recommended federal, state, city and county compliance change)
- Protection in the event of a government fine or penalty (up to $25,000)
4. Social Security wage base
The Social Security wage base increased from $137,700 in 2020 to $142,800 in 2021. For annual salaries up to $142,800, both the employer and employee must pay a 6.2% Social Security tax, which is flat with 2020. Social Security tax rates are automatically updated in our Payroll system to ensure that the correct calculations and withholdings occur.
5. Workers’ compensation premiums
Every state has their own laws around workers’ compensation. Your premium rate may increase, decrease, or stay the same depending on your state, business classification code and industry group. Check at the state level to confirm your 2021 premium rate. Note, many states have tools that allow you to search for your rate based on your classification code. Here’s an example of a search tool available via the Wisconsin Compensation Rating Bureau (WCRB).
6. Retirement contribution limits
Each year, the Treasury Department adjusts annual retirement contribution limits based on inflation. In 2021, employees can contribute the same amount as 2020 ($19,500) to their 401(k). However, the total 401(k) limit, which includes employee elective deferrals and employer contributions, has increased from $57,000 to $58,000. The limit for IRA contributions remains unchanged at $6,000. Here’s a summary, including annual compensation limits:
7. Health savings account limits (HSA)
If you offer employees a high deductible healthcare plan (HDHP) with an HSA option, you should note that contribution limits have increased 1.41% for individual and family plans. Below is additional information regarding HSA year-over-year changes:
8. State unemployment tax rate
Unlike some taxes, state unemployment taxes do not have a standard rate. Each state sets a different range, but your state (or states) will inform you of your tax rate and any rate updates that occur. You will likely need to communicate changes and confirm rates with your payroll provider, so you can ensure proper employer contributions are made.
Note: If you work with B2E Solutions and have employees working in Wisconsin, we obtain annual rates from the state on your behalf. If you pay unemployment outside of Wisconsin, you’ll want to confirm the state rate and send it to your client service representative (CSR) or email it to tax@b2esolutionsinc.com.
Stay informed about future payroll changes
In addition to the changes discussed above, there may be additional legislative updates announced later this year. To ensure you stay up to date on the latest and greatest, we recommend checking out, subscribing, following, and bookmarking payroll sites and organizations that routinely share payroll-related news. Just remember to always consult a legal professional if you have any questions on new laws that may impact your business.
To get you started and help you stay in the know, we’ve compiled a list of our top 11 go-to payroll resources. Click here to check them out.
Note: This article was originally published in 2019 and was updated in 2020 and again in 2021 to reflect the most up to date information.
