How to Do Payroll in Vermont: What Every Employer Needs to Know
You’ve hired your employees, set their salaries, and established the benefits you’re going to offer them. But are you still missing one crucial detail? Are you sure you’re doing the Vermont payroll correctly? Don’t worry—we can help! In this guide, we’ll walk you through how to do payroll in Vermont and make sure that you’re following all of the rules and laws when it comes to your employees’ paychecks.
VT Wage Payment Protection Act
Are you new to being an employer and wondering how payroll works? If so, here are some of the basics. First, read up on the VT Wage Payment Protection Act. This is one of the most important pieces of legislation for any employer as it sets out minimum payment requirements for all workers, whether they are part-time or full-time employees.
Is your business subject to the VT Wage Payment Protection Act?
The Wage Payment Protection Act requires any employer who has six or more employees and who pays at least $100,000 per year for annual wages to establish a system for the electronic payment of wages. Businesses meeting these requirements must set up an automated system that can electronically transfer earnings from an employee’s designated account on payday. Vermont also mandates employers to provide employees with documentation of their earnings in one of the following ways: pay stubs, direct deposit statements, or bank deposit slips. Employees are entitled to request copies of their W-2 and 1099 forms each year they work. Plus, all employers must notify the State Department of Labor when they hire new employees and when those workers leave their company.
Are wages due daily, weekly, biweekly, semi-monthly or monthly?
Vermont employers are required to pay wages due daily, weekly, biweekly, semi-monthly or monthly. An employer is considered delinquent when more than seven days of wages are unpaid after the date they were earned. Wages will be subject to a 20% penalty for each week an employer is delinquent unless the delayed wages will cause hardship for the employee.
If an employer violates any provision of Vermont’s minimum wage law, the department may seek injunctive relief and impose a civil penalty of not less than $250 and not more than $1,000 for each willful violation or each day that a violation continues following due notice and opportunity for a hearing.
What are the penalties for non-compliance?
Employers need to keep accurate records of how they calculate and withhold the payroll taxes from employees’ paychecks. This includes calculating and withholding the state income tax and Social Security (FICA) tax from employee wages, as well as calculating their total federal income tax withholding for a year, and sending this information to the IRS by April 15th. The employer also needs to withhold and remit any federal unemployment taxes that become due for 2017, which is typically deposited through the Electronic Federal Tax Payment System. Failure to do so could result in penalties up to $15,000 per quarter or other higher amounts if statutory requirements are not met by employers and depending on the severity of the failure.
When do VT employers have to pay employees if they fire them or lay them off?
Employers are generally required to pay employees when their employment ends for any reason, including firing, layoffs, and resignations. VT law says that when an employer terminates the employee’s work due to economic conditions such as a strike or natural disaster, the termination can be made with or without notice. Termination is also considered voluntary if it is done at the employee’s request. If an employer determines that the termination was not voluntary, then the employer must provide up to 30 days written notice of termination and up to 60 days’ wage payment following the notice of termination.
Who do I make payments too and what information should be included?
Do I make payments too and what information should be included?
It is the employer’s responsibility to pay an employee according to the work done. The employer must deduct state, federal, and social security taxes from the employee’s wages and send them electronically or postmarked by January 31 each year. These are due on or before February 15th for the previous calendar year. The social security tax is calculated at 6.2% of wages paid up to $127,200. Taxes owed are then divided into four equal installments and sent to the IRS quarterly. For example, if a worker earns $10,000 in one quarter then their social security taxes would be about $650 for that quarter (or $1,800 per year).
If an employer does not withhold these amounts from wages as required then they may owe unemployment compensation contributions as well as face penalties and interest charges. Failure to withhold these amounts could also result in fines of up to 10 times the amount not withheld plus 20% if a repayment plan cannot be agreed upon with the IRS.
Some employers will want additional coverage like disability insurance which will protect them against missed income when employees cannot work because of sickness or injury.
How do I comply with new unemployment compensation laws?
Changes to unemployment compensation laws can happen throughout the year. When major changes do occur, we will provide detailed information on our website about how you need to comply with these changes.
Here are some common questions and answers about new and proposed unemployment compensation laws from January 2019:
What is happening? The federal Protecting Family and Small Business Tax Cuts Act (HR1) repealed the Work Opportunity Tax Credit. The Universal Paid Leave Act (HR1388) will increase the number of workers entitled to paid leave under the FMLA.
When do I need to comply? For HR1, all employers must submit updated IRS Form 940 to the Department of Labor before March 31, 2019.