Payroll compliance has always been a challenge in skilled nursing, but 2020 is proving to be an even bigger challenge because of a few new regulations. With a revamped W-4, a new overtime threshold and changes to the Affordable Care Act (ACA), skilled nursing providers both large and small face a new wave of payroll compliance demands.
A historic wave.
“The W-4 is what I am calling the single largest and most impactful change in the payroll industry since at least the Tax Reform Act of 1986,” says Yonina F. Shineweather, consulting director of compliance services at payroll technology company Viventium.
Here is a look at these three key areas of change, and how skilled nursing providers can stay ahead of the payroll compliance game in 2020.
The New W-4
As Shineweather says, the new W-4 impacts every employee in the United States. But it will pack a particularly powerful punch in skilled nursing, where its direct impact on the employee-employer relationship touches one vital aspect that all operators want to control: star ratings.
“In nursing facilities, where the emphasis is on retention and tenure, and the eyes of the public are turned to your five-star ratings, one of the biggest ways to improve retention is to keep your employees happy, and make sure you are withholding taxes properly: not over, not under,” Shineweather says. “Many payroll solutions are not supporting the W-4 properly.”
The big change to the W-4 is that it demands a lot more information from employees, and hence more of their time. Industry stakeholders are describing it as being “like a mini-tax return.” There are three big changes:
— There is a new filing status called “head of household”
— There are two sets of payroll withholding tables: for people with pre-2020 W-4s or with 2020 forms but only one job, and a separate set for those with new W-4s and multiple jobs
— There are no more exemption allowances
While those three changes are the biggest, Shineweather says, they are by no means exhaustive. The “frequently asked questions” page on IRS.gov about the new form is lengthy, with 21 total questions, including 11 for employees and six for employers. A payroll solution not equipped to address this new form can create headaches that ripple in all directions.
The new overtime threshold
On January 1, 2020, a new federal overtime pay rule took hold under the Fair Labor Standards Act (FLSA), and with 1.3 million American workers newly eligible for overtime pay, skilled nursing providers in many states will feel its effects.
The key change is the raising of the “salary threshhold” — the pay rate that nixes overtime eligibility — from $455 per week to $684 per week. People earning a wage between those two figures are newly covered under FLSA. This means that skilled nursing providers must begin tracking their hours.
“You don’t have to install punch clocks — any record keeping method is fine, even manual time sheets,” Shineweather says. “But you have to start tracking.”
Indeed, the U.S. Department of Labor (DOL) notes that the most common payroll violation in the skilled nursing industry is employers failing to pay for all of the hours worked. According to DOL, the most common failures in the skilled industry to fully and accurately compensate time are when work is performed:
— Before and after a worker’s scheduled shift
— During an employee’s scheduled meal period
— While employees are attending staff meetings and compensable training sessions
Skilled nursing providers also have a challenge when a collection of decentralized locations use one payroll office, Shineweather says. Therefore, capturing and retaining the hours performed at each location is vital.
Affordable Care Act and Payroll-Based Journal
The Payroll-Based Journal, or PBJ, under the ACA is not new, but a reminder on how it impacts skilled nursing providers is valuable.
U.S. Centers for Medicare & Medicaid Services (CMS) uses the data from the PBJ to determine a nursing facility’s required staffing level, and because of the CMS stipulations about how the data must be collected, “the quality reporting … can sometimes turn into a nightmare,” Shineweather says.
CMS requires that the data be uploaded in an XML format, which not all payroll service providers use.
“So one of the things that skilled nursing facilities often look for in a provider is a partner that has experience preparing PBJ reports, software that is easy to use and also getting that format already in XML,” she says.
Another key potential problem area for skilled nursing providers is that submissions have to be finished by 45 days after the calendar quarter, but CMS numbers them differently than the standard Q1, Q2, Q3, Q4:
Skilled nursing providers who are working on the new W-4 and the new overtime threshold can’t ignore the other massive payroll pitfalls that aren’t new — but are always looming.
Keeping up with these changes is daunting, and generic payroll solutions don’t always prepare skilled nursing facilities as well as niche payroll solutions. To learn how Viventium’s flexible software and expert guidance can ensure your payroll and HR is done right, visit viventium.com