As an employer operating in New Hampshire, overseeing payroll requires you to adhere to precise legal procedures when compensating your workforce. This includes tasks like computing their earnings, implementing deductions, and adhering to payroll tax guidelines. To manage payroll well, it’s important for employers to understand these rules and stay updated about New Hampshire’s labor and tax laws.
This guide aims to assist New Hampshire businesses in managing their payroll effectively. It offers tailored advice and instructions to simplify the process of paying employees, ensuring compliance with state laws and accurate payroll management.
This Article Covers
Laws That Affect Payroll Procedures in New Hampshire
Worker Classifications in New Hampshire
Payroll Forms and Relevant Bodies in New Hampshire
Applicable Taxes in New Hampshire
- Employer Contributions
- Withheld from Employee’s Wages
- Additional Relevant Subtractions to Withhold on Behalf of Employees
Key Pay Elements That Impact Payroll in New Hampshire
Step-by-Step Guide to Payroll in New Hampshire
Laws That Affect Payroll Procedures in New Hampshire
New Hampshire Laws
New Hampshire has its own employment rules impacting various work areas such as labor laws, minimum wage standards, and family leave policies. Here’s a basic rundown of some important laws and rules in New Hampshire:
- New Hampshire Labor Code: This oversees things like wage payments, sick leave, and worker’s compensation. It also includes federal laws like the Federal Labor Standards Act (FLSA).
- Minimum Wage: New Hampshire has a fixed minimum wage that can change. Currently, it stands at $7.25 per hour.
- Overtime Pay: Non-exempt employees get 1.5 times their regular wage for hours worked over 40 in a workweek, following federal standards.
- Family and Medical Leave: Eligible employees can take unpaid leave for specific family or health-related situations.
- Equal Pay: Laws in New Hampshire ensure employees get equal pay for similar work regardless of gender.
- Meal and Rest Breaks: In New Hampshire, Salaried employees may be entitled to meal breaks during their workday, depending on regulations set by their employer.
- Parental Leave: Eligible employees can take unpaid leave for things like childbirth or adoption.
- Sick Leave: New Hampshire doesn’t have specific laws mandating paid or unpaid sick leave.
- Wage Payment Rules: To prevent wage theft, New Hampshire has rules covering wage disbursement, deductions, and payment timing.
Federal Laws
- Fair Labor Standards Act (FLSA): The FLSA establishes regulations for minimum wage, overtime pay, recordkeeping, exemptions, and child labor. It covers various sectors, including private businesses and government entities at federal, state, and local levels.
- Federal Insurance Contributions Act (FICA): FICA mandates contributions to Social Security and Medicare from both employers and employees. Employers deduct 6.2% for Social Security and 1.45% for Medicare from each employee’s pay. Employers also match these deductions, totaling a 15.3% FICA payroll tax rate for each employee.
- Federal Unemployment Tax Act (FUTA): FUTA requires employers to contribute to unemployment taxes, providing benefits to eligible employees who lose their jobs. Although it’s not a direct payroll deduction for employees, employers need to account for FUTA contributions in every payroll cycle. Typically, there’s a 6% tax on the initial $7,000 paid to an employee annually, with specific industry exceptions possible.
HR Laws
- New Hire Reporting: In New Hampshire, employers have a legal duty to inform the relevant department within 20 days of hiring, recalling, or rehiring a new employee. This notice should contain specific details about the newly hired, recalled, or rehired person, including their full name, address, social security number, and the start date of their employment.
- Posting Requirements: Businesses in New Hampshire that employ workers must follow certain posting rules. They’re obligated to exhibit labor law posters at the workplace. These posters cover various critical topics, such as minimum wage guidelines, health and safety rules, and other essential labor laws. This ensures that employees are aware of their rights and responsibilities as outlined by New Hampshire labor laws.
Worker Classifications in New Hampshire
Employees and Independent Contractors
Determining if a worker is an employee or an independent contractor in New Hampshire is a crucial step in complying with federal and state payroll regulations. It involves assessing different work aspects. This includes examining how much control the employer has over the worker’s tasks and considering the worker’s independence. Independent contractors typically handle tasks with more freedom, while employees often work under direct supervision. Reviewing the nature of the work relationship, payment methods, tools used, and any written agreements are essential in making this determination. Accurately classifying workers is crucial for complying with New Hampshire laws, as misclassification can lead to legal and financial issues.
Properly classifying workers ensures compliance with regulations and avoids problems like tax liabilities or denied benefits for workers. Seeking guidance from legal or HR professionals helps New Hampshire businesses correctly categorize workers and understand the implications of each classification. This approach supports adherence to the state’s employment laws and promotes a fair and legal work environment.
The ABC Test
New Hampshire employs the “ABC Test” to determine an individual’s employment status. According to this test, services provided by an individual will be considered as part of employment, necessitating unemployment insurance coverage, unless the employer can prove that all three criteria of the “ABC Test” are satisfied.
The criteria for the ABC test includes:
- The individual has both contractually and practically maintained independence from control or direction over their services’ performance.
- The service provided either falls outside the typical scope of the business’s operations or is conducted outside all the enterprise’s locations.
- The individual is customarily engaged in an independently established trade, profession, occupation, or business.
To learn more about the rights of salaried and hourly employees, you can read our guides on your rights as a salaried employee in New Hampshire, and your rights as an hourly employee in New Hampshire.
Payroll Forms and Relevant Bodies in New Hampshire
New Hampshire Payroll Forms
- NH-1040: New Hampshire residents use this form to report their state income tax obligations.
Federal Payroll Forms
- W-3 Form: This document summarizes and consolidates the overall compensation and tax payments made by all employees.
- Form 940: Its purpose is to report the unemployment taxes owed to the IRS.
- Form 941: Employers utilize this form to report their quarterly earnings and deductions for income and FICA taxes withheld from employee paychecks.
- W-4 Form: Employers use this form to accurately determine the tax withholding for their employees.
- W-2 Form: This form details each employee’s yearly earnings.
- Form 944: It’s employed for the annual reporting of income and FICA taxes withheld from employee paychecks.
- 1099 Forms: These documents provide contractors with the necessary details to compute their IRS tax obligations based on their earnings.
Federal and New Hampshire Payroll/ Tax Bodies
- Internal Revenue Service (IRS): The IRS manages federal tax collection and enforcement, including payroll taxes like income tax withholding, Social Security, and Medicare taxes.
- Department of Labor (DOL): The DOL oversees federal labor laws, such as minimum wage and overtime regulations.
- Social Security Administration (SSA): The SSA administers Social Security benefits, including the collection of Social Security taxes (FICA).
- Centers for Medicare & Medicaid Services (CMS): CMS manages the Medicare program, including the collection of Medicare taxes (FICA).
- New Hampshire Department of Revenue Administration (NHDRA): The NHDRA manages state tax collection, including income tax withholding and unemployment taxes.
- New Hampshire Department of Labor (NHDOL): The NHDOL is responsible for enforcing state labor laws, ensuring fair wages, and handling workplace-related issues within New Hampshire.
Applicable Taxes in New Hampshire
Employer Contributions
- Federal Unemployment Tax Act (FUTA): FUTA requires employers to contribute to unemployment taxes, aiding eligible employees who lose their jobs. Though not directly deducted from employee pay, it involves a 6% tax on the initial $7,000 paid to each employee annually, with possible exceptions based on industries or situations.
Withheld from Employee’s Wages
- New Hampshire Income Taxes: New Hampshire does not impose personal income tax. However, there is a tax on interest and dividends. It worth noting that this tax is gradually being reduced. The tax rate is currently 5% for taxable periods ending before December 31, 2023. It will decrease to 4% for taxable periods ending on or after December 31, 2023, and further decrease to 3% for taxable periods ending on or after December 31, 2024.
- Workers’ Compensation in New Hampshire: Similar to many other states, New Hampshire mandates employers to carry workers’ compensation insurance. This insurance is essential as it covers injuries or illnesses that occur due to work-related activities. Employers must acquire and sustain workers’ compensation insurance to provide this essential coverage for their employees.
- Social Security (FICA) Withholding: Social Security (FICA) withholding is a federal program applied consistently across all states, including New Hampshire. The tax rate for Social Security is 6.2% for employees, with a set income cap subject to this tax, currently at $147,000. For Medicare tax, it’s 1.45% for employees and applies to all covered earnings without an income cap. Higher-income earners might face additional Medicare taxes.
Additional Relevant Subtractions to Withhold on Behalf of Employees
The federal Fair Labor Standards Act (FLSA) sets limits on employers regarding deductions from employees’ wages unless explicitly permitted by the law or with clear employee consent. There are specific scenarios where deductions are allowed:
- Jury, Witness Fees, and Military Duty: Employers can deduct jury fees, witness fees, or temporary military duty pay received by employees.
- Safety Violations: Penalties for serious safety rule breaches can be deducted in good faith by employers.
- Disciplinary Suspensions: Deductions are permissible for unpaid suspensions lasting a full day or more due to workplace rule violations, enacted in good faith.
- Personal Absences: Deductions can occur for employees’ personal absence lasting one or more full days, except in cases of illness or disability.
- Sickness or Disability: If employees are absent due to sickness or disability for one or more full days, deductions can be made, provided a valid compensation plan or policy exists.
- Family and Medical Leave: Deductions are allowed for unpaid leave taken under the Federal Family and Medical Leave Act, which provides job-protected leave for specific family and medical reasons.
Key Pay Elements That Impact Payroll in New Hampshire
Minimum Wage
The current minimum wage in New Hampshire stands at $7.25 per hour, aligning with federal guidelines that govern exemptions from mandatory minimum wage requirements. It’s crucial for employers to stay updated on these rates as they might change periodically.
Overtime
New Hampshire follows overtime rules in line with the federal Fair Labor Standards Act (FLSA). Employees who work beyond 40 hours in a workweek are entitled to overtime pay at 1.5 times their regular hourly wage. For example, with New Hampshire’s minimum wage set at $7.25 per hour, this translates to an overtime rate of $10.88 per hour.
Workers’ Compensation Insurance
In New Hampshire, compliance with Workers’ Compensation Insurance laws is essential for employers. These regulations act as a safety net for employees dealing with job-related injuries or illnesses. They provide disability benefits to workers affected by work-related issues, lessening the financial impact when employees require time off due to work-related conditions.
Pay Stub Laws
Employees in New Hampshire have rights concerning pay stubs. They are entitled to receive statements and records of all deductions and records of their work hours and earnings.
Paycheck Deduction
Employers in New Hampshire are restricted from deducting funds from employee earnings for regular operational costs. If employers mandate a uniform, they must cover the expense or reimburse the employee for incurred costs, ensuring employees aren’t burdened with business-related expenses.
Final Paycheck
In New Hampshire, employees resigning from their positions must receive full payment by the next scheduled payday or the first Saturday following their departure if there’s no regular payday. For terminated or laid-off employees, full payment is due on their final working day. Employers can opt for direct deposit but cannot specify the financial institution for employees’ earnings.
Step-by-Step Guide to Payroll in New Hampshire
In New Hampshire, employers must comply with specific laws. Here’s a breakdown of the payroll process in simple steps:
- Understand Payroll Rules: Before starting payroll tasks in New Hampshire, grasp the regulations applicable to your business. These rules vary based on industry, workforce size, and payment methods like hourly or salary. Familiarize yourself with state labor laws and federal payroll rules for smooth payroll operations.
- Get an Employer Identification Number (EIN): An Employer Identification Number (EIN), issued by the IRS, is crucial for tax-related purposes. To meet tax obligations in New Hampshire, acquiring an EIN is essential. You can easily apply online through the IRS website.
- Register with the New Hampshire Department of Employment Security: Employers need to register with the New Hampshire Department of Employment Security for unemployment insurance purposes. This registration ensures accurate reporting and payment of unemployment taxes to the state. Online registration is available on the department’s website.
- Employee Classification: Properly categorizing workers in New Hampshire as employees or independent contractors is vital due to tax and wage reporting implications. Incorrect classification can lead to legal issues.
- Collect Employee Payroll Documents: Gather essential payroll documents from your New Hampshire employees, such as W-4 Forms for federal tax withholding and I-9 Forms for employment verification.
- Track Work Hours: Maintain precise records of employee work hours, breaks, overtime, and leave as per New Hampshire regulations. Using tools like time and attendance software can simplify this task.
- Establish a Payroll Schedule: New Hampshire requires a consistent payroll cycle to comply with labor laws. The frequency may differ but must be consistent and clearly communicated to employees.
- Calculate Earnings: Accurate calculation of gross earnings is critical in New Hampshire due to specific wage and overtime laws. This includes commissions, bonuses, overtime pay, and reimbursements in line with state laws.
- Federal Payroll Tax Compliance: Adhere to IRS guidelines for depositing employment taxes as prescribed, not only in New Hampshire but also across other states.
- Maintain Payroll Records: Keep precise employee payroll records in New Hampshire, including work hours, pay statements, tax forms, for at least three years to meet state and federal regulations.
- Annual Reporting: Complete essential annual government reports like W-2 and 1099 forms for employees by the specified deadline in New Hampshire.
Final Thoughts
Administering payroll in New Hampshire has it’s unique set of challenges. Individuals must navigate the state’s specific minimum wage standards, tax responsibilities, and labor legislation. To simplify payroll management, explore our recommendations for the top 6 applications tailored to streamline payroll duties in the United States. If you’re already using a system, we’ve detailed ten tips to enhance your payroll procedures within the United States.
Important Cautionary Note
This content is provided for informational purposes only. While we make every effort to ensure the accuracy of the information presented, we cannot guarantee that it is free of errors or omissions. Users are advised to independently verify any critical information and should not solely rely on the content provided.
