Welcome to Payroll Updates for 2024! Now that the celebrations are over, it’s time to purge the past and prepare for the future. Before your first payroll of the year, it’s a good idea to create a checklist of all the changes you should make to employee or company records and devise a system to verify that no system glitches were triggered by the new data. Be sure you’ve researched employer and/or employee taxes, insurance premiums, benefit contribution limits, and more in your state and federally. Double-check that you haven’t keyed anything incorrectly to avoid errors.

Below we examine a few payroll-related issues that administrators should keep in mind in January.

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Payroll Updates for Federal and State Tax Differences

Wage Base Increase

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In 2024, the Employee Social Security wage base for all states increased to $168,600 (up from $160,200 in 2023). This means 6.2% is withheld from employee pay until they make $168,600, at which point they’re no longer required to contribute for the rest of the calendar year.

FUTA Credit Reduction Increase

Three states had a FUTA Credit Reduction (FCR) increase in 2024. This is an additional tax that employers there pay on employee earnings up to $7,000 to reimburse the federal government unemployment funds they borrowed during the COVID-19 pandemic. California and New York increased to 0.9% FCR, while the Virgin Islands increased to 4.2%. Connecticut and Illinois had FCRs previously but no longer require the tax in 2024.

Tax and Payroll Updates

Unemployment Developments for 2024

Each employer has its own State Unemployment Tax (SUTA or SUI) rate based on experience ranges set forth by the state government. That rate could change by year, and the state could also alter its taxable wage base or add an assessment tax.

You should receive guidance from your state with your individual company’s rate, and you must also research any statewide changes.

Here are some examples:

  • Colorado – The taxable wage base increased to $23,800 (up from $20,400 in 2023).
  • South Carolina – SUTA rates range from 0.06% to 5.46% and include a 0.06% contingency assessment, but the taxable wage base remains the same.

Payroll Updates on Benefit Contribution Caps

401(k) Contribution Limit

The 2024 401(k) Contribution Limit increased to $23,000 (up $500 from 2023). The catchup limit for participants 50 years and older did not change.

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Annual HSA

Annual HSA (Health Savings Account) contribution limits increased to $4,150 for self-coverage (up from $3,850 in 2023), and $8,300 for family coverage (up from $7,750).

Excepted Benefit HRA

Annual Excepted Benefit HRA (Health Reimbursement Arrangements) contribution limits increased to $2,100 (up from $1,950 in 2023).

FSA Account

FSA (Flexible Spending Account) contribution limits increased to $3,200 (up from $3,050 in 2023). The FSA Carry Over limit increased to $640 (up from $610).

Insurance Premium Hikes

If yours is like most companies, your health insurance plan year mirrors the calendar year starting January 1. In that case, you’ve recently finished open enrollment and know your employee selections for health, dental, or other supplemental insurance.

Make a spreadsheet to verify your system changes match the employee choices, and that any premium increases or changes were loaded into your system. Once you process your payroll, spot-check for errors by comparing deductions to the amount expected for each employee.

payroll updates hikes

Payroll Updates for Rate Revisions

Twenty-two states increased the minimum wage at the beginning of 2024, with some cities and regions at a higher minimum wage than the state.

Prevailing Wage

Union contractors or those on prevailing wage jobs may already pay an hourly base that’s higher than the minimum wage. It’s important to compare the minimum wage with wage determinations or collective bargaining agreements and pay employees the higher of the pay rates.

Post Employee Notice

Regardless of the situation, companies are required to post a notice informing employees of the increase or the current minimum hourly wage.

In addition, if your company offers raises at the beginning of the year versus the anniversary date, it’s a good idea to create another spreadsheet to track the increases.

Various Modifications for Construction Payroll Updates

As you’re verifying the information on individual pay stubs for January, some other topics to consider include:  

Workers’ compensation rates

Check with your WC insurance carrier for any changes and update your payroll system as needed. Ensure all employees are classified correctly based on tasks and job titles.

Certified payroll for construction

PTO balances and rollovers

Some companies limit rollover amounts from one year to the next for vacation or sick time. Verify that each employee’s PTO bank contains the expected hours for the new year. 

Training certifications

Check for any credentials that expire within the calendar year and arrange renewal training.

Payroll calendars and holidays

Set your pay periods for the upcoming year, make sure no holidays conflict with your normal pay date when banks may be closed, and mark any dates of note for the future, such as tax or other reporting deadlines.

Mileage

If your company reimburses mileage commensurate to the IRS, keep in mind that their rate increased to 66-68 cents per mile for 2024 and update your system accordingly. They haven’t released the official new rate yet, just estimates. Last year they announced it on Dec. 29.

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FAQ – Basic Payroll Management Questions

What is Payroll Reconciliation?

Payroll reconciliation is the process of comparing and verifying financial records related to employee compensation, ensuring accuracy and compliance. It involves cross-referencing data from payroll registers, bank statements, tax withholdings, and employee benefits to identify and rectify discrepancies. This meticulous review helps maintain precise financial records, aligning with regulatory requirements and preventing errors in employee compensation and tax reporting.

What is the payroll timeline in a construction company?

A payroll timeline in the construction industry is a chronological schedule detailing crucial dates and deadlines within the payroll process. It includes milestones like collecting employee timecards, processing payroll, and meeting specific tax filing deadlines. This timeline is essential in construction to ensure the timely and accurate disbursement of employee payments, comply with industry regulations, and fulfill legal obligations regarding tax reporting. It serves as a structured guide for navigating the unique challenges and requirements associated with payroll management in the construction sector.

How can I stay up to date on payroll updates and practices?

Staying current on payroll practices involves actively participating in workshops, webinars, and seminars provided by reputable organizations like the American Payroll Association. Regularly checking and following updates from government websites and federal agencies, especially the IRS, is crucial for staying informed about regulatory changes and best practices. Subscribing to industry publications and actively participating in online forums ensures awareness of the latest developments. Engaging in continuous professional development, networking with fellow professionals, and relying on information directly from government sources guarantees accuracy and compliance in payroll processes. This approach places a strong emphasis on leveraging government and federal resources for up-to-date knowledge.

The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.