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What is Paid Family and Medical Leave?

Currently, thirteen states have a Paid Family and Medical Leave law. This is a new law and in about 15 states – CA, NY, CO, MA being a few of them. Each state is different – in some states, it is fully paid by the employee (CA and NY for instance) and in other states, both the employee and employer pay this (CO and MA for instance). The employer rate is about 0.5% of payroll in the states that require employer participation. This funds parental leave, medical leave and family caregiving leave.

Here is a good state-by-state guide:

https://onpay.com/hr/basics/paid-family-leave-by-state
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What are TURNKEY payroll registrations?

In a nutshell, “turnkey” means “we do it all” as opposed to “you do some and we do some”.

We recently sent an email to over 1,000 startup founders regarding payroll pain points.  Overwhelmingly, state payroll tax registrations were the biggest pain point.  When we dug in, though, it was not just the registration. It was the stress of entering the information correctly into Gusto or Rippling, updating the rates and especially dealing and acting on snail mail from these states and emails from Gusto and Rippling threatening to block payroll if something was not fixed.

Many firms will do registrations and many of these firms will also forward snail mail the states send once you are registered.  Their service stops there, though.  You then need to enter the state specific account numbers, unemployment rate and other identifying information into Gusto or Rippling. 

You will also need to deal with the snail mail and notices from the states.  Some of these notices are just informational or paper copies of tax forms that Gusto or Rippling will eFile and can be ignored.  Other notices, though, such as request for missing tax returns, rate changes, new payroll tax laws (a lot of states are in the process of passing Paid Family and Medical Leave laws), demand for additional taxes, changes in filing frequency, etc. need action.

The firms that forward the mail from the states do only that – they receive the mail, scan it and forward to you.  If there is any action needed, it is your responsibility to get it done – not theirs.  

All of our registrations include “turnkey” service.  So, “we do it all” – we will respond to all notices, enter new information into Gusto or Rippling, file pre Gusto or Rippling payroll tax returns, update the payroll system with new information such as new rates or filing frequencies, etc.

Our service is intended for startups that do not have an HR or Accounting Department.  The other services are more intended for larger companies.

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What are Payroll Taxes?

In short, payroll taxes are the taxes employers pay the government for the benefit of their employees.

The biggest tax is the Social Security tax.  This tax is paid by both the employer and the employee.  The employee pays 6.2% of their salary (through payroll withholdings) and the employer matches that amount.  Therefore, the government receives 12.4% of the salary to fund the employees’ Social Security benefits when they retire.  The tax is assessed on only the first $160K in calendar year salary.  

The Medicare tax is 1.45% of the salary and works exactly like the Social Security tax, but there is no cap (does not stop at $160K of salary). So, the government gets 2.9% of the salary to fund the employees’ health insurance when they retire.

The employer also pays state unemployment insurance tax (SUI).  This is totally funded by the employer.  SUI is paid to the state where the employee works.  It funds the unemployment pay that employees receive if they get terminated.  The rate is based on the employer’s experience – the more an employer terminates workers, the more they pay in SUI.  The rates are updated each year.  SUI is assessed on about the first $10K of annual salary (each state has a different wage base) and the rate for most startups is about 3%.

There is also the federal unemployment insurance tax.  This federal fund bails out the states when their unemployment fund runs out of money.  It is only $56 per year per employee and fully paid by the employer.

The last one is the Paid Family and Medical Leave (PFML) tax.  This is a new one and in about 15 states – CA, NY, CO, MA being a few of them.  Each state is different – in some states, it is fully paid by the employee (CA and NY for instance) and in other states, both the employee and employer pay this (CO and MA for instance).  The employer rate is about 0.5% of payroll in the states that require employer participation.  This funds parental leave, medical leave and family caregiving leave.

So, a good back of the envelope estimate for employer taxes is about 10% of payroll paid.

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The Birth of eKomply

The founders of eKomply are CPAs and accountants and have serviced the tax and accounting needs of tons of startups.

State payroll registrations have always been a pain point for startups.  Accountants do not want to do these registrations as they are time consuming, not very sexy and a good way to lose their staff to other firms by taking on this type of work.  Gusto, Rippling and other payroll services do not do these registrations.  HR consultants and lawyers do not do these.

So, startup founders are on their own and need to deal with this problem.  They can either attempt to do them themselves (not a good use of their time) or find a firm to do them.  Firms such as CorpNet have been around for a while and many startup founders use them.  

The CorpNets (see our comparison chart for the other firms like CorpNet), though, only do the registration and electronically forward your snail mail.  They do not enter the registration information into Gusto or Rippling, do the Third-Party Authorization connection, update your rates, take action on the slew of snail mail these states send you, file payroll tax returns for pre-Gusto and Rippling payroll periods, troubleshoot Gusto and Rippling problems, etc.  Any of these can result in Gusto or Rippling “blocking” your payroll (refusing to run it).

We recently sent an email to over 1,000 startup founders regarding payroll pain points.  Overwhelmingly, state payroll tax registrations were the biggest pain point.  When we dug in, though, it was not just the registration, it was the stress of entering the info correctly into Gusto or Rippling, updating the rates and especially dealing and acting on snail mail from these states and emails from Gusto and Rippling threatening to block payroll if something was not fixed.

So, eKomply was born with its purpose of not only filing the state payroll registrations but to take action on all payroll related tasks.  We are not a “you do some and we do some” solution.  We are a “we do it all solution”. 

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