Released on September 1, 2020
A payroll tax deferral on workers’ portion of the Social Security payroll tax begins today. But it’s unclear how many employers will participate and how much it will affect the staffing industry.
The move is designed to give employees more money in their paychecks through the end of the year. However, that money would need to be paid back between Jan. 1 and April 30 of next year — likely through extra payroll tax deductions by employers — unless Congress votes to forgive the tax. The deferral stems from an Executive Order by President Trump on Aug. 8.
Some extra guidance on the deferral was released Friday afternoon by the US Treasury Department. But questions remain on how the money will be paid back, especially for the staffing industry.
Nick Florio, founder of Strategic Staffing Consultants, said the payroll tax deferral looks a bit dicey at this point. This is especially the case in the staffing industry because it can be uncertain whether a contingent worker will still be on assignment through April of next year when the deferral must be repaid.
Florio, who was a partner at accounting firm Citrin Cooperman & Co. LLP, where he served for 30 years, said it’s uncertain if the deferral will be forgiven, which is a decision that must be made by Congress. Even if the deferral is forgiven, the process of Congressional decision-making could take months.
But for employers that do participate in the optional program, the onus may be on the worker if the money is to be paid back, even if they are no longer working for a company.
“That’s why it’s so dicey; you’re playing with somebody else’s money,” Florio said.
Although the extra guidance was released, more information is still needed to clarify the guidelines and the possibility of forgiveness, he said. Once some of the uncertainty goes away, then employers could make a more sound decision.
The deferral taking effect today also only applies to the employee portion of the Social Security tax. The employer portion has already been deferred under a separate program.
Roy Fazio, chairman of Affiliated Staffing Group, an association of noncompeting staffing firms, checked with members regarding the deferral on Monday; one response was the rules for the deferral were “clear as mud” and didn’t seem workable for the staffing industry. Another contact said there were no plans to allow the deferral; given the high turnover of temporary workers, it would be a nightmare trying to collect from former employees.
Mark Roberts, CEO of the TechServe Alliance, an organization representing IT and engineering staffing firms, said he doesn’t see the employee payroll tax deferral having much of an impact on the IT and engineering staffing industry.
“Because of the nature of staffing, I don’t think they are going to be inclined to defer payroll taxes for their consultants,” Roberts said.
The deferral doesn’t relieve the tax liability. And with a lack of clarity on whether an employer may be liable for the tax if the employee is no longer at the company when the deferred tax must be paid, there does exist a risk the staffing firm may ultimately bear the cost. In addition, the deferral cannot be used for more highly paid workers such as those typically employed by IT and engineering staffing firms. To be eligible for deferral, employees’ wages in general must be less than $4,000 during any bi-weekly pay period calculated on a pre-tax basis ($104,000 per year).
The attention of many staffing firms is focused elsewhere.
“What our folks are focusing on and watching much more closely is [Paycheck Protection Program] relief,” Roberts said. This includes watching for a possible second round of PPP and more lenient rules on loan forgiveness. It will have a bigger impact on industry firms.
It’s likely Congressional action on such relief will come around Sept. 30, the end of the federal fiscal year, he said.
Original author: Staffing Industry Analysts (SIA) | Daily News