Payroll And Timekeeping Manager

Payroll and Timekeeping - Manager Reference

Manager Timesheet Review and Approval

  • Managers must review and approve all employee timesheets for each pay period before payroll is processed.
  • Managers must compare timesheets against the schedule to identify missed punches, unexplained gaps, or potential off-the-clock issues.
  • If a timesheet appears to undercount hours (e.g., an employee was scheduled for eight hours but clocked only five with no recorded meal break), the manager must investigate before approving - not simply approve the record as submitted.
  • Managers may not reduce or edit an employee's recorded time without a documented, legitimate reason and the employee's acknowledgment.
  • Employees must review their own timesheet each pay period and sign off (physically or electronically) before it is submitted to payroll.

Rounding Policy

If our timekeeping system applies any rounding to clock-in and clock-out times, the rounding practice must be neutral - meaning it must round up in the employee's favor as often as it rounds down. Rounding that systematically results in employees being underpaid is unlawful. The payroll administrator will audit rounding outcomes quarterly. If rounding is found to consistently undercount employee time, it will be eliminated and we will switch to paying exact clock-in/clock-out times.

Preventing Missed Breaks

  • Managers must proactively schedule meal and rest breaks for all employees at the start of each shift.
  • No client should be scheduled in a way that prevents an employee from taking a legally required break.
  • If a client appointment runs long and threatens to push through a break window, a manager must intervene to ensure the break is provided.

Payroll Tax Obligations

Federal Taxes (Employee Withholding)

  • Federal Income Tax (FIT): Withheld from each paycheck based on the employee's W-4 elections. Employees are responsible for submitting an accurate W-4 and updating it when their tax situation changes.
  • Social Security Tax (OASDI): Withheld at 6.2% of gross wages up to the annual Social Security wage base.
  • Medicare Tax: Withheld at 1.45% of all gross wages. An additional 0.9% applies to wages above $200,000 for single filers.

Federal Employer Taxes

  • Federal Unemployment Tax (FUTA): Paid by the employer at 6.0% on the first $7,000 of wages per employee per year. A credit of up to 5.4% is available for timely state unemployment tax payments, reducing the effective FUTA rate to 0.6%.

California State Taxes (Employee Withholding)

  • California Personal Income Tax (PIT): Withheld from each paycheck based on the employee's DE 4 form.
  • California State Disability Insurance (SDI): Withheld from employee wages. Beginning January 1, 2024, there is no wage ceiling on SDI withholding.

California Employer Taxes

  • California Unemployment Insurance (SUI/UI): Paid by the employer on the first $7,000 of wages per employee per year. The rate is assigned by the EDD based on the employer's experience rating.
  • California Employment Training Tax (ETT): Paid by the employer at 0.1% on the first $7,000 of wages per employee per year.

Employer Responsibilities

  • Payroll taxes must be deposited with the IRS and the EDD on the required schedule (semi-weekly or monthly depending on payroll size).
  • Quarterly payroll tax returns (IRS Form 941; EDD Form DE 9 and DE 9C) must be filed on time.
  • Annual W-2 forms must be provided to all employees by January 31 of the following year.
  • Any changes to employee tax withholding elections take effect no later than the first payroll after the updated form is submitted.

Record Retention

California law requires employers to maintain payroll and wage records for a minimum of four years (California Code of Regulations, Title 8, Section 11070; and Labor Code Section 1174).

Records to Retain

The following records must be kept for at least four years and made available to the California Labor Commissioner upon request:

  • Time records showing daily start and end times and total hours worked for each employee
  • Meal break records (clock-out and clock-in times for each meal break)
  • Wage statements (copies of all pay stubs issued)
  • Records of all pay rates in effect for each employee, including any rate changes
  • Records of any meal or rest break premiums paid
  • Payroll registers showing gross wages, deductions, and net wages per employee per pay period
  • Records of all garnishments, levies, and other court-ordered deductions
  • I-9 employment eligibility verification forms (retain for 3 years from hire or 1 year after termination, whichever is later)
  • W-4 and DE 4 forms for current employees and for four years after an employee's separation

Storage

  • Records may be maintained electronically provided the electronic system preserves records accurately and they can be printed or exported in a readable format upon request.
  • Records must be stored securely. Employee payroll records contain sensitive personal and financial information and must not be accessible to unauthorized personnel.
  • The payroll administrator is responsible for ensuring records are backed up and retained according to this policy.

Wage Statement Liability

Wage statement errors - including missing information, incorrect rates, or inaccurate hour totals - expose the business to statutory penalties of up to $4,000 per employee under Labor Code Section 226(e).

Waiting Time Penalties

Failure to pay final wages on time triggers waiting time penalties of one day's wages for each day the payment is late, up to 30 days (Labor Code Section 203).

Last reviewed: March 2026