Paychex HR and Payroll Services in Irving, Texas

As Texas begins to re-open and businesses restore or start planning to restore operations, we at Paychex remain dedicated to serving you, your employees, and your business. Please see below for guidance and best practices around some common questions related to these new challenges for Texas employers.

Unemployment

What are the eligibility requirements for Unemployment Benefits in Texas?

Although specific eligibility requirements may vary by state, employees in Texas generally qualify if they:

• Are totally or partially unemployed (which may include layoffs and reductions in hours/wages);
• Lost their job through no fault of their own, did not quit (without good cause or without good reason unrelated to work, in limited circumstances), or were not terminated for misconduct;
• Have a minimum amount of wages earned in what is called the "base period," which is the first four of the last five completed calendar quarters before the initial claim’s effective date;
• At the time of application, are physically and mentally able to work, available for work (which includes having adequate transportation and child care, if necessary), and is actively seeking work, unless otherwise exempt from this requirement.

For more information on initial eligibility and ongoing eligibility requirements, how to apply for, and how to file a claim for Unemployment Benefits, please visit the Texas Workforce Commission (TWC) Unemployment Benefits website or explore the TWC’s Unemployment Benefits Services page.

Employee Safety & Travel Concerns

What current COVID-19-related travel restrictions are in place for Texas?

On May 21, 2020, Governor Greg Abbott passed Executive Order GA-24, which terminated all air travel restrictions previously established on March 26, 2020 that mandated temporary quarantines for all travelers arriving by air from select high-risk U.S. locations. Executive Order GA-24 also eliminated the previously established 14-day mandatory quarantine order for all travelers entering Texas on roadways from Louisiana, which was put into place on March 29, 2020. For a full overview of all the Executive Orders passed by Governor Abbott, please visit the Legislative Reference Library (LRL) of Texas Executive Order Resource Page.

Despite the passing of Executive Order GA-24, the State of Texas still encourages travelers to follow all guidance provided by the CDC and U.S. State Department regarding travel safety measures and social distancing and advocates that individuals remain up-to-date on all travel-related alerts, warnings, and/or restrictions.

For more information on travel-related restrictions, please visit the Texas Department of State Health Services (DSHS) Information for Travelers website, review Travel Texas’s COVID-19 Resources for Industry Partners page, or explore the following travel resources provided by the CDC:

• COVID-19 Travel Resource Page
• Returning from International Travel
• Considerations for Travelers—Coronavirus in the US
• Travel FAQs and Answers

As an employer, can I prevent my employees from traveling for vacation? If they’ve traveled by plane either internationally or to a high-risk U.S. location, can I restrict them from returning to work for a certain period?

Employers can encourage their employees to limit any nonessential personal travel, especially to high-impact areas, however, they cannot prevent them from traveling outright.

Employers should also educate their employees on the current COVID-19-related risks that are associated with traveling. Some of these travel risks can include but are not limited to potential/greater risk of exposure to coronavirus, becoming stranded due to federal, state, and/or local travel restrictions or closures, and/or having to comply with potential mandatory quarantine protocols for individuals who have recently traveled to and/or returned from a high-risk location. Employers should also advocate that their employees follow all safety, hygiene, and social distancing guidance provided by the CDC.

Employers can require an employee to work from home and to monitor their health for symptoms of COVID-19 for a 14-day period if the employee has:

• Recently traveled to an international location on the current CDC widespread transmission list;
• Recently been on a cruise ship or traveled domestically by air to an area with widespread transmission;
• Recently traveled to a high-risk location within the US under a CDC travel advisory;
• Recently been in contact with an individual with a known diagnosis of COVID-19;
• Or is a resident covered by a state or local ordinance requiring physical office closures.

If an employee who has recently returned from international travel displays symptoms of COVID-19, then employers can and should enforce any federal and/or state-mandated quarantine measures, regardless of whether their travel was for personal or business reasons. The same would apply for those who may have traveled to high-risk areas within the U.S. Employers can also use the CDC’s Risk Assessment tool to help determine which individuals may be pose a risk to the workplace.

Employers should consider a policy about the above and communicate it to all employees in order to ensure awareness of the potential impact travel may have on their ability to return to the workplace. Before making business decisions that may alter your workplace, consider consulting with an HR professional and/or your legal counsel to help you ensure compliance with federal, state, and/or local law, and for the latest updates, refer to your state and/or local authorities.

For more information, please review our Infectious Disease Outbreak Plan WORX article, explore our Coronavirus at Work FAQs, or visit the Paychex COVID-19 Help Center.

How do I properly conduct COVID-19 temperature testing in the workplace? How do I maintain confidentiality with the test results, or if I must send an employee home? Are there any Equal Employment Opportunity Commission (EEOC) considerations that I should be aware of?

Temperature testing/screening can be conducted on-site at businesses to determine if an individual has a fever. Based on CDC guidance, a fever is just one of many symptoms of COVID-19 and conducting temperature screenings may be a way to potentially protect your employees and business. However, a fever does not always indicate COVID-19 and some with COVID-19 never experience a fever. Therefore, it is one method to consider, but alone may not necessarily be the most effective way to protect a work environment. Temperature testing/screening may also put the employee(s)/individual(s) assigned to take temperatures at a higher risk of exposure, which can create additional concern(s). Other safety methods to consider may include more consistent deep cleaning of the workplace, the reorganizing of work spaces to ensure individuals are spaced six or more feet apart, implementing or continuing remote work capabilities, if applicable, and/or staggering your staff to work on specified days. CDC guidelines also allow for virtual health screenings to be conducted rather than in-person health checks. For more information on this, please review the CDC’s Resuming Business Toolkit, General Business FAQs, or visit their COVID-19 website.

The Equal Employment Opportunity Commission (EEOC) generally considers temperature testing/screening to be a “medical examination.” The agency’s guidance generally permits employers to measure employees’ body temperatures as a result of the CDC and state/local authorities acknowledging that COVID-19 is community spread. It is possible the EEOC may revise this guidance in the future.

Before conducting temperature testing/screening, consider consulting with an HR professional and/or your legal counsel to help you to ensure compliance with state and/or local law.

If an employer plans to implement in-person temperature screenings at their business after discussing their options with an HR professional or legal counsel, they should consider:

• Who will take temperatures and how that person will be protected from exposure,
• Where temperatures will be taken,
• When temperatures will be taken,
• How temperatures will be taken,
• How the temperature screening equipment will be sanitized,
• Where the information/readings will be recorded,
• If recording this information, how will it be recorded and confidentially maintained separate from the employees’ personnel files,
• What steps to take for a high temperature,
• What safety protocols will be put in place and how they will be communicated to the screener(s) and employees,
• Ensuring the time waiting for and undergoing the screening process is considered compensable time.

All temperature screenings should be administered based on legitimate and nondiscriminatory business needs and should be as non-invasive as possible. Employers should also consider whether a third-party vendor will be used to conduct such screenings. Employee results of such testing are considered medical information and should be kept in a confidential file and separated from an employee’s personnel file.

Any employee showing symptoms of COVID-19 should be sent home immediately and encouraged to seek appropriate medical attention. If an employee has a confirmed case of COVID-19, employers should advise other employees who could potentially have had contact with the infected employee about possible exposure to COVID-19. Employers may not, however, disclose the name of the affected employee and should take all possible steps to maintain confidentiality.

In addition, employers may:

• Ask employees if they are experiencing symptoms of COVID-19.
• Request that employees notify them if they or a close family member tests positive for COVID-19.
• Inquire if employees have come into close contact with anyone that is known or suspected to have COVID-19.
• Inquire about employees’ personal travel plans, whether to other countries or within the U.S. (particularly regarding current “hot spots”).

An employer may not ask non-COVID-19-related medical questions, as these may impact an employee’s rights under the Americans with Disabilities Act (ADA). Employers must maintain confidentiality as required by the ADA and applicable state laws with respect to employee medical information.

Be sure to always consult with an HR professional and/or legal counsel before asking employees’ specific medically-related questions to help you to ensure compliance with federal, state, or local law.

For more information, please visit the Texas DSHS COVID-19 Resource Page, review our WORX article, explore the Paychex COVID-19 Help Center, and follow all safety guidance provided by OSHA, the CDC, and your state or local agencies.

Staffing Concerns

Can a grandparent be considered a child care provider/caregiver under the Families First Coronavirus Response Act?

According to the U.S. Department of Labor (DOL), the definition of a “child care provider” is an individual who cares for your child. This includes both persons who are paid to provide child care, such as daycare providers, babysitters, and/or nannies, as well as persons who provide child care regularly at no cost and/or without a license, such as grandparents, relatives, or neighbors.

For more information, please visit the DOL’s FFCRA Resource Page and review the Families First Coronavirus Response Act: Questions and Answers.

What is the Families First Coronavirus Response Act and who is eligible for covered leaves?

The Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA) are both included in the Families First Coronavirus Response Act (FFCRA). Employers should consider consulting with an HR professional and/or legal counsel to review their obligations under the FFCRA. Generally, the FFCRA provides employers with under 500 employees an option of refundable tax credits that reimburse them for the cost of providing paid sick and family leave wages to their employees for specific qualifying reasons related to COVID-19.

Small businesses with fewer than 50 employees may be exempt from providing certain paid sick leave and expanded family and medical leave if providing an employee such leave would jeopardize the viability of the business as a going concern. This is not an automatic exemption and must be analyzed on a case-by-case basis. The guidance provides for the criteria and documentation for consideration. The guidance further suggests that determination for an exemption must be documented at the time of each leave request. Employers with fewer than 25 employees may be exempt from certain provisions related to job protection. If considering claiming an exemption, and employer should consult with legal counsel to fully understand the complex parameters of these exemptions.

FFCRA requires employers to provide paid leave through two separate provisions:

• Emergency Paid Sick Leave Act (EPSLA) – employers must provide up to 80 hours of paid sick time to eligible full-time employees, and a pro-rated amount of paid sick time to eligible part-time employees, when they are unable to work for certain qualifying reasons related to COVID-19.
• Emergency Family and Medical Leave Expansion Act (EFMLEA) – employers must provide paid family and medical leave to eligible employees who take leave related to a qualifying reason related only to the employees need to care for a child whose school or place of care is closed due reasons related to COVID-19.

Emergency Paid Sick Leave – Under the EPSLA there are six qualifying reasons for which an employee is entitled to take paid leave related to COVID-19 if the employee is unable to work (including unable to telework) because the employee:

1. is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
2. has been advised by a health care provider to self-quarantine related to COVID-19;
3. is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
4. is caring for an individual subject to an order (described in 1) or self-quarantine (described in 2);
5. is caring for his or her child whose school or place of care is closed (or child care provider is unavailable, now including summer camps or programs) due to COVID-19 related reasons; or
6. is experiencing any other substantially-similar condition specified by the U.S. Department of Health and Human Services.

Under the EPLSA, a full-time employee is eligible for up to 80 hours of EPSL, and a part-time employee is eligible for EPSL in an amount equal to the average number of hours the employee works over a two-week period, for any combination of the six reasons above.

When taking EPSL for any of the six qualifying reasons, the employee has the independent discretion to use their EPSL entitlement or any accrued paid leave provided by the employer under company policy or jurisdictional leave law where the reason for leave is consistent with the policy and/or law. However, the employee cannot be forced to use other available paid time prior to using their EPSL entitlement.

Expanded Family Medical Leave – Under the EFMLEA, an employee qualifies for Emergency Expanded Family and Medical Leave (EFML) for only one reason – if the employee is caring for his or her child whose school or place of care is closed (or child care provider, which now includes summer camps or programs, is unavailable) for reasons related to COVID-19. An eligible employee is entitled to up to 12 weeks of expanded family and medical leave; however, the first two weeks of EFML are unpaid unless EPSL or another applicable paid leave is used. Under the EFMLEA:

• Employees who have been on their covered employer’s payroll for at least 30 calendar days for a covered employer would be eligible for leave. An employee is considered to be employed for at least 30 calendar days if the employee had the employee on its payroll for the 30 calendar days immediately prior to the day the employee’s leave would begin.
• An employee is eligible for up to 12 total weeks of leave under EFMLA for the same reason as (5) above. The first 2 weeks of EFML are unpaid but eligible employees may receive pay under EPSL taken for the same reason.
• Employees taking leave under the EFMLEA must be permitted to elect to use any available paid time off including vacation, personal time, medical leave and/or sick leave during the first 10 days of their EFML, including EPSL. Following the initial 10 days of EFML, when the employee becomes eligible for EFML pay, employers and employees may agree, where Federal or state law permits, to have accrued paid leave supplement the two-thirds pay under the EFMLEA so that the employee receives the full amount of their normal pay.

For more information on FFCRA, the EPSLA, the EFMLEA, and on the payment(s) of these leaves, please review the Paid Leave Under the Families First Coronavirus Response Act, visit the DOL’s resource page, or explore the Paychex resources outlined below:

• Coronavirus (COVID-19) Help Center
• Guidance Updates on the Families First Coronavirus Response Act WORX article
• Families First Coronavirus Response Act: Funding, Tax Credits, and Paid Leave Laws Expanded to Respond to COVID-19 Pandemic WORX article
• The Family First Coronavirus Response Act (FFCRA)

What should I consider when deciding which of my employees will return to work? What happens when an employee tells you that they have an underlying health condition and prefer to stay at home?

Establishing and applying fact-based criteria that are consistent with your legitimate business needs and documenting the reasons for your decisions are important considerations when returning employees to work. Remember to also review the requirements in any written employment agreements, or collective bargaining agreement if you have unionized employees, to make sure that you’re remaining in compliance.

Employment decisions cannot be based on reasons that violate federal, state, or local anti-discrimination laws including, but not limited to, an employee’s membership in a protected class, because an employee has exercised their right to file a complaint against the company (e.g., complaints of unlawful discrimination or harassment), an employee has taken leave that is protected under federal, state, or local law, or because the employer believes that an employee will request leave when called back to work, including Emergency Paid Sick Leave (EPSL) or Emergency Family and Medical Leave Expansion Act (EFMLEA). If you have questions about these laws, or your selection process, consult with your HR professional and/or legal counsel.

An employee’s reason(s) for not returning may make them eligible for some type of leave required by federal, state, or local law, so it is important to engage with your employees to understand why they are refusing to return before taking any action. For example, an employee concerned about their own health condition may be entitled to a reasonable accommodation under the Americans with Disabilities Act (ADA) or similar state law, or an employee caring for a child because their child’s school or daycare is still closed may be entitled to EPSL or EFMLEA.

If your employees are raising reasonable COVID-19 safety concerns, their complaints or even their refusal to work may be protected under OSHA or the National Labor Relations Act, even if your workplace is not unionized. Discuss these issues with you HR professional and/or legal counsel before taking any business action, such as termination or imposing other discipline.

For more information, please watch our prerecorded webinars or review the following WORX articles:

• What to Do if Employees Refuse to Return to Work
• Infectious Disease Outbreak Plan: Considerations for Employers Preparing for Coronavirus
• White House Issues Guidelines for Opening Up America Again during COVID-19 Pandemic

What are an employer’s obligations regarding the posting of the Families First Coronavirus Response Act (FFCRA) “Employees’ Rights” posters? Are there currently exemptions for businesses with under 50 employees?

Under the Families First Coronavirus Response Act, all covered employers are required to post the U.S. DOL’s model notice in a conspicuous place. Other ways employers can satisfy this requirement include:

• Emailing or direct mailing the notice
• Posting on an internal or external employee information website

Employers must also retain documents and information regarding FFCRA leave for a period of four years, regardless of whether the decision was made to grant or deny the request for leave.

For tax credit purposes, the DOL requires employers to maintain the following for four years:

• Documentation to show how the employer determined how much paid leave the employee was eligible for (e.g., records of work performed, telework, and paid leave credits)
• Documentation to show how the employer determined the amount of qualified health plan expenses that were allocated to wages
• Copies of any completed IRS Forms 7200 and 941 that the employer submitted to the IRS (or provided to a third-party payer to meet an employer’s employment tax obligations).

The DOL has also indicated that exemptions for small businesses may be addressed in forthcoming regulations and that until these regulations are passed, employers with less than 50 employees who believe that providing certain benefits under the FFCRA, such as child care, may jeopardize the ability of their business, should record/document why their business would need such an exemption.

Be sure to consult with an HR professional and/or your legal counsel to help you to ensure compliance with federal, state, or local law.

For more information on FFCRA, the EPSLA, and the EFMLEA, please review the Paid Leave Under the Families First Coronavirus Response Act, visit the DOL’s FFCRA resource page, or explore the Paychex resources outlined below:

• Guidance Updates on the Families First Coronavirus Response Act WORX article
• Families First Coronavirus Response Act: Funding, Tax Credits, and Paid Leave Laws Expanded to Respond to COVID-19 Pandemic WORX article

If an employee was required to take sick time to take a COVID-19 test in preparation for another medical procedure, does the employer need to compensate for the time off for the testing? Or is it okay to count this testing time as sick leave?

Due to the CDC and state/local authorities determining that COVID-19 is community spread and poses a direct threat, employers may now choose to administer COVID-19 testing to their employees before allowing them to return to work/re-enter the workplace. To do so, specific precautions must be taken and considerations under the ADA must be met.

However, if an employee had taken sick leave for a medical procedure, unrelated to COVID-19, and was required to undergo a COVID-19 test as preparation for said procedure (and not part of an employer’s testing protocol), then the employer would generally not need to compensate the employee for the time needed to conduct or travel for testing purposes beyond the employee’s sick leave entitlement. In other words, the employee would only receive compensation if that sick leave is paid pursuant to company policy or applicable leave law. Otherwise, it is not compensable time.

Before implementing or conducting COVID-19 testing in the workplace, be sure to consult with an HR professional and/or your legal counsel to ensure compliance with state or local law.

Additional Resources

Where can I find return to work information, safety guidelines, and regulatory updates?

As multiple states begin resuming business operations, Paychex remains dedicated to serving you, your employees, and your business. That’s why we’ve developed several online resources to help you remain up to date on your state's ever-evolving policies and executive orders related to the COVID-19 pandemic and return to work protocols.

Paychex Return to Work Resources:

• COVID-19 Resources by State

Paychex Safety/Legal Resources:

• Coronavirus (COVID-19) Help Center
• What to Do if Employees Refuse to Return to Work WORX article
• After the Pandemic: What’s Next for Your Employees WORX article
• Infectious Disease Outbreak Plan: Considerations for Employers WORX article
• White House Guidelines for Opening Up America Again during COVID-19 Pandemic WORX article
• Coronavirus at Work: Frequently Asked Questions WORX article
• Preventing and Managing Illness in the Workplace WORX article
• Download Your Business Continuity Plan (BCP) WORX Guide

Texas Resources:

• Texas Department of State Health Services (DSHS) COVID-19 Resource Page
• Texas Governor Greg Abbott’s Coronavirus Resources and Response Page
• Texas Workforce Commission (TWC) COVID-19 Resource Page
• Texas Division of Emergency Management COVID-19 Page
• Texas Municipal League (TML) COVID-19 Resource Page
• Texas Association of Counties COVID-19 Information and Resources Page

Additional Resources:

• CDC Interim Guidance for Businesses and Employers Responding to COVID-19
• CDC COVID-19 General Business FAQs
• CDC Workplace Decision Tool
• OSHA Guidance on Preparing Workplaces for COVID-19
• FEMA News Release

Establishing a small business internship program can offer many potential benefits. Often college students or recent graduates can bring fresh perspectives, while training interns offers a unique management opportunity for current employees. But bringing on an intern for your business, like any other process, requires careful consideration. Let's take a look at not only how to find interns and potentially add to your future talent pool, but also identify potential internship requirements and best practices to be mindful of before starting such a program.

Determine Timeline, Budget, and Team Needs

A business may initially consider bringing on interns for a specific upcoming project or initiative. In such cases, it's a good idea to outline the project's scope and requirements, identify necessary tasks, and which skills are required. For example, a summer-long technical project may warrant bringing on interns who are computer-savvy and demonstrate strong attention to detail.

Another consideration is your budget, if any, for bringing on interns. Some internships should be paid while others may be unpaid, such as students receiving college credit in lieu of monetary compensation. There are many state and/or federal wage and hour rules to consider if you decide to bring interns into your organization. At the federal level, there are multiple factors that determine whether interns in the for-profit sector may be paid or unpaid by focusing on the primary beneficiary of the relationship. These factors include:

• Whether the internship provides training similar to what the intern would receive in an educational institution;
• Whether the internship accommodates the intern's academic commitment(s) and calendar; and
• The understanding of all parties concerning compensation, among other criteria.

When this analysis indicates that an intern would also be an employee, the intern is entitled to minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). Additional state and local laws could provide additional clarification on internships.

In instances where interns are paid, these wages should be factored into your budget for an internship program. This will also require your interns to complete any necessary new-hire paperwork, such as Form I-9, Form W-4, and any other employment forms required before they begin work.

You may want to consult with an HR professional or legal counsel to ensure your internship programs and supporting agreements comply with federal, state, and local wage and hour laws.

Connect with Local Colleges

Once you've outlined business needs for bringing on additional help, where can you find interns? Colleges and educational institutions are great places to connect with students who are ready to get some hands-on work experience. Cultivate relationships with local colleges and universities by reaching out to the institutions' career development centers, advertising internship openings on their job boards, and attending job fairs.

Communicate Your Internship Opportunity to Students

Similar to recruiting an employee, reaching out to a potential intern requires communicating about opportunities via thorough descriptions. This is where you can outline responsibilities, the type of work they will take on, timeframes (e.g., May-September during a school's summer break), whether the internship is paid, and other pertinent information. Much like crafting a job description for an employee, make sure you can answer questions such as:

• What are the goals of the internship and what specific duties and functions will the intern take on to achieve them?
• Is there any previous skill set or current program of study the person needs to succeed in the role and add value?
• Where will the person work, and during what hours?
• Which team will the intern support?
• What tools, software, or technology resources will the intern be provided with to achieve the goals of the internship?
• Is there the opportunity to bring an intern on as an employee following the completion of their internship?

The more detailed your description, the better you can communicate your needs and find the right intern. Otherwise, unclear expectations can lead to interns bouncing back and forth between teams, sitting idly with nothing to do, and developing a less-than-favorable impression of your business.

Once you have a solid description for an internship opening, post the listing with local colleges, as well as on websites that post about internship opportunities, career pages, and social networks. Encourage current employees to also reach out to their alma maters to help spread the word.

Start the Intern Selection Process

A thorough vetting process, much like hiring a full-time employee, is crucial to selecting an intern. The intern selection process may involve initial phone screenings to weed out unqualified applicants, in-person interviews to assess their capabilities, and even a meet-and-greet with the team to get a sense of future dynamics. Anyone involved in the interviewing and selection process should be mindful of the fact that this person likely has limited (or zero) job experience, so questions should reflect this. They may include:

• What do you hope to learn as an intern?
• What made you interested in your current field of study?
• What are your future career aspirations?
• Can you talk about a recent school project you worked on?

Anyone involved in the interview process should also be mindful of questions to avoid, including anything related to an individual's race, ethnicity, religion, or gender; citizenship status or place of birth; any physical or mental disability; or whether the candidate is pregnant.

Make an Offer

Just as you would extend an offer letter to a potential employee, make an offer in writing to an intern, whether it's paid or unpaid. Details to consider including in the offer letter:

• The name and location of the business
• The internship's start and end dates
• The amount of compensation you are offering if it's a paid internship (or alternatively clearly stating that the position is unpaid)
• The intern supervisor's name
• The deadline for accepting the internship

Internship FAQs

Do Interns Get Paid?

Many internships offer some form of compensation, but unpaid internships may exist in situations where the intern is the "primary beneficiary" of the agreement, per the DOL's primary beneficiary test. State and local laws should also be taken into consideration when determining whether an internship is paid or unpaid.

Do Interns Get Benefits?

While interns are generally not eligible for most company benefits, those who qualify as employees under the FLSA are typically eligible to participate in company benefit plans. As of May 2017, organizations with 50 or more employees are required to offer health benefits to any individual working 30 or more hours per week once they have satisfied a waiting period. The law doesn't specifically outline guidance in regard to interns, but if they work 30 or more hours per week and have satisfied the waiting period, interns must be offered coverage. Make sure to review your company policies prior to bringing on any interns.

What's the Difference Between Intern vs. Employee?

As stated above, there are federal and state guidelines that help organizations classify an intern vs. employee. But at the basis of an internship policy, an internship's purpose is to provide a student or recent graduate with training for a specific period of time similar to what would be given to them in an educational setting. The experience is for the benefit of the intern. On the other hand, an employee is hired to perform specific tasks for the benefit of their employer in exchange for compensation and benefits.

Do Internships Always Lead to Jobs?

Not necessarily. Internships are a great way for students to build connections within a company, demonstrate their abilities, and generally get their foot in the door. But there is no guarantee that an intern will receive a job offer.

Can a Company Revoke an Internship Offer?

An employer has the right to rescind an internship offer for almost any reason, unless it's based on discriminatory factors such as gender, race, etc. If the individual fails a background check or drug test, this could also lead to a revoked internship offer as part of the company hiring policy.

Can an Intern Get Fired?

It's possible for internships to end prematurely, but how businesses choose to handle subpar intern performance can vary. Some businesses will simply wait out the duration of the internship and wish the student well at the end of it. Others may choose to dismiss an intern before their last day. That said, internships are learning experiences, and it's important to provide opportunities for interns to learn from their mistakes. However, actions such as continually showing up late (or not at all), stealing or committing illegal acts, or exhibiting inappropriate behavior may all be grounds for immediate dismissal.

How Long is an Internship?

Internships last for a specific period of time, typically anywhere between a few months to half a year. An internship that lasts for a short duration, such as during a summer break, can be beneficial if there's a project that will have a definite end date. At the same time, a longer internship offers more time for training and additional opportunities to further develop an intern's skills.

Get the Most from Your Internship Program

An effective internship program can help students and recent graduates see what it's like to work at your company, explore different departments, and gain valuable work experience. And with today's competitive hiring landscape, interns can offer a helping hand to over-capacity departments, and be a great strategy for building a solid candidate pool for future job openings.

An owner's draw is a way for a business owner to withdraw money from the business for personal use. Typically, owners will use this method for paying themselves instead of taking a regular salary, although an owner's draw can also be taken in addition to receiving a regular salary from the business.

When the owner receives a salary, the amount must be consistent from workweek to workweek, and taxes must be withheld from the salary as they are for any other employee. Depending on the type of business structure you choose, you may instead opt for an owner's draw, which allows you to receive income when the company is doing well without jeopardizing the solvency of the business.

How Does an Owner's Draw Work?

When you own a company through a sole proprietorship or partnership, you don't have to answer to stakeholders, and you can run the business however you (and your partner, if applicable) decide. This includes when to take profits out of the business and how much to take. As an owner, you can take owner distributions — and tap into the business profits for your personal gain — whenever you deem appropriate.

If you are self-employed or a sole proprietor, you can take an owner's draw whenever you need funds and the business has them available. Keep in mind, however, that taking too much from the business can cause cash flow problems in the future. You'll also need to keep track of how much you pull from the business each year, so you can document any cash received on your personal income tax return.

In a partnership, each partner is personally taxed on half of the business profits. If one owner repeatedly takes more than their half of the profits through owner's draws, this is likely to negatively affect the other partner and cause friction in the business. However, as long as both partners agree, owner's draws can be taken at any time and in any amount inside a partnership as well.

For other business types, owner's draws are not as straightforward, and they may not be available at all.

LLC

Depending on how the Limited Liability Company (LLC) is structured, owners may take a draw in some cases. For example, single-member LLCs, also referred to as SMLLCs, generally do not have any shareholders or other owners who would be affected when profits are removed, so owner's draws are allowed in SMLLCs in most states. Rules regarding LLCs are state-specific, so it's best to review your state's laws if you are a member in an LLC.

S Corp

In an S Corporation (S Corp), the business elects to pass any financial gains or losses through the business and to their owners/shareholders for tax purposes. Since an S Corp is structured as a corporation (which is a legal entity in its own right), the profits belong to the corporation and owner's draws are not available to owners of an S Corp. Owners drawing funds can receive non-taxable distributions on a limited basis, but income must generally be structured through a traditional salary as a W-2 employee.

C Corp

For tax purposes, a C Corporation (C Corp) is taxed separately from any owners or shareholders. Since C Corps are also a corporation (and therefore a separate legal entity), owner's draws are also not available. While owners can take a distribution, any money paid out in distributions through C Corps are subject to double taxation — once to the corporation as revenue and again to the owner as dividends received.

What Is the Difference Between an Owner Draw vs Distribution?

Essentially, an owner's draw and a distribution represent the same concept. In both cases, an owner is given money for personal use that was generated by the business. However, the terminology varies based on the business structure to coincide with IRS tax laws. In short, "owner's draw" is the term used for business structures that have individual or split ownership (as in a sole proprietorship or partnership), while "distribution" is the term used for cash distributions made to owners of a corporation.

Owner’s Draw vs. Salary

While it may sound ideal to have easy access to business funds whenever you choose, taking an owner's draw isn't the only way to get income from your business. Owners can also opt to take a regular salary instead of or in addition to an owners draw, and each method comes with certain tax implications for both the owner and the business.

The Owner's Draw Method

When taking an owner's draw, the business cuts a check to the owner for the full amount of the draw. No taxes are withheld from the check since an owner's draw is considered a removal of profits and not personal income.

• Pros: Using the owner's draw method can help you, as an owner, keep funds in your business during times when your business may not be able to afford paying yourself a salary. You can also reap the rewards and withdraw higher amounts when business performance is strong.
• Cons: Since your draws are not taxed, taking frequent draws can have significant tax implications on your personal income tax return, and you may be subject to quarterly estimates or self-employment taxes.

The Salary Method

With the salary method, the business owner is treated as any other W-2 employee and receives a regular salary. Once this salary level is set, it must be paid consistently with the appropriate amount of taxes withheld on both the employee (in this case, the owner) and the business side.

• Pros: Using the salary method gives you, as an owner, a consistent level of income to meet your personal needs so you can focus on growing your business. Taxes are deducted from your paycheck through the same calculations as if you were an employee with any other organization, so there are unlikely to be surprises at tax time.
• Cons: Salaries aren't as flexible as owner's draws, and you can't opt to skip paychecks if your company falls on hard times. Giving yourself too high of a salary can also raise red flags with the IRS or future stakeholders.

How Is Owner's Draw Calculated?

According to the IRS, compensation to owners (regardless if it's an owner's draw or salary) must be reasonable. This can mean different things to different people, but essentially you should take out what is needed to cover your expenses and what your business can afford.

To calculate the amount of your owner's draw, you should consider a few factors:

• How much do you need to cover your expenses?
• How much available cash does your business currently have?
• Are there any upcoming business expenses that you will need to cover soon?
• What are your business cash flow patterns?
• Will your planned income be able to cover your business expenses after the owner's draw is taken out?
• If applicable, what does your partner think is fair for both of you?

After considering those factors, you can arrive at a reasonable amount to withdraw without jeopardizing the stability of your business.

How Often Can You Take an Owner's Draw?

If you are taking a draw from your business as a sole proprietor, you can draw as many times as desired, as long as funds are available. The IRS does not limit the number or frequency of owner's draws on partnerships either, but you should consult with your partner to be in alignment with any funds extracted from the business.

How Does an Owner's Draw Get Taxed?

The specific tax implications for an owner's draw depend on the amount received, the business structure, and any state tax rules that may apply. In most cases, the taxes on an owner’s draw are not due from the business, but instead the income is reported on the owner's personal tax return. For many individuals, an owner’s draw is classified as income and may be subject to federal, state, local, and self-employment taxes, so it's important to plan ahead before filing taxes.

Payments by Business Entity Type

Depending on the structure of your business, certain payment methods are more ideal when factoring in flexibility, IRS regulations, and tax implications.

• Sole proprietorship: It's best to start out using the draw method, especially when your sole proprietorship is in its first few years of operation. Once your business is more established with consistent revenues, you can consider switching to the salary method or taking a combination of salary and owner's draws as your cash flow allows.
• Partnership: Using the draw method, especially for a younger partnership, can help ensure that each partner is receiving a fair share of the business profits. Using the salary method can be challenging since the partnership would need to support two salaries, not just one.
• LLC: For single member LLCs, the draw method can help maintain control over business profits. Larger LLCs or LLCs in states that have excessive tax regulations may opt for the salary method.
• Not-for-profit: Since NFPs are not designed to generate a profit, owner's draws can raise red flags to the IRS. Salary method is best to track all labor costs incurred by the company.
• S Corp: Owners must take income through a salary. Since the corporation is a separate legal entity, owners can only take distributions, not owner's draws; distributions must be limited in scope and not in lieu of a regular salary.
• C Corp: Owners must take income through a salary. Since the corporation is a separate legal entity, owners can only take distributions. In addition, those distributions are taxable to the owners, which can create a double-taxation scenario.

How Much Should You Pay Yourself as a Business Owner?

When paying yourself as a business owner, generating a reasonable income while still maintaining the health of your business is possible. While there is more than one way to withdraw income, you'll want to consider the pros and cons of the salary vs. draw method before pulling any money from your business. It's also important to track and document any withdrawals correctly so there are no unintended tax consequences or penalties. For additional assistance with payroll tax services, connect with the experts at Paychex.