With the dawn of the New Year, employees have been hit by a hike in Social Security payroll tax by 2 percentage points, ending the “payroll tax holiday” that has been in effect for the past two years. The payroll tax is historically split between employers and employees, with each paying 6.2 percent. However, in 2011, the share of payroll tax paid by employees was reduced to 4.2 percent in order to stimulate consumer spending. The temporary reduction has now expired for employees, thus bringing down their take-home pay, compared to 2012.
As far as employers are concerned, just a few changes are needed in payroll accounting calculation. As an employer, it is time to start using the updated withholding tables and amend the amount of Social Security tax withheld before February 15, 2013. When importing employee hours from your wireless time clock, make sure the calculated tax complies with the revised rate.
Note that if you were not able to correct the payroll tax withholding for the 2013 first payroll, you will need to calculate the under-withholding amount and make the appropriate adjustment in employee pay before March 31, 2013.