Common Paymaster
A “common paymaster” is one employer within a group of employers that pays the wages of its own employees as well as the wages of the employees of the other members of the group.
Under certain circumstances, a common paymaster is treated as the employer for the employees of all members of the group for purposes of the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). The common paymaster files FICA and FUTA returns and pays the corresponding taxes for all the employees it pays, including employees of the other group members.
While FICA and FUTA may allow a common paymaster to include in its tax returns the employees of other employers, common paymaster reporting is not permitted under the PA UC Law. Section 302 of the PA UC Law provides that the “department shall establish and maintain for each employer a separate employer’s reserve account …” Section 302 clearly requires each legal entity providing employment to have its own, separate UC account. Distinct reporting for each employer is necessary for experience-based contribution rates.
Common paymaster reporting may result in significant penalties. Section 802.1 of the PA UC Law provides that any employer, agent of an employer or other person that “willfully reports…the wages of one or more employees on an unemployment compensation account other than the account of the employer under this act…” is subject to a penalty. The penalty can be as high as $10,000. Each employer and each calendar quarter for which wages are reported on the wrong account can be a separate penalty.
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Professional Employer Arrangement
A professional employer arrangement is an arrangement between a business, called the client, and a Professional Employer Organization (PEO) where the client leases some or all of its workforce from the PEO. Typically, the leased workers were employees of the client prior to the arrangement. At the beginning of the arrangement, the client transfers its workers to the PEO and then leases them back from the PEO. In the past, professional employer arrangements were known by other terms such as "employee leasing" and "staff leasing."
Professional employer arrangements should not be confused with temporary help arrangements. Under a professional employer arrangement, a client leases workers from a PEO for the long term. In a temporary help arrangement, a temp agency provides workers to a business on a short-term basis, such as the duration of a special project or to meet a seasonal need for additional workers.
Section 4(j)(2.1) of the PA UC Law specifies that the client in a professional employer arrangement is considered to be the UC employer of leased workers, rather than the PEO. This provision does not include temporary help agency arrangements. Wages must be reported on the client's UC tax account, and contributions on those wages must be paid at the client's tax rate.
If you are using a PEO, be sure to add them as a representative to your account on UCMS. This allows your PEO to contact UCTS on your behalf. Even if you have given a PEO permission to work on your company’s behalf, you are still ultimately responsible for ensuring they accurately fulfill your business’ reporting requirements.
If you need help to correct a reporting error, please contact the UCTS Audit and Compliance Division at 412-565-5121. The phone message will be returned within 2 business days.
For additional information please contact the Office of UC Tax Services.
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