TOP QUESTIONS ASKED BY PRODUCERS
Top Questions Asked By Producers
ABS Answers The Top Questions Asked By Producers
TOP QUESTIONS ASKED BY PRODUCERS
- What’s the difference between a w-4 and a w-9 and which should I use?
- Why do our actors/crew need to be classified as “employees” rather than “independent contractors”?
- What’s a Coogan account?
- How long will it take to process payroll?
- Is our production too small?
- Which SAG-AFTRA agreement does my production fall under and how will it affect payroll?
- What can I expect to pay on union pension and health contributions?
- What are some avoidable payroll fringes to keep costs down?
- What does ABS’ Payroll Services Include?
WHAT’S THE DIFFERENCE BETWEEN A W-4 AND A W-9? WHICH FORM SHOULD I USE FOR MY ACTORS OR CREW?
W-4 and W-9 forms are both used to process information for workers, but they serve very different functions. The W-4 is used to determine the tax withholding for “employees”, while the W-9 is used to verify the worker’s tax ID and determine eligibility for backup withholding for independent contractors, loan-outs, and other vendors. The determinant for which form is required is whether the new worker is being hired as an employee or as an independent contractor: W-4 for standard employees, and the W-9 for contractors. A W-4 form requires the employee’s tax information, including exemptions and filing status, because the employer is responsible for withholding the proper deductions from the worker’s pay for state and federal taxes (as well as the employer’s payroll tax). Also, employers are subject to additional fringe costs associated with W-4 employees, including workers compensation insurance. The W-9 form does not include tax filing information (though it DOES still require the worker’s Taxpayer Identification Number) because the independent contractor’s company is responsible for reporting taxes as its own entity.
While it might seem beneficial to an employer to hire new workers as independent contractors rather than as standard employees, it is imperative to note that there are strict guidelines regarding who classifies as an independent contractor and who does not: they are NOT interchangeable, and the costs and penalties of misclassification are high.
WHY DO OUR ACTORS/CREW NEED TO BE CLASSIFIED AS “EMPLOYEES” RATHER THAN AS “INDEPENDENT CONTRACTORS”? CAN’T I JUST “1099” MY CREW?N
Many producers are given the advice to “1099” their crew to simplify the payroll process and avoid payroll fringes such as the employer’s payroll tax. Producers might have even received this same advice from seasoned veterans in the industry who told them they have been 1099’ing their crew for years. However, while this practice will cut down on payroll costs, it is illegal to misclassify your workers, and the potential damages and costs far outweigh the potential benefits. States have been aggressively punishing worker misclassification violations in recent years, particularly within the entertainment industry, and getting caught violating the law will leave you open to fines, interests, and other penalties ON TOP of the principle amounts that were avoided in the first place.
As of Jan 1 2012, new laws make it unlawful to intentionally misclassify workers, and if the courts find you guilty of breaking that law, you will be subject to a civil penalty of $5,000 - $15,000 PER INDIVIDUAL. Furthermore, anyone suggesting/offering advice to intentionally misclassify those workers will also be personally liable. Within the entertainment industry, most below-the-line positions are considered by the IRS to be “employee” positions. California Law, for instance, PRESUMES that workers are employees, rather than contractors, and it is the burden of the employer to establish the classification of independent contractor. As such, taxes need to be withheld from employee’s paychecks, workers compensation must be legally acquired, employer payroll taxes need to be paid to the state and federal government, and the employees are entitled to benefits, rights and protections including overtime pay, anti-discrimination laws, and unemployment insurance.
WHO DOES QUALIFY AS AN INDEPENDENT CONTRACTOR?
The most important factor that courts use to determine worker classification is who dictates the manner and means by which the end result of the work is achieved. If the principal has the right to control how a job is accomplished, this suggests employment—are the workers subject to call times, mandatory meetings, or other requirements by the producer?—but if the end result is the only controllable factor for the principal, that suggests an independent contractor.
Other factors include:
- Is the worker being paid by hour (employee) or by job (contractor)?
- Who supplies the tools and other necessities to complete the job: principal (suggesting employee), or the worker (suggesting contractor).
- Whether or not the skills required of the job are part of the regular needs of the principal (if yes: employee, if no: contractor).
- Courts will sometimes also consider fairness in relation to workplace injuries as a factor. In cases where an injury has been sustained in the workplace, the courts have been more open to ruling in favor of “employee” status to assist low-wage earners via worker’s compensation.
WHAT IS A COOGAN ACCOUNT?
Coogan accounts (Blocked Trust Accounts/UTMA) are special accounts for minors working in the entertainment industry required by state law in California, New York, Louisiana, and New Mexico. Coogan law was originally created to help protect the earnings of minors, affirming that the wages are the property of the minors, not their parents. The law creates a fiduciary relationship between parent and child, and in California also requires that 15% of a minor’s gross wages be deposited in their trust account within 15 days of employment. These are NOT additional funds that need to be added as a payroll fringe, it is an amount taken from gross wages. However, it is important to supply proof of the Coogan accounts for ALL minors before payroll is processed so that the lawful deductions can be made.
HOW LONG WILL IT TAKE ABS ENTERTAINMENT PAYROLL TO PROCESS PAYROLL?
Factors such as the size of the payroll or complications in processing/payment can play a determining role, but typically 24 - 48 hours from the time of submission should be expected for any payroll to be processed. One of the best ways to ensure the fastest turnaround possible is to make sure all the necessary paperwork is filled out properly, fully legible, and turned in on-time. A timely payroll deposit also goes a long way in ensuring a speedy process.
IS OUR PRODUCTION TOO SMALL?
No production is too small at ABS. Part of what makes us the independent filmmaker’s choice is our willingness and ability to work with smaller productions, even when other entertainment payroll companies have said no. Over the years we’ve provided payroll and accounting services for many first-time filmmakers, student films, and other smaller projects. Even if you require payroll for only one or two crew members, or a single SAG actor, contact us today to find out how ABS can help with your production.
WHICH SAG-AFTRA AGREEMENT DOES MY PRODUCTION FALL UNDER AND HOW WILL IT AFFECT PAYROLL?
SAG has different production agreements based primarily on budget size and the production’s shooting schedule (all low-budget agreements must also be shot entirely in the US). Different SAG agreements can affect your SAG payroll differently in regards to pay rates and some common payroll fringe costs.
Here is a quick breakdown of the common agreements and some of the affects they may have on payroll/payroll costs:
Short Film: Maximum budget of $50,000, maximum running time of 35 minutes, maximum shooting schedule of 30 days of principle photography.
- Payment can be deferred until distribution.
- Minimum $100 daily rate for performers, excluding stunt performers.
- Consecutive employment provisions do not apply to performers unless they were on an overnight location while filming.
Ultra Low Budget: Maximum budget of $250,000, running time not less than 80 minutes, maximum shooting schedule of 30 days of principle photography.
- Minimum $125.00 daily rate for performers, excluding stunt performers.
Modified Low Budget: Maximum budget of $700,000 running time not less than 80 minutes, maximum shooting schedule of 30 days of principle photography.
- Minimum $335.00 daily rate for performers, excluding stunt performers.
- Minimum $1,166.00 weekly rate (5 day week) for performers, excluding stunt performers.
- Some penalties and payroll violations (including consecutive meal penalties) are now a higher cost than at the lower brackets.
Low Budget: Maximum Budget $2,500,000 running time not less than 80 minutes, maximum shooting schedule of 30 days of principle photography.
- Minimum $630.00 daily rate for performers, excluding stunt performers.
- Minimum $2,190.00 weekly rate for performers, excluding stunt performers.
- Some penalties and payroll violations (including consecutive meal penalties) are now a higher cost than at the lower brackets.
New Media: This contract is for productions whose initial exhibition will be via internet, mobile devices, or similar emerging media outlets..
- No minimum rates apply; pay is negotiable between the producer and performer(s) as long as the contract is in compliance with all state and federal laws (including minimum wage laws).
- Pension and Health/Health and Retirement contributions will be due at the rate of 16.5% both for principal performers and background actors (lower than the normal applicable rates).
- Payments can be deferred as long as the performer(s) make an agreement with the producer at the time of the initial agreement.
WHAT CAN I EXPECT TO PAY ON UNION PENSION AND HEALTH CONTRIBUTIONS?
P&H contributions are one of the most common payroll fringes, and they are important to keep in mind when trying to determine your production’s total payroll cost and budget. The most common unions include SAG-AFTRA, the Director’s Guild of America, and the Writer’s Guild of America, and each union has different rates to determine what must be paid out to that union based on each union member’s gross pay.
SAG-AFTRA is the largest and most commonly used union. The standard Pension and Health contribution rate for SAG is 17.3% (as of July 1, 2014), to be paid concurrently with paychecks and accompanied by weekly reports. NOTE: SAG Background performers have a slightly lower rate of 17%. This means that for every dollar you are paying your talent, an additional $0.173 must be factored into your payroll budget to be sent out to SAG Pension and Health Plans ($0.17 for SAG background actors).
With all the common unions, rates vary by the agreement type and are subject to change on a year-to-year basis. In all cases, it’s best to contact the Pension and Health department of the specific union you are dealing with in order to guarantee the correct rates and contributions.
SAG-AFTRA P&H: (800) 777-4013 Website
DGA P&H: (323) 866-2200 Website
WGA P&H: (818) 846-1015 Website
IATSE P&H: (212) 580-9092 Website
WHAT ARE SOME OF THE AVOIDABLE PAYROLL EXPENSES AND WAYS TO KEEP MY COSTS DOWN?
Keeping your production costs as low as possible is always a high priority, and there are several types of payroll fringes that are easily avoided and yet commonly incurred during production.
Meal Penalties: SAG agreements stipulate that a professional performer’s first meal time MUST be called within 6 hours of beginning work; it must last at least half an hour, but not longer than one hour, and no work can be required of the performer during that period. Additionally, if the same performer works another six hours after the conclusion of the first meal period, a second meal time must also be called before reaching another 6-hour mark. Under the SAG/AFTRA low-budget agreements, the penalty for violating a meal time is $25 for every half-hour in violation, meaning that if a performer does not get a meal period during an 8-hour shift, there will actually be four violations ($100 total), not just one. The cost is even higher for productions that fall under the Modified Low Budget agreement—or anything bigger—with meal penalties increasing with consecutive infractions ($25, $35, $50 [maximum]), resulting in a $160 meal penalty total for the same example given before.
In order to avoid these unnecessary costs (and also avoid violating local, state, or federal laws regarding employee meals), it is important to properly document meal times. If you are using a payroll company such as ABS, it WILL NOT be assumed that adequate meal periods were provided for performers: they MUST be included on each performer’s exhibit G form.
- Forced Call: if the performer is given less than 12 hours rest period between work days, they are subject to an additional day’s pay (if the period is less than 10 hours, the performer is also allowed to refuse to report). Keeping in compliance with the 12-hour rule will avoid these unnecessary payouts.
- Wardrobe Fees: wardrobe fees are often paid when they are not necessary because of improperly filled out Exhibit G forms. A wardrobe fee ($11.50 - $23.00) only applies when the performer provides their own wardrobe for a day’s shoot; if the production team is providing costume/wardrobe, no fee needs to be paid.
- Travel time and gas mileage are other fringe costs that are commonly paid out unnecessarily. If the production site is within a performer’s normal driving range, travel time should not be included as a pay item. Only when the site is outside of a performer’s normal range (or if they are required to travel to an additional offsite location) are these payroll items required. With gas mileage reimbursed at $0.30 per mile for SAG members and $0.51 per mile for crew, the additional costs can add up quickly.
- SAG agreement incentives: the maximum budgets for agreements can be exceeded in some instances through use of the “diversity in casting” incentive. For the Modified Low Budget agreement, this means that a production can actually have a budget of up to $937,500 (instead of $625,000) if the following is true:
“A minimum of 50% of the total speaking roles and 50% of the total days of employment are cast with Performers who are members of the following four (4) protected groups:
2) Senior Performers (sixty (60) years or older)
3) Performers with Disabilities
4) People of Color (Black/African American, Asian/Pacific Islander and South Asian, Latino/Hispanic, Arab/Middle Eastern and Native American Indian) and; b. A minimum of 20% of the total days of employment is cast with performers who are People of Color.” (Pages 1-2 of the SAG MLB agreement) For Low Budget productions that meet the above requirements, the maximum budget size is increased from $2,500,000 to $3,750,000.
Under both agreements, the added budget size allowance can end up saving your production large amounts in payroll costs: going even just $25,000 over budget on a Modified Low Budget production can increase your daily pay rates by nearly 200%, meaning the extra budget room from incentives could be the difference in avoiding almost doubling your payroll costs.
There is also a Background Performer Incentive that allows a $100,000 increase in the maximum budget size if the proper requirements are fulfilled (this incentive is for the Modified Low Budget agreement ONLY).
- Filling out and filing paperwork correctly and on-time is one of the best ways to keep costs down for ANY production. Whether it’s weekly SAG Pension and Health contribution reports, or crew time cards and exhibit G’s, providing all the necessary information and documents in a timely manner is the best way to avoid unnecessary fees and costly delays.
- Making accurate tax deductions and ensuring those payments go to the appropriate institutions in a timely fashion. Maintaining compliancy with all local, state, and federal tax laws is a MUST for a smooth payroll experience.
- Year-end reporting, including sending W-2s for employees and W-9s for independent contractors.
- Compliance with state and federal wage laws.
- Unemployment and worker’s compensation claims (including the processing of benefit audits).
- Any specialized deductions, such as those required for Coogan accounts or union employee contributions.
- Weekly Pension and Health contribution reports
- Generating a Final Cast List
- Working with your union representatives
WHAT DOES ABS’ PAYROLL SERVICES INCLUDE?
As an entertainment payroll company, we have the expertise and industry-specific knowledge that you won’t find with your average payroll provider. Computing wages earned and issuing checks to entertainment professionals is only a part of what our payroll services include. With over 30 years of experience, ABS is well-positioned and informed to assist you with your independent or low-budget production and all its payroll needs.
Operating as the Employer of Record for your production means that we handle all of the integral concerns of payroll, including:
We also offer industry-specific services that are important to your SAG-AFTRA production, such as:
Remember, no production is too small at ABS, and our payroll services are available for all kinds of productions including: short films, commercials, documentaries, music videos, live events and staff payrolls. For more information regarding any of our services, or to receive a quote for your production, call today to speak with a representative from our sales department
Los Angeles (818) 848-9200
New York (212) 675-4600
Atlanta (404) 288-5977
Or start by filling out an online quote.