Payroll and HR Compliance: A Quick Guide for Business Owners

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Payroll and HR Compliance: A Quick Guide for Business OwnersPayroll compliance is vital for HR teams and business owners. Fail to stay on top of it and you could see serious fines or penalties coming your way.

You also need to make sure you’re following procedures to ensure your employees are treated fairly. Having proper documentation in place will make getting to the bottom of issues much easier.

In this article, we’ll take a closer look at payroll compliance and provide some tips on how to make sure you’re aligned with regulations.

What is Payroll Compliance?

Compliance is simply ensuring you’re organizing your finances according to laws and regulations. It’s a big challenge for finance and HR departments, who need to keep up-to-date with current employment laws and regulations, as well as ensure documentation is in order at all times. If not, and your company is audited or an employee launches a dispute, you could incur fines—which brings us to our next point...

What Happens If You Are Non-Compliant?

Failing to have the right paperwork could result in hefty fines or even litigation from an unhappy employee with a pay complaint. It could also permanently tarnish your reputation as a business in the eyes of employees, the public, and investors. This is never a good place to be.

7 Tips to Maintain Payroll Compliance in Your Organization

1. Keep Employee Records Up-to-Date

It sounds really obvious, but maintaining up-to-date and correct employee records is vital, from the first day of employment to when an employee leaves the company. Be aware that personal information changes all the time—from house moves and maternity leave to promotions and pay reviews. Payroll must be updated accordingly. Engage with employees so they know it’s their responsibility to provide updates when important employee information changes on their end.

Payroll and HR Compliance - Employee vs. Independent Contractor
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Often, employees come to their payroll team asking about how changes to their tax exemptions or deductions will affect their paycheck. With Paycheck What-If Calculator, these pay modeling questions can be forecasted without making changes to the master employee record, eliminating the risk of making a major change by mistake.

2. Classify Employees Correctly

On top of keeping employee data current, personnel need to be classified as independent contractor, part-time, or full-time employee. This is because the payment rules will be slightly different for each—and you don’t want to be caught misclassifying them. The state of New Jersey recently fined Uber $649 million for wrongly classifying their drivers as independent contractors instead of employees.

“For years, workers have been organizing and speaking out against our mistreatment by billion-dollar gig companies who have refused to obey the law. Today, the court sided with workers and not corporations,” says Edan Alva, a Lyft driver and member of advocacy group Gig Workers Rising.

3. Manage Your Audit Trails

If there’s an investigation into your business, your paperwork should be in order. Audit trails will help you out here. They link transactions with payments, purchase orders, and invoices. So, if there are any suspicious transactions, you will have the necessary information to support an investigation.

Audit trails can also help to protect you against fraud and give you greater insight into the financial health of your business.

ACA compliance tracking and reporting is a prime example. You have to keep a close watch on each employee’s hours each month, and make sure you are offering affordable coverage to those who qualify. Then you have to have all that data handy in order to generate 1095-C forms for each employee who was offered coverage, and a 1094-C form to send to the IRS. If the paperwork doesn’t look right, you’ll be getting a letter from the IRS asking for documentation to prove you were in compliance. Having the right software or expertise here is crucial, or you could pay hefty fines.

Integrity Data has a team of ACA pros who can take that work off your hands with our ACA Full Service offering. Click here to learn more.

4. Track Local and National Regulations

Many businesses operate across different countries. If your business fits into this category, then you should be aware of international payroll laws and regulations. Every government has its own rules regarding deductions, remittances, reporting, etc. You will need to know them while dealing with different currencies and timezones. If you think that sounds difficult, then you’re right—it is. Accounting software, not to mention a trained professional who understands international regulations, can help lessen the burden.

5. Use Payroll Tools

Legislation changes regularly and it’s a challenge to keep up. The problem is, this in itself is not an excuse: it’s the HR and finance team’s responsibility to do so. Sending them to industry conferences and seminars, as well as being informed via webinars, can help your company stay on top of the rules, changes, procedures, and payroll trends.

Speaking to experts and reading articles on industry trends can also help provide insights. Payroll software can help; with a variety of tools that offer advice and updates to remain on the right side of legislation.

Microsoft Dynamics GP payroll users have many tools available with the Starter Pack. But payroll staff often find they need additional functionality. That’s where our payroll and HR solutions come in to bridge the gap in areas of payroll processing, productivity, benefits management, and more.

Users of Dynamics 365 Business Central have been missing a very important tool - payroll! Payroll NOW by Integrity Data has developed to help fill that void. Payroll teams on Business Central can now enjoy a fully embedded payroll experience right within their ERP system.

6. Do Taxes Correctly and On-Time

Tax inspectors rarely take mistakes well, so ensure your submissions are correct and on-time. Mess up and you risk penalties.

Payroll teams need to know quarterly deadlines and paydays, and plan well to complete everything on-time. A digital calendar clearly showing dates is a must. HR teams should also have timesheets, payments, and invoices correctly recorded and stored in their payroll software for efficient cross-referencing. The more information you have, the more informed everyone will be. A tax advisor can serve as a point of reference in these complex processes.

Dynamics 365 Business Central users can minimize tax mistakes by using Payroll NOW by Integrity Data to automate tax filing, including year-end filing. Federal and State taxes are automatically updated.

7. Calculate Overtime Hours Correctly

Your finance and HR teams have too much on their plates to worry about things like timesheets, overtime, and expense sheets. This is where self-management comes in handy.

Time tracking technology allows you to use the data gathered to make informed decisions about performance management and employee engagement. Time tracking software will help your team stay on top of their performance and productivity.

By letting employees manage their own time, you shift the responsibility over to them—which many appreciate. It also makes it easier for managers and HR teams to review and approve requests as they come in.

Overtime also comes with it’s own set of regulations. With our Overtime Hours Rules add-on, you can automate overtime calculations, and set custom rules to meet state/local regulations, all without any extra steps during payroll.

Payroll Compliance Doesn’t Have to be Hard

Staying compliant is important and while it can seem like a juggling act at times, there are things you can do to make payroll processing easier. Finding a good, reliable accountant to help you out is a must. Invest in time tracking tools and payroll software to ensure employee hours are accurate and you are ‘in the know’ regarding current legislation. Knowing the law and being equipped with the right tools for the job will give you the best possible chance of staying compliant.

Join us for a deep dive into payroll compliance for Dynamics GP, 365 Business Central, or the ACA by coming to our upcoming Payroll Year-End event November 17-18. See the topics and register today. Hope to see you there!

Written by Integrity Data

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