Everyone finds it challenging to keep up with the ever-changing payroll laws. We’ve got five tips that will help you stay compliant and get payroll right every time.
Don’t stress! You’ll be relieved to discover that majority of companies have experienced issues like this at some point.
According to a report by Ernst and Young in 2013, 59% of companies experienced local tax authority audits and queries. Similarly, according to research by Fundera, a third of businesses are penalized for payroll compliance mistakes.
Today, new laws are impacting compliance too.
In the US, many states are planning to raise minimum wage requirements over the next few years and enforce new overtime laws. Once these new changes go into effect payroll will be processed differently.
When you also factor in the challenges of an international workforce operating under different tax laws, it’s easy to appreciate the risks involved.
Errors in payroll not only leave businesses vulnerable to government penalties; they also negatively impact employee morale and performance.
According to research by Sage, more than a third of employees would seek alternative employment after just one payroll error.
In the same study last year, 90% said they would not want to work for a company with a history of payroll mistakes, over 50% said a payroll error would cause them to lose trust in their employer, and 44% said they wouldn’t enjoy their job thanks to an issue with payroll.
“Payroll is something employers must get right,” says Jonathan Dowden, Payroll Expert at Sage. “With a clear potential to transform staff morale, influence employee engagement and make an employer more appealing to current or future talent, it should be brought out from the shadows and into the spotlight for businesses.”
It is critical that businesses get payroll right by meeting government rules and regulations to keep employees on their side. Here are five tips that will help you do just that:
- Get personal information right
This may seem obvious but make sure you have the right personal information for each employee and get them to confirm their personal information with you in writing. Don’t be fooled into thinking this is a once-off job. Personal information that affects payroll regularly changes – e.g. employee status, addresses, marital status, bank account details etc.
Consider scheduling a regular check-in with your employees when you can confirm the personal information you hold on file is still up to date. Don’t assume the relevant departments will automatically keep you informed of changes in pay or hours. It’s your responsibility to maintain employee records accurately for the duration of their tenure.
- Don’t assume that people know as much as you do
Keep an open dialogue with your employees and don’t be afraid to check, check and check again that they understand their obligations in terms of remaining compliant, such as adhering to your expense policies or keeping overtime records.
Let’s be honest, when you start a new job you get a lot of paperwork that often finds its way into the drawer marked ‘Read Later’.
Just because a policy is put in place doesn’t mean that everyone’s has read it or knows how it works. You may need to educate employees regularly on their responsibilities and how to document expenses and overtime properly, so you don’t get caught out at the end of each month.
- Roll on enrollment
Are there certain benefit packages that your employees need to be enrolled in? Government websites are a good place to start when it comes to checking what employees need to be enrolled in and the contributions you and the employee are required to make.
- Understand local legislation
If your business operates across multiple states it’s important to be informed what the tax and payroll laws are for that region. It’s your job to keep up-to-date about these changes. Areas to monitor include: changes to legislation particularly concerning the minimum wage, employee tax reporting and maternity leave. Similarly, different states will have different laws covering how businesses handle expenses and overtime.
Many states have experienced legislative changes with payroll over the past year and are planning to enforce new rules in 2017.
Staying up-to-date with changing legislation is a challenge. Outsourcing payroll can help your organization stay-up-date on the local legislation that may affect your business.
- Don’t forget there are people on your team
Do you know who knows a lot about compliance? Your accounting department. If you have questions, you should set up a meeting them. They have a deep knowledge of accounting and compliance laws and can help you to make sure that you’re getting it right.
Keep tracking of a complex and constantly changing set of rules and regulations seems like an impossible task. While it’s unlikely that all of your colleagues are aware of the challenges you face, remaining compliant will help you protect the future of your business.