Payroll and HR Compliance: A Quick Guide for Business Owners
Payroll 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.
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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