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
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
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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 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
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
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
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,
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
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
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
Dynamics 365 Business Central users can minimize tax mistakes by
Payroll NOW by Integrity Data to automate tax filing, including
year-end filing. Federal and State taxes are automatically
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.
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
Payroll and HR Compliance: A Quick Guide for Business Owners
appeared first on ERP