For any organization, payroll compliance and reports are essential. As your business expands, rules become more intricate, and so does the necessity to look out for new rules. Pay rates, work hours, income taxes withheld, days off taken, overtime hours, and benefit costs are all details that are included in a payroll report.
To avoid unpleasant circumstances with IRS and DOL and the time-consuming processes of correcting IRS forms, it’s important to look out for laws and submit reports that are compliant with the law. Here is a list of ways your business can become non-compliant if payrolls aren’t maintained correctly.
1. Increase in tax limits
The tax exemption amounts vary annually. You can avoid the issues you’ll encounter as a result of failing to make the necessary adjustments if you give yourself enough time to regularly keep up with new adjustments through research.
For instance, there was an increase of $4,200 in the Social Security base limit which consequently increased the tax amount. It’s important to make sure your company has already made the required changes to match the increased amount.
2. Incorrect employee classification
Misclassification of employees is very common in companies. Although misclassification could be accidental, in some cases companies do this intentionally to avoid paying for insurance and other benefits that the law enforces for salaried employees. This robes employees of their benefits and fair payment. In both cases, this leads to penalties from the government.
FLSA mandates employee minimum wage and overtime records in all organizations. This is to keep a clean record of employee payroll and tax conversion in the company. Violation of FLSA rules can cost companies an amount of $2,000 or more (for each employee).
FLSA rules vary from state to state, some states have higher penalty amounts and rules in place for organizations, so employee rights are not undermined.
3. Different state laws
Different states imply different state laws on minimum labor wage, tax payment, overtime work, and other IRS-related factors. For companies operating in multiple states, it’s important to know the rules well and stay compliant.
Another sensitive matter would be remote employees who work in your organization from other states. Due to different laws in states, it’s an extra load of work for the HR department to ensure the accuracy of employee payroll and tax reports.
4. Filling forms on time
The federal government demands certain paperwork from companies such as proper documentation of the new hires, and quarterly and annual payroll tax reports. As much as the government emphasizes the accuracy and transparency of the details in your report, they also demand on-time report submission.
It is important for the organization to realize its deadlines and submit reports and files on time to avoid potential audits and penalties.
5. Document Archive
According to the FLSA, companies are required to keep all the employee records and payroll reports, including all the details and specific employee data for a period of time. These time periods vary in different states which is from 3 to 7 years.
For bigger companies with larger workforces, companies are also required to keep a documented record of all employee details including medical leaves, emergencies, etc.
Conclusion
It’s time-consuming and difficult to stay compliant with FLSA rules. This is especially true if you are running a multi-state company or hiring remote employees. But that doesn’t change the necessity of staying compliant with the rules.
