Compliance is something that businesses of all sizes must consider, and payroll compliance is especially important. Not only is compliance a legal requirement in order to stay in business and avoid penalties, but it’s also something that can help guarantee your employee’s security within the company and when it comes to payment. These regulations are put in place to protect employees from mistreatment by private companies and need to be followed at all times. Here’s what payroll compliance means for your business.
It’s the Law
While laws and regulations differ depending on the state or city you’re operating in, there are some federal regulations that are universal to every geographic location in the country. States generally set their own minimum wage requirements, but there are some federal regulations in place. Payroll covers more than just direct deposit and writing checks to the employees. It also covers onboarding, the hiring and firing process, benefits, bonuses and insurance, and much more.
Payroll is also linked with your taxation process and accounting division, making it all the more essential to get it right so as to avoid trouble from the IRS. Make no mistake; the IRS will not miss any mistakes you make, and this could cause serious problems for your business in the form of penalties, fees, and even legal action.
Overtime is also something that’s regulated by the government. There was a time when laborers would work in terrible conditions with few safety regulations, no overtime pay, and little time off. Those days are part of a shameful past, and with current regulations, anything over forty hours in a single week is considered overtime; and is, therefore, subject to higher wages equaling one and a half times the regular hourly rate.
You’ll Need A Good HR Department or Payroll Service
If you’re running a small business, it’s unlikely that you’ve hired a full-fledged HR department. You’ve probably outsourced your payroll to a payroll or PEO service (you can compare some of the best PEO companies on Retireat21.com) to ensure you’re staying in compliance and meeting all of your payroll needs on time.
This is a popular option for startups and small businesses that can’t quite allocate the money or resources to an HR department. PEO services can ensure your business isn’t missing any tax deadlines, failing to pay overtime rates, or violating minimum wage requirements.
Personal Details Must Be Accurate
One of the most common payroll compliance mistakes among small businesses is the inaccuracy of personal details. When you hire a new employee, it’s vital that you get your employees’ personal details right, or else be subjected to penalties and fees for submitting incorrect information. Not to mention, messing up someone’s personal information, and therefore, their tax forms, is a good way to upset your employees and lead them to question your competence.
If you’re unsure of anything on the employees’ paperwork, don’t be afraid to ask. The sooner you fix mistakes, the better off you’ll be in the long run.
Record Keeping
Keeping accurate records is part of staying in compliance, and can help protect your business as well. You’ll want accurate records of payments, withholdings, and hours worked so as to maintain your business’s standing with the IRS. Should any legal trouble befall you, this information will be crucial to proving that you not only employed the person in question, but also how much they were paid and when, and how long they were in your employment.
Records should be kept in a backup location in addition to your main storage. Most companies are opting for digital storage instead of physical hard drives or filing cabinets. Digital storage is generally more secure, and with backups, you’ll be protected from any accidents or lost information.
Your Reputation Depends on It
A business that develops a reputation for being out of compliance with the law will quickly become undesirable to both customers and potential employees. Would you support a business that didn’t take paying its workers seriously, or disobeyed the law on a regular basis? It’s no understatement to say that your business’s reputation depends largely on how you treat your workers, and payroll compliance is just one factor in this treatment.
The Take-Away
Payroll compliance is nothing to take lightly. Not only are you legally required to remain in compliance, or else put your entire business at risk, but it’s also important for establishing your reputation as an honorable business. You won’t keep many employees if you’re not paying them correctly, or continually submit information in error. Keep your records straight, fix mistakes, and ensure you’re filing on time every time. If you’re struggling with compliance, you may benefit from the services of a PEO or payroll services company.
