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(Editor’s Note: Today’s article is brought to you by our friends at ADP, a comprehensive global provider of cloud-based human capital management solutions. Industry analyst firm Nelson Hall recently identified ADP as a leader in both the small and medium business as well as mid to large market segments. Congrats to them! Enjoy the read.)
Ensuring employees are paid in a secure, efficient, and timely manner is one of the fundamental roles of an employer. So, making sure that organizations have the systems in place to properly manage the payroll process is vital. That includes compliance with employment tax payment and reporting rules with each of the various local, state, and federal agencies to avoid penalties.
However, as much as we want to do everything properly, it can be a challenge to maintain complex compliance requirements. If your organization doesn’t have human capital management (HCM) technologies in place, there can be more than 250 manual tasks to be completed to maintain compliance. It should be no surprise that in the ADP Research Institute white paper “Midsized Businesses: Poised to Lose Balance in a Time of Uncertainty“, business owners cited the complexity of government regulation and the ability to comply with employee data laws as a major obstacle to company growth.
A few weeks ago, we talked about “Making the Case for Change” when it comes to strategic compliance. In today’s dynamic compliance environment, organizations should take a closer look at some of the specific compliance strategies they can implement so the operation can focus on creating labor efficiencies. But implementing and maintaining a compliance strategy takes more than just HR. The entire organization needs to be involved. Here are four of the compliance strategies that can help the company spend more time running the operation:
#1 – Automated Compliance Opportunities
High-volume, routine processes like payroll processing and production are excellent opportunities for automation, where rules-based technologies can reduce errors and exceptions while at the same time significantly lowering costs. But according to a 2018 Deloitte Payroll Operations Survey, only 6% of organizations surveyed relied on some form of process automation for payroll processing.
In the same survey, respondents regarded payroll compliance/controls and payroll accuracy as the top two areas for improvement, both of which can be achieved through automation, resulting in greater efficiency and costs savings.
#2 – Operational Efficiency with Systems and Service
All too often, companies are too over-burdened administratively to even identify systems or services for which they may be eligible. For example, tax credits often require records that document fulfillment of the credit. Organizations need to plan for tax credit reporting requirements and calculations in advance and keep records to prove compliance.
One of the most common employment tax credits is the Work Opportunity Tax Credit (WOTC). The WOTC allows eligible employers to secure a tax credit when they hire an employee from certain targeted groups who have historically faced significant barriers to employment. Integrating WOTC qualification data into the application process can help companies streamline and improve the applicant process, which can ultimately result in hiring the best talent in a competitive job market.
#3 – Reducing Risk Exposure
I mentioned earlier that employer compliance challenges are broad, complex, and can include a wide range of operations. Not getting compliance right can put the whole organization at risk. Some of the most challenging employer compliance issues include activities that organizations deal with every day like garnishments and responding to agency requests.
- Wage garnishments are the legal seizure of employee pay to repay debts and meet obligations like child support payments, tax levies, student loans, and consumer debt. Garnishments impact 1 in 14 U.S. workers, and an estimated 12% of those with a garnishment have more than one type, according to the ADP Research Institute report “The U.S. Wage Garnishment Landscape: Through the Lens of the Employer”.
- Affordable Care Act (ACA) compliance penalties were increased in 2020 for employers that fail to comply, fail to comply on time, or fail to document their compliance.
- Unemployment overpayments occur because of employers failing to respond promptly or properly to state agency requests which occurs approximately 20% of the time, according to the U.S. Department of Labor.
#4 – Embracing the Future of Pay
When it comes to payroll and employee pay, it isn’t just how much employees are paid that matters but how they are able to access those funds. According to a 2019 ADP survey, more than 60% of employee respondents said if an employer offered more payment flexibility (e.g., the ability to select pay frequency, same day pay, or early access), it would make a difference in whether they would accept a job offer.
These pay card/digital pay solutions can reduce cost and effort for employers while enhancing talent recruitment and employee retention—just another example where innovation and labor efficiency can go beyond cost savings to contribute to the strategic goals of the company.
Process Improvements That Pay Off
Sadly, many HR processes are still manual and labor-intensive, burdening staff with tedious, inefficient tasks that can potentially introduce avoidable errors and compliance risk into the process. Creating a compliance strategy can lower costs, reduce unnecessary overhead, reduce risk, and position companies for both compliance and growth. As a result, the organization can concentrate on more strategic work – which may go beyond cost savings to positively impact employee hiring, engagement, and retention.
P.S. ADP has created a simple yet compelling, data-driven framework to help companies gather the data needed to present alternatives in support of their strategic compliance strategy. If you want to learn more, check out ADP’s Smarter Compliance site.
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