The end of the year is a crucial time for businesses to review their payroll and human resources (HR) policies, procedures, and records. Conducting a thorough evaluation enables companies to correct issues, update protocols, comply with regulations, and plan for the future. This comprehensive guide examines key aspects that business owners, managers, and HR professionals should focus on during year-end payroll and HR reviews.
Errors in payroll can lead to unhappy employees and damage your company’s reputation. A year-end review allows you to spot and correct any discrepancies in payroll processing. Accurate paychecks are not only a legal requirement but also a morale booster for your workforce.
- Verify that employee salaries, wages, bonuses, commissions, and reimbursements were calculated and paid correctly throughout the year. Check for errors that led to overpayments or underpayments.
- Confirm proper payroll tax calculations and withholdings for federal, state, and local jurisdictions. Review W-2 forms for accuracy.
- Validate proper application of garnishments, 401K deductions, healthcare premiums, and other voluntary deductions.
- Confirm employee classifications are correct (exempt vs non-exempt, full-time vs part-time). Update as needed.
Year-end is the perfect time to ensure that your payroll and HR practices are compliant with the latest federal, state, and local regulations. Laws and regulations can change frequently, and failing to comply can result in costly penalties and legal issues. A comprehensive review helps you identify and address any compliance gaps.
- Examine payroll policies and procedures to ensure compliance with FLSA, FMLA, ADA, ACA, EEOC, OSHA, and other regulations.
- Review and update the employee handbook and any additional HR policies and procedures.
- Complete any required annual trainings including sexual harassment training.
Streamline Tax Preparation
Accurate payroll data is the foundation of seamless tax preparation. By reviewing your payroll records, you can ensure that all taxes have been correctly calculated and withheld throughout the year. This not only prevents surprises during tax season, but also minimizes the risk of audits and fines.
- Organize payroll records, tax returns, tax payments, and supporting tax documents in preparation for W-2 and 1099 production.
- Confirm all required tax forms were filed accurately and on time throughout the year.
- Review independent contractor agreements and payments to determine if 1099 forms are required. Verify contractor W-9 forms are current.
Year-end is an excellent opportunity to evaluate your employee benefits programs. Are they still competitive? Do they meet the evolving needs of your workforce? A thorough HR review can help you optimize your benefit offerings while boosting employee satisfaction and retention.
- Gauge if benefit plans, including health insurance, retirement accounts, paid leave, tuition reimbursement, etc., remain competitive to attract and retain top talent.
- Consider modifications to provide cost-effective benefits tailored to an evolving workforce.
- Ensure benefit plans comply with ACA regulations and reporting requirements.
- Communicate any changes to benefits packages to employees and administer open enrollment.
HR Processes and Records
By reviewing your HR processes, you can ensure that these evaluations are carried out effectively and fairly. This helps in motivating employees, setting clear goals, and promoting professional growth within your organization.
- Assess performance review systems and update employee goals and training needs.
- Confirm procedures for onboarding, employee development, succession planning, and offboarding meet business goals.
- Review HR information systems and technologies for desired capabilities and cost-effectiveness.
The year-end payroll and HR review allows businesses to verify compliance, maximize cost and operational efficiency, boost employee satisfaction, and lay the groundwork for success in the year ahead. Investing the time in a comprehensive evaluation positions organizations to proactively address challenges rather than reactively fixing issues down the road. With careful attention to payroll accuracy, regulatory compliance, tax preparation, benefits packages, and overall HR processes, companies can ensure a smooth transition into the new year.