Changing labor and tax regulations are a fact of life for payroll teams, but strategic payroll teams succeed because they understand that the best way to manage these changes is to proactively prepare for them.
Here are four compliance changes, both recently implemented and on the horizon, that payroll teams should be aware of, along with some tips to help you prepare for them.
1. New state leave laws
A few states passed family medical leave laws in 2019, kicking off a trend – now, more states, like Oregon and Colorado, have also passed their own family medical leave laws that will begin funding or go into effect in 2020.
Most of these leave laws are being funded by employee payroll deductions, so it will be important for payroll to:
- Identify impacted employees and notify them of the new regulations
- Ensure all deductions and eligibility requirements follow new regulations
- Ensure any new state taxes are being collected and paid
2. Payroll OT rule change
So it’s official – the new FLSA overtime laws have been approved and will go into effect January 1st, 2020. The changes include an increase in the overtime threshold to $684 per week and increase in the total compensation requirement for “highly compensated employees” to $107,432. But there will be no changes to the job duties test.
For payroll and HR teams, it will be critical to:
- Review impacted employees and their hours worked to understand if you'll incur additional overtime costs
- Pay close attention to employees with multiple positions to ensure you're tracking and aggregating all hours worked
- Assess job descriptions to understand if certain roles need to be reclassified
- Understand the details of the new regulations, like how nondiscretionary bonuses and incentives can satisfy up to 10 percent
Some organizations may be concerned about their overtime costs increasing. However, by leveraging a robust timekeeping, payroll, and HR solution, they will be able to gain better insights into their workforce data to proactively manage overtime and staffing levels.
3. Predictive scheduling
In an effort to improve the stability of hourly workers, some cities – such as Seattle, San Francisco, Chicago, and New York City – have approved “predictive scheduling” or “scheduling fairness” laws that mandate employers to give hourly workers advance notice of their schedule. And these regulations may also require employers to pay employees a premium or pay for their originally scheduled hours if they failure to provide a schedule or make changes to schedules within a certain timeframe.
For example, Chicago recently passed a strict predictive scheduling law that requires employers to:
- Give ten days' notice of workers' schedules (this will rise to 14 days on July 1st, 2022)
- Pay one hour of predictability pay (one hour of the employee's regular rate) for each adjusted shift after the ten-day deadline that was not changed in mutual agreement
Given the initial positive results of these regulations, it will be important for businesses to proactively prepare for these new laws. For payroll teams, a predictive scheduling law could add a new wrinkle when calculating employee gross wages.
For example, payroll may need to understand the hours employees were originally scheduled for and if there were any changes made after their respective deadlines that may impact gross wages. The best way to track this is through a single solution for timekeeping, scheduling, and payroll that enables organizations to automatically track these changes and ensure employee wages align with these new laws.
4. W-4 changes
The federal government has proposed significant changes to the form W-4. In the latest draft, the proposed changes eliminate the use of allowances and add a new step for multi-job households – which means employees in a multi-job household will need to either estimate their withholding, provide their employer with household income information, or check a box to opt for a higher withholding.
At the time of this writing, these changes have not received final approval, but payroll teams should proactively create a comprehensive change management plan to prepare for them, including:
- Building a comprehensive employee communications plan to help them understand the new form and how it may impact them
- Creating a guide for new hires to help them complete the form (without providing tax advice)
- Ensuring your HR and payroll solutions are up to date and prepared to handle the new W-4 form
Conclusion: In payroll it pays to be prepared
While these compliance issues may create new challenges, organizations can get ahead of the curve and mitigate any compliance risks by proactively preparing for them and leveraging modern HCM technology for payroll, HR, and timekeeping.
Learn more about compliance trends and other key issues in HR, payroll, and workforce management from industry thought leaders – while also scoring some APA, SHRM, or HRCI credits – by attending our free HR & Payroll eSymposium. Register today.