Ease HR/Payroll Compliance Woes With Technology
June 2009By Jessica Simmons
It’s a fact—finding and keeping skilled workers, managing increased government compliance reporting, and getting more done with fewer resources have many companies stretched to the limit.
The reality is that compliance concerns don’t go away in a down economy; they actually have the potential to increase dramatically. For example, according to a March 12 article in Workforce Management magazine, the number of EEOC claims recently reached a record high of 95,402, the most since the agency opened its doors in 1965.
According to the Society for Human Resource Management’s (SHRM) “10 HR Challenges That Should Keep You Up at Night?,” approximately 150 new federal and state rules are proposed each year, costing small businesses more than $100 million in compliance costs per rule. That same document says health insurance premiums have risen 15 to 20 percent in each of the past 4 years.
“New regulatory requirements are mandating that construction firms keep impeccably accurate records of all their employees and their payrolls,” says Brian Sommer, president and founder of business consulting firm TechVentive, Inc., and technology research firm Vital Analysis.
American Recovery and Reinvestment Act of 2009
Earlier this year, President Obama signed the $787 billion American Recovery and Reinvestment Act (ARRA) of 2009 into law. Several provisions of ARRA, also commonly referred to as Recovery Act or Stimulus Plan, are affecting businesses in a variety of ways.
The Making Work Pay Credit and the COBRA (Consolidated Omnibus Budget Reconciliation Act) Health Insurance Extension are impacting worker withholding and employment tax returns. Having a human resources management system (HRMS) in place can automate and improve the way contractors manage the requirements for these and other legislative regulations.
Let’s take a quick look at the various ARRA legislative changes affecting HR professionals.
COBRA Coverage Expansion
ARRA provides for premium reductions and additional election opportunities for health benefits under COBRA. More specifically, it offers a 65 percent COBRA premium subsidy, and an additional enrollment period for up to 9 months, for workers who have been or are involuntarily terminated between September 1, 2008, and December 31, 2009. Employers can credit these payments on Form 941.
The TAA Health Coverage Improvement Act of 2009, which was enacted as part of ARRA, makes significant changes to the COBRA continuation coverage rules.
Numerous notifications must be made to current and former employees in compliance with the regulations, which take effect on the first day of the COBRA coverage beginning after February 17. (COBRA coverage also becomes effective at this time.) Employers must also determine reporting requirements and establish a record-keeping process related to these COBRA changes.
Making Work Pay Credit – Income Tax Credit
The Making Work Pay Credit, another part of the ARRA, provides eligible workers with an incremental tax credit of up to $400 for working individuals, and up to $800 for married taxpayers filing joint returns, during 2009 and 2010. No action is required on the part of the eligible worker; the additional credit should automatically appear in taxpayers’ paychecks.
The ARRA also temporarily increases, by 5 percent, the Earned Income Tax Credit (EITC) percentage for families with three or more qualifying children. The threshold phase-out amounts have also increased.
Additionally, the IRS issued new tables for calculating the Advance Earned Income Credit (AEIC) for the remainder of 2009. The AEIC allows taxpayers who expect to qualify for the EITC, and have at least one qualifying child, to receive part of the credit in each paycheck during the year the taxpayer qualifies for the credit.
In order to comply with all of these pay-related ARRA regulations, employers and payroll systems needed to begin using new federal income tax withholding and advanced earned income payment tables by April 1.
Work Opportunity Tax Credit
The Work Opportunity Tax Credit (WOTC) is available for employers hiring from one or more of nine targeted groups. Changes to the WOTC include an expanded definition of qualified veterans, plus the addition of disconnected youth as a new category.
No More Unemployment Compensation Tax
The ARRA extends Emergency Unemployment Compensation (EUC) to an additional 13 weeks through 2009. It also increases weekly benefits by $25 through 2009, and temporarily suspends federal income tax on the first $2,400 of unemployment benefits.
Information Overload
All of this information can be overwhelming. Fortunately, contractors that have implemented an HRMS can ease the pain of complying with the ARRA and other new legislative requirements.
“Tracking employee information in a single database source is more important than ever before,” says Elizabeth Leng, SPHR, human resources director for Pompano Beach, Florida-based Current Builders.
Putting Out an HRMS SOS
As Leng mentioned, an HRMS can facilitate the COBRA changes by allowing HR professionals to more easily track employee termination types and reasons. Likewise, such a system could have helped the HR department quickly identify employees who terminated between September 1, 2008, and the enactment of ARRA.
“An HRMS can also help when it comes to creating the required notices to eligible COBRA-qualified beneficiaries,” adds Jennifer Hennessy, a consultant with HR software consulting firm Pacific Data Marketing in Poway, California. “Automatic tracking, and the ability to generate reporting and letters directly from the HRMS, can make implementing the extended periods of COBRA coverage transparent.”
Regarding the federal tax table updates, an HRMS certainly comes in handy when it comes to complying with payroll regulations. It’s the job of a good HR/payroll solution provider to provide its customers with updated tax and payment tables as soon as they become available.
In addition to ensuring their customer support representatives are adequately trained to help customers who have questions, the best HRMS vendors continually watch for potential legislation, as well as provide users with quick and accurate product or service updates to finalized legislation.
“Monitoring the various entities that pass legislation is very difficult,” explains Gary C. Crouch, CPA.CITP, MCP, president of Tulsa, Oklahoma-based CS3 Technology, a professional services firm offering HRMS and accounting applications. “Spreading the time and cost with other users of an HRMS system, and its publisher, makes economic sense. The sad fact is that many mistakes are not caught for a long time. Paying back taxes or other fines and penalties for mistakes occurring over multiple years can sink a business.”
Sommer agrees. “The days of contractors keeping their ‘books’ as a loose pile of receipts, and notes on the dashboard of their work truck, are clearly over; that’s not a best practice,” he says. ■
About The Author:
Jessica Simmons, SPHR, is strategic accounts vice president for Sage North America’s Employer Solutions business, which includes the award-winning Sage Abra HRMS software. She holds a BBA, Finance, from Stetson University in Deland, Florida, and an MBA from the University of South Florida in Tampa. For more information, please visit www.sageabra.com.
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