Employers faced several payroll and human resources regulatory challenges in 2020 and will do so in 2021 and beyond. Business owners and human resources departments need to become informed and plan accordingly each year.
With these key factors in mind, here are the top compliance subject challenges that both employers and HR departments need to aware of and plan for each year.
W-4 Form Changes
There was a forced revision of key federal withholding process brought about by the Tax Cuts and Jobs Act of 2017. These changes resulted in a new Form w-4 for the 2020 tax year. The largest updates that are part of the forced changes include getting rid of withholding allowances and the allowed method of additional tax withholding by taxpayers when filing taxes after the year that tax reform legislation is initiated. Starting in 2020 all new employee hires are required to complete the new form. Employees already on the books do not have to complete the new Form W-4, but they can change their withholding because of the new form. Adjustments made to payroll withholdings completed in Jan. 1, 2020 are required to be made with the new Form W-4. Employers are required to calculate employee tax withholdings using the old Form W-4 and the new Form W-4. Since the new Form W-4 release along with updated withholding tables, States around the country required to figure out if the will revise their tax system predicated on the 2020 Federal tax withholding table changes, retain the process they are using now or create an updated withholding method. A handful of States in the U.S. have made their decision on how they are going to manage withholdings, but most States have not yet determined what they are going to do.
Final Overtime Rule
The U.S. Department of Labor issue its long time coming Final Overtime Rule. The new rule changed the U.S. federal regulations overseeing employees due minimum wage and overtime pay under the auspices of federal wage and hour law. Along with several changes, the Final Overtime Rule increased the ‘standard salary’ for the following job classifications which include executive, administrative and professional white-collar exemptions from the existing enforced wage level of $455 per week to $684 per week. This means that employee would be making the standard of $35,568 per year for a full year of work worker. This ruling took effect on Jan. 1, 2020. The ruling permits employers to make up to 10% of the standard salary level in a full year using non-discretionary bonuses and specific payment incentives which can include commissions.
The major challenges for employers in Payroll and Human Resources in 2020 and beyond are going to expand as our workplaces become more complex and technologically oriented. The best approach to stay in line regarding all these topics and subjects is to review each of them quarterly, check to see if there have been any new changes in the last 90 days and then make changes to your companies policies, rules and regulation compliance strategies where and when necessary.