By Jessica Saperstein
March 7, 2013
Companies of all sizes are facing increased complexity due to historic legislative changes stemming from the American Taxpayer Relief Act of 2012 as well as the Patient Protection and Affordable Care Act and the Health Care and Education Act of 2010 - more commonly referred to as health care reform. Keeping pace with new benefits coverage mandates and payroll and employment tax changes further complicates the already daunting and perennial challenge of regulatory compliance.
If you drill down into the middle market - which represents a large segment of the U.S. economy and a key growth engine - you find HR professionals seeking a more strategic approach to simplify compliance. Like their larger and smaller peers, midsized companies recognize that falling behind, and not keeping pace with ever-evolving government regulations can potentially lead to costly consequences. According to a recent ADP Research Institute study titled “Top Concerns of Business Leaders in the Post-2008 Economy,” 81 percent of midsized business owners believe their business is in compliance with tax and labor regulations. Yet, 33 percent reported having incurred unintended expenses such as fines or penalties in the last year due to non-compliance.
By taking a best practice approach to compliance, HR professionals can reduce administration so they can focus on further optimizing their workforce. Following are three best practices that can help your organization mitigate compliance risk and operate more efficiently:
1.Thoroughly evaluate the impact of new government regulations across your business. Analyzing the compliance requirements and timelines associated with each new benefits-related mandate and change to payroll and employment tax law requires an investment of time and resources. Make this an ongoing priority. As part of your analysis, determine how those requirements will impact both your administrative burden and your overall cost of doing business. For example, additional reporting requirements and mandates to expand employee benefits coverage can have significant financial implications. Based on your evaluation, create a detailed plan and secure additional budget, as needed, to implement the required changes in time to avoid penalties for non-compliance.
2.Integrate all areas of human capital management (HCM) to streamline compliance processes. According to the same ADP Research Institute study cited above, midsized business owners ranked the level/volume of government regulation among their top three business concerns. Yet, this key operational challenge also presents an opportunity to optimize business processes and increase productivity. By integrating all HCM activities - from benefits administration and payroll to talent management and time and attendance - across your organization, you can automate core compliance processes, such as tracking and reporting that you notified all employees of their benefits eligibility. This integration and automation enables your HR staff to spend less time on back-office administration, while also further streamlining your overall compliance efforts.
3.Engage a trusted partner to help you manage evolving regulatory changes. Many companies - especially those with fewer than 1,000 employees - lack the resources and internal legal expertise to efficiently manage shifting compliance requirements. As a result, a growing number of U.S. businesses outsource core HR administration tasks, including compliance.
When selecting a third party to support your compliance efforts, be sure to verify that the vendor has extensive experience implementing tax law changes that impact payroll and employment tax administration. You should also ask potential partners if they have dedicated compliance experts who will continuously monitor federal and state legislative and regulatory measures impacting human resources, payroll, tax and benefits administration. Finally, see if your partner can leverage cloud-based technology, which will help allow you to make compliance-related changes more quickly. This is especially important for regulations with short implementation deadlines, such as the recent return of employee Social Security tax rates to 6.2 percent due to the passage of the American Taxpayer Relief Act of 2012 in early 2013.
As government regulations continue to evolve, companies of all sizes must remain vigilant to ensure compliance with rapidly changing employee benefits coverage mandates and tax and labor laws. Adopting best practices and leveraging a trusted, third party with compliance expertise can help HR professionals successfully navigate constantly changing requirements and achieve regulatory compliance. Above all, businesses that succeed in simplifying and streamlining compliance administration can focus more of their time and resources on workforce management activities and initiatives that directly support their overall operational goals.
Jessica Saperstein is division vice president of Strategy and Business Development at ADP, one of the world’s largest providers of business outsourcing solutions - including human resources, payroll, benefits and talent management. Saperstein is based in Parsippany, N.J., and can be reached at [email protected].