Accounting & Bookkeeping

Payroll-Related Rules That You Need To Track Annually

Written by Analytix Editorial Team | August 2, 2021

Payroll related provisions are liable to modifications depending on multiple factors. If your business handles payroll for employees, you’re most certainly aware that business payroll rules can change. Depending on the economic environment and government policies, businesses must track their payroll liabilities to ensure compliance.

Payroll planning

Multiple factors influence payroll in a business, including:

  • Salary structure: Businesses may have multiple salary structures in place, given the number of employees they employ. Payroll processing needs to take into account the differences while processing payment figures. Typically, a salary payment is a mix of elements such as wages, allowance, and benefits.
  • Worker or employee category: Especially in a startup or a small company, workers may be part-time, contract, or employed full-time.
  • Holidays, time-off calculations, and leave privileges.

Payroll related provisions and need for compliance

The 2020 Paycheck Protection Program (PPP) involved financial assistance that was forgiven if the funds were used for paying salaries and other eligible expenses. The loan had to be repaid if the proceeds were not utilized for making eligible payments. Similar legislative changes can impact business payroll-related provisions if compliance is not maintained.

payroll related provisions Infographics

Compliance with federal income tax withholding rules

Businesses must ensure compliance with federal tax brackets. These are liable to changes, especially annual tax rate changes, and usually influence the tax withholding. According to the IRS, employees using the new Form W-4 provide employers with information on the amount of taxes withheld as well as the amount of wage income subject to income tax withholding.

Health savings accounts and retirement compensation

Businesses offering employees high deductible healthcare plans with the option of heath savings accounts should be aware of the contribution limit increase of 1.41% for individual and family plans. Furthermore, Health Savings Accounts (HSA) also have annual modifications that need to be complied with.

Social Security taxes

Employers are responsible for Social Security tax payment contributions. They are also responsible for withholding this tax from the employee wages.

Understanding Social Security taxes is important for calculations; the wage base, employer contributions, and withholding also changes accordingly. Contribution and withholding are stopped for employees earning above the Social Security wage base.

State laws and contributions

The State Unemployment Tax Act (SUTA) is paid by employers on wages paid to employees. Tracking any new SUTA legislation and modifications made to the wage base, or limit up to which employers need to pay the SUTA tax, is important for businesses if they want to stay compliant.

Other state taxes include the paid family leave, paid sick leave, and state income tax.

Minimum wage

Since federal and state minimum wage can differ, businesses need to stay updated about changes to legislation regarding minimum wage.

In some states, the minimum wage increase schedule is also followed, which means annual changes to existing wages.

For businesses that have employees in multiple states, keeping track of state-sanctioned minimum wage changes is important.

Knowing your obligations

Given the importance of compliance, businesses must keep a sharp eye on any changes to payroll related provisions. COVID-19 related furloughs and layoffs have had a negative impact on hiring and staffing; some businesses may still be financially struggling with the need to hire necessary staff.

Strategic partnership may be an easier way to address some of the challenges due to the recent lockdown restrictions and COVID-19 related economic and financial crisis. Together with judicious utilization of automation software, businesses can stay on top of payroll obligations.

To assist with compliance, accounting software can be customized to employee types, salary structure, and time-off details.

Next Steps

Written by

Analytix Editorial Team
Analytix Editorial Team

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