Compliance with tax obligations and local, state, and federal labor laws such as the Fair Labor Standards Act (FLSA) is essential for any business to maintain functional payroll processes. A few key areas of compliance focus include:
- Worker classification – Correctly classifying workers as employees or independent contractors is important because employers do not pay payroll taxes for contractors. Improper classification can lead to heavy fines and penalties. Contractors must also be paid a prevailing wage for the industry, including fringe benefits.
- Exempt employees – Salaried workers and certain employees who perform specific jobs or roles in an organization are exempt from federal requirements for minimum wage and overtime pay. Classifying or paying employees improperly to claim a false exemption is a major compliance violation.
- Withholding taxes – Managing and properly withholding payroll taxes is another key concern for business owners. Failing to account for FICA taxes in your payroll tax liabilities as laid out in IRS Form 941 can lead to audits and fines.
- Human resources compliance – Compliance concerns between a payroll service and a human resources team frequently overlap. Areas like benefits administration, exempt status, form I-9 filings, and payroll records management often involve coordination between HR and payroll, especially for small businesses where those functions are largely shared. This is an area where reliable payroll software can be a major help in maintaining compliance.
Ascentis’ powerful payroll software can help you manage all your payroll compliance needs.