Human Capital Management Blog

Strategies for HCM Professionals

Compliance the Hard Way and the Easier Way

HR TechnologyBy BP Gallucci, Communications Manager, Ceridian

For businesses of any size, staying compliant takes work. But there’s compliance the hard way – on your own, with manual calculations and tax tables, staying abreast of tax rate changes, jurisdiction changes, and tax limit changes through whatever means available to you – then there’s compliance the easier way, with technology that provides support, such as automatic tax updates.

With the complexity of staying compliant, ensuring an organization’s people are paid accurately and on time, deducting the appropriate taxes at the correct rate, remitting and reporting those taxes and so on, the right technology is the way to go.

The case for using a payroll solution to help with this challenge has already been made. Clearly no one is advocating you do your company’s payroll by hand, with pen, paper, and calculator. But just because you have payroll software doesn’t mean you’re staying compliant the easier way. Businesses should be using a solution that automatically performs tax and compliance updates, and over the next couple of paragraphs I’m going to convince you too.

Remember Political Subdivision Codes?

If you haven’t dealt with political subdivision (PSD) codes, six digit numbers that uniquely identify each municipality in Pennsylvania, then you’re not doing payroll for people in Pennsylvania; if you are, then you remember when they came out and what it meant for payroll departments across the state: for each employee that lived in Pennsylvania, businesses had to find out which PSD code applied in order to remit the correct amount of local earned income tax to the correct taxing jurisdiction.

The reality for payroll departments when this came about was a lot of legwork. Each employee’s PSD code had to be determined based on their primary residential address. This could mean looking up the code on the government’s website or some other source, storing that code with the employee’s details, and communicating the details back as part of the quarterly and annual tax filing.

All the local earned income tax and local services taxes withheld for employees residing in Pennsylvania had to be remitted with a PSD code.

This was an impactful change. Businesses using a payroll solution with automatic tax and compliance updates had a huge advantage to staying compliant with Act 32.  When their payroll solution was updated they received every employee’s PSD code necessary for quarterly reporting.

While payroll departments still had to run reports and audits to review and test data, the heavy lifting was done by the solution to detect, apply, and report automatically; I’m sure you’ll agree, this is compliance the easier way.

While PSD codes might not affect you, that’s no guarantee that other jurisdictions won’t adopt similar legislation to Act 32. Consider the state of Oregon’s new paystub bill, due to come into effect January 1st, 2017. It requires businesses to record their business registry number or business identification number on all paystubs – less impactful than PSD codes but still something your payroll department could stay compliant with the hard way or the easier way.

And these are just legislation changes; of course on top of these examples, there’s all the tax rate changes, tax limit changes and so on that occur – for example, If you’re in Canada the CPP tax rate will likely change soon – if you have a solution that provides automatic updates you won’t have to worry about it. What could be easier?

brian-galluciBP Gallucci, Communications Manager for Ceridian, focuses on telling the stories of Ceridian, its people, clients, and award-winning products. BP brings the historical viewpoint of a veteran of the HCM industry, having lived through extensive changes in the industry over the past decade while working in R&D, implementation, and customer support for several HR software vendors. BP’s work can be read in Connect magazine, the Glassdoor blog, and; his novel Lexus Sam is published by Iguana Books.

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