Did you know that according to a recent American Payroll Association (APA) members survey, the primary factor contributing to payroll related compliance risk in many U.S. organizations is the lack of knowledge of regulatory guidelines and updates in changing legislation?
Regulatory complexity is a fact of life for the HCM industry. Whether organizations are small, medium or large, constantly trying to keep up with U.S. legislative changes can be stressful and challenging for a company’s HR and payroll professionals to manage.
In 2017, there has already been an avalanche of far-reaching changes in HR compliance from a local, state and federal level. While many HR and payroll practitioners contend with compliance risk and regulatory reporting requirements daily, it is the recent uncertainty and increase in regulatory change that has focused the attention of many U.S. employers on compliance and the importance of technology in enabling their business to cope.
At the end of the day, it is the employer’s responsibility to stay current, be knowledgeable and adaptable to change, or face legal ramifications, harsh fines and penalties for non-compliance. According to the 2016 American Payroll Association (APA) members survey, the top three regulatory/compliance issues that most U.S. employers are concerned with include: health care reform and the ACA employer shared responsibility, the potential new Overtime Rule, and Mandatory Paid Sick and Family Leave.
Read on for a brief description of each concern and what every U.S. employer should know to keep informed with legislative changes as they arise. And for an in-depth look at the top seven compliance trends impacting U.S. employers today, download this guide to understand the obligations that organizations need to consider in order to keep on top of these changes.
1. Health Care Reform: The American Health Care Act (AHCA)
No single federal law or regulation in the past 50 years has presented greater compliance change, complexity and risk for employers than the Affordable Care Act of 2010. On May 4, 2017, the House of Representatives approved the American Health Care Act (AHCA) which is the Republican’s legislation to repeal and replace the Affordable Care Act. The bill then moved on to the U.S. Senate, where it has undergone further changes as the recently proposed Better Care Reconciliation Act (BCRA).
Neither proposal completely eliminates the Affordable Care Act, but instead each retains some provisions, replaces certain sections, removes other parts, and reduces other ACA policies. Some of the key provisions that will affect employer-sponsored plans include a delay of the 40% “Cadillac Tax” on employer-sponsored coverage, the elimination of the ACA’s employer and individual mandate penalties, and the repeal of the Medicare surcharge on high-earners and the expansion of health savings accounts (HSAs).
As proposed legislation, BCRA must still pass the Senate by formal vote, be reconciled and approved by both houses of Congress, and be signed into law by President Trump prior to becoming enacted. The next chapter of the health care story is far from over.
2. Changes to State and Federal Overtime Rules
Ten days before one of the most sweeping changes to the Fair Labor Standards Act (FLSA) overtime rules was to have taken effect on Dec. 1, 2016, a federal judge for the Eastern District of Texas issued a preliminary injunction stopping the Department of Labor from implementing it. The final rule was set to double the minimum salary threshold, from $23,660 to $47,476 annually, or from $455 to $913 a week, imposing a heavy compliance burden on public and private employers.
This delay of the final rule, along with potential state law changes, continues to pose problems for the vast majority of U.S. employers who have already taken steps to be in compliance with the FSLA rule on its original effective date. To address this concern, U.S. employers should consider the flexibility of their current HR systems and technology and how easily it can be revised now and in the future, based on further changes to overtime requirements.
3. Paid and Protected Leave Expansion
The Family Medical Leave Act (FLMA) of 1993 has for 23 years provided 12 weeks of unpaid leave for mothers, parents and caregivers who qualify for coverage in the U.S. Many employees claim that the unpaid leave offered under the FMLA is far from enough to give them the financial stability and freedom they need.
However, the confusing mix of new and proposed state family and sick leave laws, which are intended to provide additional employee protections, are also a great concern for many U.S. employers. Not only will the patchwork of inconsistent requirements in protected time off affect their workplaces, but will they know exactly what their obligations are to pay their employees who are starting families or caring for elders or sick relatives?
At the state level, approximately ten states have sick pay requirements either already in effect, or that will come into effect in 2017. These changes have required many employers to begin reviewing their paid leave policies – particularly if they have personal or PTO policies that combine sick and vacation time.
Sick pay requirements for federal contractors went into effect on Jan. 1, 2017, requiring up to seven days or 56 hours of paid leave. Then, in February 2017, Washington, D.C. passed a paid family leave bill. Capitol Hill leaders have begun to recognize that national policy may be needed for paid family leave as well. As a starting point, President Trump included in his 2018 budget the framework for six weeks paid family leave so that mothers and fathers can bond with a new born or adopted child.
Knowing the facts can help ensure the smooth financial running of any organization and enable clear communications with their employees.
Read Ceridian’s new guide, The Seven Compliance Trends Every Employer Should Know in 2017 to stay on top of sweeping and federal legislative changes.