By Danny Mosaquites, Director of Regional Sales
As the end of the year quickly approaches, businesses across industries face the critical task of closing out their payroll and HR operations smoothly and accurately. The final quarter is not just about wrapping up financials; it’s also a time to ensure compliance, finalize employee records, and prepare for the year ahead.
To help your business navigate this busy season, we’ve compiled essential payroll and HR best practices for year-end preparation.
- Review Employee Data for Accuracy
Before diving into year-end processes, it’s crucial to ensure that all employee data is accurate and up-to-date. This includes checking employee names, Social Security numbers, addresses, and tax withholding information. Any discrepancies in this data can lead to errors in W-2s, tax filings, and even payroll processing.
Payroll Pro Tip: Send out a reminder to employees to update their personal information in the HR system. This step can help minimize the risk of errors and streamline year-end processing.
- Conduct a Payroll Reconciliation
A thorough payroll reconciliation is vital to ensure that all payroll transactions are accurately recorded and match your financial records. This process involves comparing your payroll register with bank statements, tax filings, and benefits contributions to identify and resolve any discrepancies.
Payroll Pro Tip: Reconcile payroll records at least quarterly to avoid last-minute stress during year-end processing. Keep a checklist of key reconciliation tasks to ensure nothing is overlooked.
- Prepare for Tax Filing Deadlines
Year-end payroll tasks are closely tied to tax reporting, making it essential to be aware of upcoming deadlines. This includes filing W-2s for employees, 1099s for contractors, and other relevant tax forms. Late or inaccurate filings can result in penalties, so staying ahead of deadlines is critical.
Payroll Pro Tip: Create a tax calendar with key deadlines highlighted to reduce the risk of errors.
- Audit Employee Benefits and Deductions
Year-end is an ideal time to audit employee benefits and deductions to ensure they’ve been applied correctly throughout the year. This includes reviewing health insurance, retirement contributions, and other voluntary deductions. Confirm that all deductions match the benefits elected by employees.
Payroll Pro Tip: Schedule a meeting with your benefits provider to review and confirm employee enrollments and contributions. This can help identify and correct any discrepancies before the year-end close.
- Plan for Year-End Bonuses and Payroll Adjustments
Many companies offer year-end bonuses, which require careful planning to ensure they are processed correctly. Consider the impact of bonuses on payroll taxes, benefits contributions, and overall budget. Additionally, review any outstanding payroll adjustments that need to be made before the year closes.
Payroll Pro Tip: Communicate with your finance team early to plan for bonus payouts and ensure that sufficient funds are allocated. Be sure to account for any additional tax liabilities associated with bonuses.
- Communicate with Your Team
Clear communication is key to a successful year-end close. Keep your HR and payroll teams informed of important deadlines, updates, and any changes to year-end procedures. Regular communication with employees about what to expect during year-end, such as receiving W-2s or updating tax information, can also help prevent confusion.
Payroll Pro Tip: Consider hosting a year-end meeting or webinar to walk your team through the year-end process. Provide employees with a checklist of tasks they need to complete, such as verifying their personal information or selecting benefits for the upcoming year.
- Prepare for the Year Ahead
While year-end is a time to close the books on the current year, it’s also an opportunity to prepare for the year ahead. This includes setting payroll and HR goals, updating policies, and planning for upcoming changes in labor laws or tax regulations. Consider conducting an end-of-year review to identify areas for improvement and set priorities for the next year.
Payroll Pro Tip: Work with your HR and payroll teams to develop a roadmap for the upcoming year. This could include plans for implementing new technology, improving employee engagement, or enhancing compliance efforts.
Year-end preparation can be a complex and demanding process, but with careful planning and attention to detail, your business can close out the year smoothly and set the stage for a successful new year. By following these best practices, you can ensure compliance, accuracy, and efficiency in your payroll and HR operations.
If you need assistance with year-end payroll or HR tasks, our team is here to help. Contact me today to learn how we can support your business through every step of the process.
Danny Mosaquites can be contacted at [email protected] or by calling 909.946.2032. Schedule a consultation with Danny anytime and connect on LinkedIn.
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*Southland Data Processing (“SDP”), an MPAY Company, is not a law firm. This article is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other SDP materials does not create an attorney-client relationship. SDP is not responsible for any inadvertent errors that may occur in the publishing process.