State and federal labor legislation remains pending. Employees are demanding more flexibility. Workforces remain decentralized. The future is hazy, but HR compliance in 2022 doesn’t need to take you completely by surprise.
After closing the book on 2021, a year that certainly added to the complexities of the compliance space, it may seem natural to want to ease your foot off the gas pedal for a brief reprieve. But from all indications we have so far, 2022 is gearing up to be just as busy as 2021, as the regulatory landscape continues to evolve.
However, that doesn’t mean the next year is completely unpredictable. Here are the key trends and compliance considerations that business owners should keep front of mind as we head into the new year.
Changing Federal Laws and Guidelines
With last year’s change in administration, and the world approaching nearly two years of the COVID-19 pandemic, we have seen a number of federal legislative and regulatory changes that employers need to track closely.
The recent Infrastructure Investment and Jobs Act, signed by President Joe Biden on Nov. 15, includes changes that affect employers. One of these changes is an end to the Employee Retention Credit, retroactive to Oct. 1, 2021.
This means if employers took this credit for October or part of November, they would need to pay that money back to the IRS. The retroactive nature of this change may be problematic, since many employers literally reduced employment tax payments to the IRS based on tax credits that are no longer valid. Are those now considered underpayments that are late and subject to penalty? IRS guidance was released Dec. 6 but is not entirely clear on this question.
One big year-end question to watch is the Build Back Better Act. It is important to watch major programs that could affect employers, like the paid family leave mandate or advance child tax credits to see how they evolve in the bill if it is signed into law. While keeping abreast of the daily progress isn’t necessary, it is important to keep an eye on parts of the bill that could impact your business to prepare you for any changes that might be required in the future.
Another item employers should prepare for is their employer Social Security tax repayment, a deferral program enacted as part of the CARES Act. The deferral period ended Dec. 31, 2021, with 50 percent of the deferral due at that time, and the other half due at the end of 2022. Late payments could expose the entire deferred amount to a 10 percent penalty.
Local and State Laws
At a local and state level, employers need to be aware of the payroll and other tax implications of having a large, decentralized workforce. Because every state and locality has different laws, having a remote or hybrid workforce can become more challenging to manage from a compliance standpoint.
Having your organization based in one state, with most of its workforce there but a few remote employees in different parts of the country can pose challenges if you are not prepared to address state-by-state differences.
There are tax implications of hiring a new employee in a new state that will need to be addressed from Day One. Foremost for many employers is the concept of nexus, i.e., a legal and tax connection to a state. If you didn’t have an office in a state but you have one worker who began working from home from that state due to COVID-19, guess what? You now have an office in that state, and you have volunteered to pay corporate, payroll and other business taxes in that state henceforth.
In the past two years, we’ve seen more than 2,000 legislative changes in the U.S. that impact employment, payroll and compliance. Adding to that complexity, more changes are in the pipeline, either in the form of new legislation or stemming from previously passed laws that are still being implemented.
An example of this is retirement plan mandates. Currently, more than a dozen states have passed retirement plan legislation, including California, Connecticut, Colorado, Illinois, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Vermont, Virginia and Washington. These mandates require that employers either offer a comprehensive retirement plam or automatically enroll all workers in a state-run savings plan. However, several of those states either plan on implementing their laws in the coming years or have no current timeline for when they will implement.
Instituting permanent hybrid and remote work arrangements is a major trend the market is seeing evolve, as employers work to meet their employees’ needs. As a result of today’s competitive job market, workers are demanding more flexibility from their employers. This can range from hybrid/remote work arrangements to a more comprehensive benefits packages, early access to earned wages, integrated time keeping and retirement plans.
Incorporating these features into an employer’s existing offering requires careful consideration to ensure it is not only integrated properly for employees but that it is also compliant with changing laws and regulations.
Employees are also demanding mobile solutions to easily access their pay, benefits, HR-required responsibilities and more. For employers using legacy systems to run their back end, this could prove to be an extremely challenging task.
Given the smartphone’s relative newness as technology in the payroll industry, many systems today are not built to handle mobile functionality. In turn, finding a solution to meet your employees’ needs, while staying compliant with security and regulatory requirements is a challenge employers will have to face head on in the coming year.
In 2022, we see a trend of people and purpose driving workplace culture. Employers are implementing people-focused programs and policies to meet the modern demands of talent and better engage their workforce. Meeting the compliance needs for your current and prospective employees not only sets you up for success in 2022 but lays the foundation for success in the years to come.
While meeting the needs of current and prospective employees, employers also need to consider business needs. With people so critical to an organization’s success, it’s more important than ever to find ways employers’ needs can be met by meeting the needs of employees.
For example, consider your paid time off (PTO) policy. We are seeing employees demand more flexibility in their work, which includes time off. For years now, we have been seeing more employers move from offering a set amount of vacation and sick days to extending unlimited PTO.
What was first seen as a benefit only larger companies could offer is now gaining popularity with other employers. For the employee, it takes away the limitations of vacation time, or the complicated process of calculating roll-over days or payout periods. For employers, the offering is shown to improve productivity, remove pressure for sick employees to come in and avoid a rush during holiday periods for everyone to take time off.
There are other policies and offerings where this same principle can apply, allowing employers to meet the needs of their workforce in tandem with the organization’s needs.
Power of Data
As employers leverage workforce data to guide their decision-making around important issues with compliance considerations, staying ahead of the game when it comes to security is becoming more critical. Data continues to be a driving trend in the world of work, helping employers act more confidently and better meet the needs of their people.
The value of real-time data is significant in the compliance space. Timely insights into the workforce can help lead employers through changing compliance needs and help predict and avoid compliance issues in the future.
There is no longer a one-size-fits-all solution when it comes to compliance. Organizations and their leaders need to be adaptable and proactive, an edge that data is providing. From data on competitive pay to data on where your workers are located or how they feel about returning to the physical workplace, access to information will drive compliance in 2022.