Using your HRMS payroll module to keep on top of tax filing

A payroll module is a common feature to have as part of an HRMS. After all, integration with time and attendance and scheduling makes sense and one key benefit is the automation of your organization’s tax compliance and filing responsibilities.

So, if you want a payroll module in  your HRMS that will handle your tax issues smoothly, what kind of features should you be looking for?

Legislation compliance

To take the US as an example, certain key federal legislation mandates that employers comply with a number of payroll-related reporting and record-keeping requirements. The four key pieces of legislation are:

  • FICA (The Federal Insurance Contributions Act) – Social Security, disability, and Medicare; employers are required to keep records and report to the IRS and Social Security Administration regarding employee salaries and tax returns.
  • FUTA (Federal Unemployment Tax Act) – the federal unemployment program, placing record-keeping and reporting responsibilities on employers.
  • FLSA (Fair Labor Standards Act) – highly-detailed recordkeeping requirements for employers, covering minimum wage, overtime pay, equal pay and child labor.
  • CCPA (Consumer Credit Protection Act) – specific responsibilities for attachment of earnings and garnishments.

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And don’t forget that these are just the ‘big 4’, there’s also local, state, international and other federal provisions to be taken into account.

Additional compliance tips

It’s worth knowing your basic compliance responsibilities as an employer, and then finding HRMS software that can take the pain out of that compliance. Sticking with the example of the US, some handy HRMS compliance features or prompts include:

  • EIN (Employer Identification Number) – this is very basic, given that any employer needs this number to file tax and other returns. If your HRMS doesn’t record this information (or prompt you for it) it’s probably a non-starter for payroll and tax functions.
  • Worker classification – correctly distinguishing between employees and independent contractors is another key basic.
  • Social Security – contributions can be complicated and are subject to changes in legislation; your HRMS should  be kept up to date and be prompting you to make the right payments at the right time.
  • Tax filing – scheduled reporting can automatically prepare your employee tax submissions and calculate appropriate withholding amounts, including compatibility with Electronic Federal Tax Payment System (EFTPS).

In a nutshell…

The average employer needs a payroll-enabled HRMS that is customizable, easy to use and provides appropriate compliance support for whatever country or countries you are based in. That support should include detailed mandatory recordkeeping and automatic notification of compliance ‘events’ or due dates. Ideally, the other side of the payroll and tax coin is comprehensive employee self-service functions that allow individual workers to access, review and even update their information.

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Dave Foxall

About the author…

Dave has worked as HR Manager for the Ministry of Justice for a number of years, he now writes on a broad range of topics including jazz music, and, of course, the HRMS software market.

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Dave Foxall

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