Payroll and Compliance: What Every Business Needs to Know

APR 9, 2024

Payroll and Compliance: What Every Business Needs to Know

One of the biggest responsibilities you have as an employer is making sure your employees get paid, and an important part of that is ensuring you comply with all the laws and regulations. Payroll and compliance are vital to both keeping your company running smoothly and keeping out of legal trouble. In this blog, we’ll look at exactly what’s meant by compliance, who’s in charge of enforcing it, and how to ensure your business stays on the straight-and-narrow with its payroll. 

Your Payroll Responsibilities

Payroll compliance, simply put, is the practice of making sure to adhere to all the regulations and laws related to payroll and taxes that apply to you. As an employer, you’re responsible for performing a number of payroll-related duties, including the following: 

• Calculating wages.
• Withholding taxes.
• Making tax payments.
• Adhering to labor laws.

Payroll regulations are more than just industry best practices; they’re legal requirements. Failure to comply with payroll regulations can result in a number of potential consequences. Depending on the severity of the violations, you may be fined, face legal penalties, and in severe cases, your business may be shut down. 

Four Types of Compliance

While defining compliance with payroll regulations is simple, performing it isn’t. The trouble with payroll laws and regulations is there are four different levels of regulation compliance, and each of these can change separately from one another. These four levels are as follows: 

• Global payroll compliance - On the highest level, businesses that employ people in multiple countries must abide by the labor laws in each country in which their employees work. This has become a matter of interest to more businesses in recent years, thanks to the growth of remote working. 
• Federal government compliance - Businesses that operate within a single country must abide by any labor and/or payroll laws set by that country’s government. In the U.S., this is the purview of the U.S. Department of Labor and the IRS. 
• State government compliance - Many states have their own payroll regulations, such as minimum wages and workers’ compensation regulations. 
• Local government compliance - Lastly, some cities and towns have their own labor laws. 

Because payroll and taxes are regulated by multiple levels of government, compliance with all of them can be complicated. While an employer can try to keep up with these laws and manage their payroll in house, this requires them to hire staff or learn the intricacies of a well-organized payroll system. There is, however, a third option. 

Outsourcing Your Payroll

Contracting a third-party payroll provider like Payroll Vault to act as your payroll and compliance manager allows business owners like you to utilize the expertise of payroll and tax specialists without having to hire additional full-time employees. A payroll service provider is a company that provides client businesses like yours with a customized payroll system made by experienced payroll managers, making sure it’s a streamlined process that pays employees what they’re owed. They also specialize in keeping up to date with the latest regulations and laws that apply to their clients, managing your payroll and tax filings so they comply with these ever-changing rules. Lastly, a payroll service provider will help walk you through any process related to payroll and tax filing which requires your personal involvement, such as submitting tax returns and responding to government inquiries and audits. 

Complying with payroll and tax laws is both complex and a necessity for any employer. However you choose to manage your payroll, your business must follow the regulations, or face legal repercussions. Fortunately, as an employer, you have options available to you to keep your financial records straight and your legal record clean. 

Trust Payroll Vault to Manage your Payroll

We welcome the opportunity to provide both payroll and HR services for your small business. Our boutique-style payroll service is designed to provide your business with exactly what it needs, from tax filing services to cutting checks or direct deposit pay, from policy guidelines to new employee background checks. Visit your nearest Payroll Vault location today to learn more about how we can help your business.