As 2023 is rapidly coming to a close, there are a number of HR-related items across many functions that employers should be mindful of as they prepare for the new year. From crucial payroll tasks to workforce planning into 2024, here are our top recommendations and best practices for businesses to discuss or think through during this important time.
Final Payroll Tasks
Why It Matters: Payroll is an area that can be both conceptually easy yet deceptively difficult. While it is important to have sound payroll processes and systems in place throughout the year, there are several critical tasks that companies should be mindful of as a calendar year comes to a close.
Accurate payroll records are essential to stay compliant with applicable state and federal regulations and to ensure an effective employee experience. Errors can lead to cumbersome tax issues and create a lack of employee-trust and confidence in your organization.
Action: Conduct a detailed audit or review of essential year-end payroll tasks including: Reviewing employee tax locations, previewing W2s and 1099s, capturing any off-cycle wages or fringe benefits, recording disability payments or third-party sick pay.
Also, having internal FAQs for managers and employees that address key information such as the timing of W-2s and 1099s is an effective way of avoiding confusion and getting ahead of potential questions. Taking a proactive, thorough approach can prevent costly errors and provide some peace-of-mind to your workforce.
Benefit Changes & Updates
Why It Matters: Similar to pay, benefits are often viewed by employees as table stakes, something that is not necessarily perfect, but an area that any employer should be able to effectively manage. Companies should have a strategic plan that both proactively informs employees of the essential benefit-related year-end information as well as reactively ameliorates issues as they occur.
While not every company has a benefit plan year that coincides with a calendar year, there are a number of potential tasks employers should consider performing at the end of a calendar year regardless of when their benefit renewal falls.
Action: Companies with a calendar-year-benefit-plan year (1/1 to 12/31) should ensure that all elections made during Open Enrollment are reflected accurately in carrier portals as well as developing a plan to audit rates, deductions, and premiums once they go into effect.
Offer a Flexible Spending Account (FSA)? Don’t forget that unless your plan has a grace period, funds are “use-it or lose-it” which means employees will lose any unspent dollars at the end of the year. Impacted employees can use their balance toward last minute procedures or review and purchase eligible items online at places like The FSA Store. Employees should also be aware of the claim deadline so they do not miss the window to be reimbursed.
Even companies that do not have a benefit plan year that coincides with a calendar year should notify employees of applicable changes that tend to happen. For example, do deductibles reset 1/1 or do they roll over to the new year? How can someone increase their Health Savings Account to the new 2024 maximum?
Other tax advantaged accounts including 401ks should be reviewed as well. Compliance and nondiscrimination testing is not always tied to the end of a calendar year so confirming when the testing should be performed as well as educating employees on when necessary changes go into effect are some worthwhile tasks..
HR Compliance & Regulatory Updates
Why It Matters: Compliance with labor laws is not optional; it’s a necessity. While continual audits to protect your company from legal issues should be performed on regular intervals throughout the year, many new rules and regulations go into effect in 2024. This is an excellent time to evaluate the upcoming laws, discussing the impact they may have on your business and update company handbooks for employees to review and acknowledge.
The Action: Conduct a thorough review of HR policies, ensuring they align with the latest labor laws and industry standards. This might include updating your employee handbook, training materials, and internal policies as proactive steps to mitigate risks and uphold ethical standards.
Also, being mindful of upcoming rulings and having a plan to evaluate and address proposed legislation is the best approach to an effective year-end, year- start strategy.
One relevant example is the proposed changes to the Fair Labor Standards Act (FLSA) which could greatly impact how overtime is treated for most employers. While this topic isn’t necessarily new, according to the most recent regulatory agenda, the US Department of Labor (DOL) plans to finalize its overtime rule in April of 2024, and it could go into effect as soon as June 2024.
Other hot topics by state include: Required paid sick leave mandates, Recreational marijuana/cannabis use laws, and salary transparency laws.
HR Tech
Why It Matters: With the complexity of end-of-year HR tasks, robust HR technology can be a game-changer. It ensures the efficiency and accuracy of payroll, benefits administration, and compliance reporting. Technology can automate tasks, streamline processes, and provide critical data insights, making year-end procedures less burdensome.
At the same time, HR Technologies come at a cost and companies that lack a process to continuously evaluate the functionality, product-fit, and financial impact on their business, are at a major disadvantage.
Action: Leverage HR technology to conduct audits, manage year-end checklists, and track important deadlines. Ensure all systems are updated with the latest regulatory changes and assess which modules or functions of the system you are underutilizing or will never use. If your platform allows, conduct a “dry run” of year-end processes to identify any potential issues before they become critical.
Evaluate your current HR systems and the people who use it (or don’t). Request system utilization metrics and solicit feedback to see how employees and HR/Finance teams are using various systems and what features are not being used. Discover if the solutions you have in place solve the problems they are supposed to and if it has been over 2 years since you have evaluated your HR tech, develop a plan to go to market in 2024.
Workforce Management
Why It Matters: As organizations enter a new year, it’s crucial to ensure that workforce management strategies are aligned with projected growth and organizational goals. Effective workforce management involves not just recruiting and onboarding but also developing current employees and managing performance to meet the evolving needs of the business.
Many companies don’t realize the impact that organizational design principles such as organizational structure, role clarification, governance, talent development, and change management have on operational effectiveness.
In addition, many of the small-to-medium size employers that recognize the importance of these factors, lack the expertise or oversight to bring a strategic plan from concept to reality.
Action: If you find yourself rolling your eyes at this section, take a few minutes to make a list of how these factors are at play in your organization today. Are you making data-driven decisions? Does every employee know what their job duties are and able to receive continuous feedback in alignment with the company’s goals? Do you have a detailed hiring plan that accounts for expected turnover, company growth, and strategic initiatives? Are learning and development programs designed to close skill gaps in place?
If your company is like most, the answer to most of these will likely be “no”, or at best, “maybe”. Gravitate to one of these that you hear the most from employees or that has become abundantly clear to be a hindrance. You will find that many of these components are intertwined and dependent on one another and developing a plan to address one will help create a roadmap for the others.
Conclusion
The end of the year is not just a time for finalizing budgets and celebrating achievements; it’s a strategic phase for setting the groundwork for a prosperous year ahead. Many find this time to be overwhelming with the fear of the unknown and worry that something may slip through the cracks.
If you find yourself in the same boat, please reach out to us today to see how we can help.