Payroll plays an important role in ensuring employees are properly paid and protects employee rights. Labor laws are complex. They vary from state to state, and the U.S. Department of Labor has over 180 federal laws that also govern 165 million workers.
Protecting employee rights and ensuring labor laws are followed requires cohesion between human resource teams and legal teams.
Companies must follow compliance laws or face fines and penalties for violations. Compliance with federal law, including the FLSA, FMLA, and ACA, on top of state-specific laws, requires a full understanding of payroll and the role of different state laws.
Time tracking, record-keeping, training, education, employee classification, and overtime are essential aspects of payroll. Compliance with labor laws requires attention to these areas. Consulting legal experts in your business's state is the best way to stay compliant with changing state and federal laws.
Technology can help bridge the gap and improve compliance. But it’s also good practice for someone in the human resource department to know and understand these laws.
Businesses must follow both federal and state labor laws. Federal laws come with fines and penalties that vary from one law to another. FSLA penalties include:
In addition to remaining compliant on the federal level, each state has its laws that coincide with federal laws.
For example:
California’s minimum wage is $16 per hour. Employees who work more than 40 hours in a work week receive one and one-half times their regular pay. Children aged 14 to 17 can obtain work permits. Exceptions may apply for individuals who are 12 and 13 years old.
Massachusetts has a minimum wage of $15 per hour. State law requires it to be at least $0.50 higher than the federal minimum wage. Individuals under 14 are not allowed to work. There are a few exceptions to this rule. Workers under 16 are subject to strict regulations. For example, they cannot operate pressure cookers or work in roofing. Work hours are also regulated.
Regulations vary based on age and the school calendar.
Texas follows the federal minimum wage rate of $7.25 per hour. Under Texas law, children under 14 cannot be employed unless under special exemptions, such as being a performer.
The Department of Labor has a full list of state labor laws, including minimum wage laws, minimum wages for tipped employees, child labor laws and more.
Accurate payroll systems help businesses manage complex payroll and tax rules and handle increasing paperwork. Payroll must comply with state labor laws, which vary significantly. For example, California requires a $16 minimum wage, while Texas allows $7.25 per hour for the same position.
For example, California workers must be paid a $16 minimum wage, while Texas workers in the same position can be paid $7.25 an hour. Payroll can help enforce compliance, but human resources must ensure the company:
Training and education can further ensure compliance across all business locations.
Integrating a payroll system in California helps California-based businesses maintain compliance with state laws, file payroll taxes, manage local taxes, send W-2 and 1099 forms, and more. Accurate payroll helps businesses of all sizes remain compliant on the federal and state levels.
You can find payroll systems that integrate with your company’s existing technology and offer compliance across one or multiple states on top of federal compliance. Automating these payroll compliance-related tasks reduces the risk of human error that can cause labor law violations.
Paying employees late or inaccurately creates costly violations and increases employee turnover. Payroll supports every business by driving key functions that keep operations smooth and protect employee rights, such as:
Employee take-home pay requires accurate wage calculation. An employee may make $15 per hour and $600 a week, but payroll must factor in:
Payroll must consider all factors to provide accurate wages to employees.
Employers withhold income tax and pay the IRS on behalf of the employee. While exceptions do exist, all of these withholdings are part of the payroll process and reports are reflected in the employee’s W-2 and Wage and Tax statement.
Compensation includes benefits in addition to an employee’s salary. Some benefits, like gym memberships, may not require inclusion in payroll. Payroll handles vacation pay, health insurance premiums, retirement contributions, and other essentials. These functions ensure compliance but can become time-consuming and prone to errors when managed manually.
Using the right payroll technologies ensures compliance, protects employee rights, and maintains efficiency.
Payroll compliance is complex and ever-changing, which can present challenges for businesses wanting to maintain efficiency without risking non-compliance. Technology can help solve this problem by automating compliance-related tasks and reducing the risk of human error.
There are many technologies centered on payroll compliance, but some of the leading solutions include:
While there are many options for payroll software, cloud-based solutions offer several advantages over hardware-based options, including:
These are the most compelling reasons to choose cloud-based payroll solutions, but there are other technologies that can further improve compliance, like tracking tools.
Cloud-based payroll solutions can help ensure your business is compliant with payroll rules and regulations, but integrating compliance tracking tools into your tech stack can add an extra layer of protection against the risk of non-compliance.
Payroll compliance tools are available as standalone solutions or as add-on modules for payroll software. They can help with compliance in many ways, including:
If your payroll solution lacks real-time compliance updates or you need a simpler compliance tool, automated tracking tools can benefit your organization.
Integrated HR payroll systems offer a more comprehensive and efficient compliance solution. They merge HR and payroll activities into one simple, easily-accessible platform, allowing businesses to manage their people and pay from the same system.
The integrated nature of these solutions gives them an edge when it comes to compliance.
For example, let’s say that your business uses separate, non-integrated solutions for payroll and time tracking. Because these systems cannot work together, cross-platform data will likely need to be entered manually, which increases the risk of inconsistencies and inaccuracies.
An integrated payroll and HR system eliminates this problem by allowing you to track employee time and manage payroll – along with compliance – from one solution.
Additionally, many of these solutions have automated time and attendance systems, which help ensure that you comply with applicable wage, hour and overtime laws.
Audits are an effective way to gauge compliance on a department or organizational level. However, manual compliance audits have traditionally been time-consuming and inefficient. Automation streamlines the process, but AI integration further improves the results.
AI-powered tools can do a number of things:
AI-driven tools continuously analyze regulation updates and ensure your processes stay aligned. They take a proactive approach by identifying inconsistencies early. This prevents small issues from escalating into costly problems.
Payroll ensures businesses comply with labor laws and protect employee rights. Rules and regulations vary by jurisdiction, making compliance difficult. Businesses must adopt solutions that protect employees, ensure compliance, and maintain efficiency.
Through solutions like cloud-based payroll, integrated HR and payroll systems and AI-driven audits, businesses can maintain compliance while reducing the risk of error and saving valuable time.
