With year-end quickly approaching, organizations should consider conducting year-end HR and payroll audits to address any issues before the start of the new year. Thorough audits support accuracy and ensure compliance with applicable regulations, internal policies, and procedures. According to Wells Insurance, this is also the time of year to focus on tasks that will help start the new year on the right foot. Performing year-end audits can facilitate a smooth transition into the upcoming year.
While departments across the organization can gain insight from year-end audits, HR and payroll audits have particular benefits not only to the organization, but they can also help the individuals working within those departments. Some items to have front of mind include:
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Payroll: Auditing payroll records before year-end allows for errors to be caught and corrected. Identifying over- or under-payments, as well as any misclassification of employee FLSA exempt status, is best discovered as early as possible. Make sure that special payroll items have been accounted for correctly, such as manual, voided, or reversed paychecks. Confirm that employer and employee information is in the correct format within the system to comply with W-2 reporting. According to Experian, a year-end payroll checklist helps ensure a smooth year-end process.
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Human Resources: Verify employee personal information on file is correct. Emergency contact information, as well as the current mailing address, is essential communication information and will also aid in ensuring W-2s are sent to the correct address. Update succession and workforce plans to reflect current or anticipated staff changes, and to analyze HR metrics such as turnover rates and time-to-hire to inform planning for the new year.
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Benefits: Before a new benefit year begins, there are several good audit practices to undertake. Audit employee status to ensure compliance with ACA requirements and prepare for annual reporting. Verify that employee benefit information is accurate (i.e., rates, selections, and beneficiary information), as well as company plan information for the new benefit year, particularly if changes to plan offerings are planned. Remind employees to submit FSA receipts by the end of the year. Auditing paid time-off benefits is also a good practice, particularly in states that have mandated paid time-off benefit requirements.
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IT: Verify security systems are up to date to protect sensitive employee information. Review user access permissions to HRIS and payroll systems to ensure that all accounts for former employees have been deactivated. This may also involve ensuring that backups are stored securely and that data encryption protocols are implemented.
Good practice for year-end audits is to designate individuals from within each department, create schedules and timelines, and finally, meet weekly for status updates. Please note that department audits may cross-reference specific areas. For example, having employees verify their name, address, and social security numbers will be cross-referenced between payroll and human resources.
Finally, conducting year-end audits will enable departments to set new goals, procedures, and strategies for the upcoming year, while also ensuring compliance with federal, state, and local regulations.
Conducting thorough year-end audits requires significant planning and a substantial time commitment. Please review our comprehensive audit checklist, which addresses the highest-priority audit items. For organizations that would like guidance and/or support with year-end audit activities, Employers Council is here to help. Contact us at info@employerscouncil.org or call 800.884.1328.
Mark Sikorski is the Payroll Services Manager with Employers Council.
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