Between economic uncertainty, lingering supply chain issues and ever-evolving data security threats, your clients have enough to worry about in 2023. Potential changes to payroll legislation might not be on the radar for clients who are already trying to keep hundreds of plates in the air every day.
CPAs who are well-versed in current and anticipated changes related to payroll legislation can step in and help clients navigate around them. Being able to say, “In preparation for [X], here’s what I advise,” is always preferable to getting frantic calls from clients asking, “What’s [X], and why are my employees/the IRS asking me about it?”
With that said—what are the biggest payroll challenges we’re seeing so far in 2023? And what’s the payroll industry anticipating for the rest of the year? Here’s a look at some of the most talked-about changes in payroll legislation that might come up for your clients (and your own business!) in the near future.
Expect pay equity to be a top payroll/HR issue for clients throughout 2023 and beyond. With many businesses getting serious about implementing DEI initiatives over the last several years, your clients might be experiencing both internal and external pressure to “walk the walk” around equity. Allowing pay inequity to continue unchecked could have serious ramifications for clients in terms of bad press, employee retention, payroll compliance issues and discrimination lawsuits.
Ensuring that pay policies are fair and nondiscriminatory is going to be critically important for your clients this year. If there are discrepancies between what workers of differing racial/gender/ethnic identities are being paid for doing similar work, those discrepancies need to be identified and resolved sooner rather than later.
Both salary and other forms of compensation should be considered when evaluating pay equity, which can get complicated. CPAs can advise clients about completing a pay equity analysis using their payroll data to ensure that workers are being compensated equally regardless of identity or status.
Pay Transparency Laws
In addition to new paid leave laws rolling out this year (including Maryland’s), some new pay transparency laws are also being enacted in 2023. Both new and existing pay transparency laws could create some new payroll challenges for clients this year.
CPAs may be useful in helping clients understand any wage transparency and reporting obligations they have under state law. Every state’s laws are different, which could create some confusing multi-state issues for clients that employ remote workers in other states.
For example: New York’s new pay transparency law (effective September 17, 2023) will require New York employers with at least four employees to disclose pay range and a job description in any postings for open jobs or in-house promotions/transfers. But let’s say a client located in Michigan employs remote workers, some of whom live and work in New York. Are they legally required to include a salary range in all future remote job postings because the person who gets the job might live in New York? (More guidance is still needed from New York about how/if employers based in other states are expected to comply with its new law; this is just one example of some of the confusion that might come up for multi-state employers this year.)
Massachusetts may also be passing its own pay transparency law before 2023 is over. There are two bills currently in front of the Massachusetts legislature (S.2721 and HD.2814) that would require Massachusetts employers to make wage data public, and would require employers with more than 15 employees to include pay ranges in all job postings.
Clients who are subject to pay transparency laws may need guidance from their CPAs in a number of ways. They might need help pulling and analyzing payroll data to meet wage reporting requirements, or determining fair market rates for new positions. Clients will need to be very clear about what they can afford to budget for posted roles before advertising any open positions, rather than hoping to negotiate the lowest possible salary with a qualified candidate.
Affirmative Action Revision
The use of affirmative action as it relates to college admissions has been hotly debated over the last six months. In October the Supreme Court chose to hear two related cases challenging the fairness of universities being allowed to consider race when making admissions decisions. It seems possible that affirmative action in education will be struck down this year—but there’s no evidence that affirmative action provisions in employment law will be affected if that happens.
Specifically, federal contractors and subcontractors still have to meet affirmative action requirements in hiring and other employment activities. CPAs may want to ensure that these clients are maintaining compliance with the 2022 directive issued by the Office of Federal Contract Compliance Programs, revising its compensation analysis requirements. Contractors and subcontractors have complex obligations for tracking and reporting compensation data under that revised directive, and those obligations may create payroll challenges that clients aren’t sure how to solve without a CPA’s guidance.
Employee Turnover and Retention
Three years on from the start of the pandemic, and in the wake of the recent “Great Resignation” trend, businesses across industries are still struggling to retain quality employees. Aside from the operational challenges of high turnover, businesses that lack streamlined onboarding and off-boarding processes are bound to experience payroll challenges too. Getting each new employee set up with their payroll and benefits system and terminating outgoing employees can eat up hours and hours in troubleshooting time.
CPAs can help these clients save valuable time and energy by spotting any inefficiencies in their payroll processes for new and departing employees, and by analyzing budget and payroll data to help clients find ways to provide competitive compensation to boost retention.
Need Help Understanding Changes to Payroll Legislation?
CPAs who are part of ConnectPay’s Accountant Partnership program don’t have to know about all of the payroll legislation changes and updates, or how to solve all the challenges their clients bring to them. One call to your Payroll Specialist will help you track down answers to complicated (or simple!) questions. We’ll loop in the tax team if necessary to get you the most current guidance about evolving payroll tax issues. How could ConnectPay make payroll easier for you and your clients? Let’s connect today.
Drew Schildwachter is the Chief Operations Officer for ConnectPay. Drew joined the team in 2014 with years of experience as a contractor, video retail franchisee partner, operations director, and turnaround specialist for small businesses. Drew specializes in communicating with entrepreneurs about industry challenges that they encounter, and how aligning the best practices in payroll and business administration can alleviate pain points for small business owners.