HR EOY

As we near the end of year, we turn again to the tedium of reporting, budget forecasting, and open enrollment for benefits. Before you shift your focus fully onto the future, it’s always a good idea to take stock of any goals or projects you aim to fulfill before the year’s end.

We have put together a comprehensive year-end checklist for Human Resources. Some of these items are not relevant to all employers – in that, if you have fewer than 50 employees, or fewer than 100 employees, you won’t need to do certain reports. Whatever the case, it’s a good thing to know what employers at all sizes must do to comply and manage business.

YEAR END CHECKLIST

Human Resources

☐ Verify home address for all employees

☐ Reconcile all vacation/sick and/or Paid Time off balances for year-end payout or carryover if applicable

☐ Move current year terminated personnel files to storage (Don’t throw these away!)

☐ Pull your Turnover statistics. (there’s a report in isolved)

☐ Remind employees to file an amended W-4 if there has been a change in their filing status, exemptions, etc.

☐ Audit and run EEO reports and submit as required by law (depending on organization size >100 EEs).

☐ Review what you were able to accomplish this year and develop goals for the next year to keep you motivated and growing. Analyze and project costs.

Payroll

☐ Reconcile manual checks to annual totals

☐ Send reminder to employees to verify social security number and address on pay stubs

☐ Review taxable fringe benefits that must be posted into payroll for W2 reporting.

☐ Capture all information (ex: personal use of company car, relocation, bonuses, etc.).

☐ Check third party sick pay (short- or long-term disability) postings to make sure you have captured all information required

☐ Create a list of outstanding checks to insure you comply with your State Escheat Laws (unclaimed property).

☐ Fully pay vendors and contractors. Check with accountant to see if your contractors need to submit a W-9 form. By January 31, each contractor should have also filled out a 1099-MISC form.

☐ If paid quarterly, track taxes already paid to determine what is due at year’s end. Include taxes from bonuses given to employees; these are also subject to any taxes applicable to regular pay.

Benefits

☐ Verify current employee and accurate dependent coverage

☐ Distribute new health/dental insurance cards

☐ Compile Census information for retirement plan testing (highly compensated).

☐ Review list of which employees have life insurance over $50,000 to report taxable income for taxable group term life insurance.

☐ Verify Flexible Spending Account balances to confirm that employees will have total amount deducted by end of calendar year.

☐ Send applicable year-end compliance notices and prepare Form 1095-C for ACA reporting.

Here Is Some Underlying Rationale for Year-End Routines

Reporting & Compliance

Reporting relevant data to the proper sources is a major aspect of HCM operations at every time of year. Still, the end of the year is an excellent opportunity to take stock of any work your company may have to do to stay compliant with governmental regulations. Your reporting requirements will vary depending on your company’s size and industry, but most fall under these categories: 

Healthcare information

The Affordable Care Act requires employers to supply a broad range of information, including lists of new hires, retirees, owners, directors, partners, union members, dependents, and anyone else enrolled in your company’s plan. Your state may also require its own evidence of ACA compliance. The ACA requires that employee health plans pass an affordability test, among other requirements.

Healthcare reporting doesn’t end with the ACA either (employers of 50 employees or more). For instance, insurance carriers require open enrollment data for your employees, and 1095-C forms must be sent to any current or former employees who have enrolled in COBRA coverage. Fortunately, most of these required tasks can be automated with a quality HRIS.

• Prepare for ACA compliance responsibilities, including:
• Calculate number of Full-Time Employees (FTEs)
• Double-check status of grandfathered plans to see if they can carry over
• Distribute Health Insurance Marketplace Notices to employees
• Consider amending employee pre-tax contribution to FSA to meet any increases
• Prepare for reporting Forms 1094-C and 1095-C to the IRS
• Prepare to distribute written statements to your employees
• Examine benefits package, including:
• Compare your offering to market averages to stay competitive
• Update benefits package (if needed)
• Finalize employee open enrollment details
• Verify employee dependent coverage
• Distribute new health insurance cards to employees
• Ensure proper end-of-year PTO carryover in the system or pay employees out for PTO, depending on your policy

Financial Information

Many human resources functions fall under the IRS umbrella, and of course, require diligent reporting. That includes tracking and auditing all reportable fringe benefits, submitting System and Organization Controls (SOC) 1 reports for any service providers you work with, and providing evidence of employer share responsibility for large employers. Most employees should also receive a Total Compensation Statement at the end of the year explaining their employers’ contributions toward their personal benefits. 

• Calculate your Employee Retention Credit (ERTC)
• Review company-wide salaries, including:
• Perform cost-of-living adjustment, if necessary
• Compare your offering to market averages to stay competitive
• Schedule & issue holiday bonuses
• Prepare for the first payroll run of the new year
• Confirm new year payroll schedule
• Order W-2s and 1099s
• Review employee wage, tax, and withholding information (such as W-4s)

Equal Employment Information

Many companies are required to submit evidence of compliance with Equal Employment Opportunity regulations, including information on employees’ race, sex, and job class data.  

Audits & Reviews 

A year-end checklist isn’t just a rundown of all the things you need to do each year. It’s also a helpful assessment of how you do those things, and how you can improve those processes for the future. Here are some important areas to focus on as you assess your operations. 

• Ensure employee classification compliance
• Update employee handbook
• Audit personnel files for compliance
• Verify that correct labor laws are properly posted
• Order updated posters (if needed)
• Research new state, city, or federal labor laws, e.g.
• Update OSHA logs
• Distribute annual notices to employees, e.g., ERISA
• Ensure that anti-harassment training is completed
• Move terminated personnel files to storage

EEOC Compliance

The EEO-1 Component 1 report is a mandatory annual data collection that requires all private sector employers with 100 or more employees, and federal contractors with 50 or more employees meeting certain criteria, to submit demographic workforce data, including data by race/ethnicity, sex and job categories. 

Jobs and Hiring

The end of the year is an ideal time to review your hiring, recruiting, onboarding, and training processes, and to start deciding on the tools and software you’ll need to improve them in the coming year. It’s also an excellent chance to review job titles and job descriptions for your existing employees to assess whether roles have changed over the past year or need to change in future. This can also help you to avoid misclassifying workers as employees or contractors, an important consideration for IRS purposes. 

• Review hiring processes, including:
• Analyze recruiting process, onboarding length, etc.
• Have departments check staffing needs to plan for new hires
• Create and update succession plans
• Update job descriptions

Benefits and Compensation 

Performing an annual salary survey is a great opportunity to assess your levels of compensation and decide what adjustments should be made in the coming year. It’s also a useful time to assess your current policies for paid time-off and whether your systems need to be adjusted to stay compliant with your own policy. This can also be a chance to audit your benefits, including those for retirement or termination and make sure that those events are being reported correctly.

Updating & Verifying Data 

Your employees generate a whole lot of information over the course of a year, and much of it is valuable for your year-end checklist. By verifying that employee data is up to date (including that of deceased and terminated employees), all your employees’ social security and Medicare tax information is correct, and all independent contractors are properly classified, you can help to ensure a smoother transition into the coming year. 

• Review HR budget for the new year to begin to allocate resources
• Perform annual performance reviews
• Plan holiday party
• Make departmental New Year’s resolutions
• Review and update company policies
• Remind employees to update information (addresses, tax documents, etc.)
• Review vendor contracts and set up renewal details
• Back up any necessary HR data and personnel files
• Clean and organize personal workspace
• Create and distribute vacation calendar for new year

Adjusting to Changes & Prepping for the Future 

Things change over the course of a working year and keeping up with the changes that matter isn’t always a simple task. Likewise, making plans for the coming year requires some strong foresight and a keen awareness of your current situation. 

Changing Regulations

As 2021 ends, for instance, employers may be well advised to read up on the Work Opportunity Tax Credit, which has been stuck in committee since April. The tax credit will expire at the end of December without further congressional action, so it may be time to make plans around it. Likewise, rules and levels for Health Savings Accounts are slated to change in 2022. We’ll provide more information on this in the coming months.

Changes in the Office

There are also some easy-to-overlooks, but nevertheless, important updates to be made around the office. As laws and regulations change, required postings of state and federal labor law should be updated. On the payroll side, this is the time to start reviewing your year-end calendar to make sure that all company holidays are considered when processing and distributing checks. Also, be sure updated versions of your employee handbook and all required annual notices, such as Employee Retirement Income Security Act information, are properly distributed to employees. 

Preparing for Next Year 

While you can never know exactly what the future will hold, it’s always best to go into a new year with a clear vision of what’s expected of your company. There are several key pieces of legislation to keep an eye on in 2022, including changes to the Fair Labor Standards Act, union support, updates to W-4 forms, and a swath of minimum wage changes across the country.