Payroll compliance refers to steps every employer must take to abide by the tax regulations, wage and hour rules and other applicable requirements related to payroll. These steps include maintaining the proper tax forms for each employee, withholding and filing taxes for employees who are not exempt from withholding requirements, using correct tax codes for the business, collecting and filing garnishments, and observing federal and state overtime rules and more.
Failing to remain compliant can result in significant penalties and other legal consequences. Many compliance tasks can be managed or automated by partnering with a high-quality payroll service provider. Companies handling payroll compliance in-house should check with the IRS, state and local authorities frequently, as well as consult with experienced counsel to ensure their payroll practices are consistent with all applicable regulations.