The start of a new year brings fresh goals, new opportunities, and for employers, a critical payroll reset. January is the most important time to confirm that your payroll processes are compliant, accurate, and ready for the year ahead.
A proactive payroll compliance checklist can help you avoid costly mistakes and set a confident tone for the months to come. Here’s a practical New Year payroll compliance checklist every employer should review:
- Update Tax Rates and Withholding Tables
New federal, state, and local tax rates often take effect on January 1. Confirm that your payroll system reflects the latest income tax tables, unemployment rates, and any local tax changes. Even small discrepancies can result in incorrect withholding and reporting issues later in the year.
- Reset Annual Wage Bases and Limits
Several payroll limits reset at the start of the year, including Social Security wage bases, state unemployment caps, and contribution limits for retirement plans, HSAs, and FSAs. Verify that deductions and employer contributions restart correctly with the first payroll of the year.
- Review Employee Classifications
January is an ideal time to revisit employee classifications. Confirm that exempt and non-exempt employees still meet federal and state overtime rules and salary thresholds. Review independent contractor relationships to ensure proper classification and avoid compliance risks.
- Confirm Minimum Wage Compliance
Many states and local jurisdictions increase minimum wage in January. If you employ staff in multiple locations, verify that each employee is being paid the correct rate based on where they work. Minimum wage compliance should be reviewed annually, even if pay rates did not change.
- Verify Paid Leave and PTO Policies
Paid sick leave, family leave, and PTO laws frequently reset or expand at the beginning of the year. Review accrual rates, carryover limits, eligibility requirements, and employee balances to ensure they align with current regulations and your internal policies.
- Update New Year Employee Forms
Ensure all required employee forms are current. This includes confirming Form W-4 settings, benefit elections, and direct deposit information. If your organization offers open enrollment or mid-year benefit changes, verify that deductions are accurate for the new year.
- Review Payroll Reports and Year-End Filings
Before moving too far into the new year, double-check that prior-year payroll reports, W-2s, and 1099s were filed accurately and on time. Addressing discrepancies early helps prevent issues with tax agencies or employees down the road.
- Communicate Changes to Employees
Transparency builds trust. Notify employees of any payroll-related changes, such as new pay rates, updated leave policies, or benefits adjustments. Clear communication reduces confusion and minimizes payroll questions during the first few pay cycles.
A Strong Start Makes All the Difference
Payroll compliance is not a one-time task, but January is the foundation. A thorough New Year payroll compliance checklist helps protect your organization, support your employees, and keep payroll running smoothly all year long.
At Payroll Partners, we help growing organizations start the year with confidence through simple, streamlined payroll solutions and dedicated live support. When compliance is handled right from day one, everything else runs better.
This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.
