2024 Year-End HR Compliance Checklist

Are you creating or updating your HR policies for 2025? A year-end HR compliance checklist is a great way to help make sure your bases are covered. There's too much at stake to leave compliance to chance. Particularly during the end of the year, there are many moving parts and critical deadlines your business must meet; otherwise, you could face penalties. To help you meet deadlines and compliance requirements, we've compiled a checklist that identifies some of the essential end-of-year tasks.

What Is an HR Compliance Checklist and Why Is It Important?

Maintaining HR compliance is crucial for business success, but it can be a complex process with many moving parts. With ever-changing employment laws and regulations, non-compliance poses a significant risk of penalties and fines. Our research shows that 34% of business leaders spend more than 10 hours a week on HR administration, and 56% of leaders find record-keeping and documentation to be the most challenging aspect of compliance work.¹ This is where an HR compliance checklist can be helpful.

But you may be wondering: What is an HR compliance checklist? This resource functions as a compass for businesses and HR teams, helping to guide them through and point them toward information, key dates, important documents, and best practices related to HR—from benefits to payroll, hiring and recruiting, and much more.

Payroll and Tax Compliance Review

When completing taxes and payroll for year-end, reference the HR end-of-year items for payroll and tax reporting below to help reduce the risk of mistakes during year-end:

Verify Employee Information

• Validate employee addresses. Incorrect information could delay the receipt of W-2 forms for some workers and create waste for your business with extra printing and mailing.
• Check your records for employees who left the company during the year to ensure their employment status was correctly updated.

Double-Check W-2s

• Confirm all Social Security Numbers or federal employer identification numbers (FEIN). Missing or incorrect numbers could result in a penalty by the Internal Revenue Service (IRS) of up to $60 for each W-2 returned.
• Include any taxable cash or non-cash benefits (e.g., use of a company car) on the W-2.
• If your business doesn't already do so, consider setting up a secure online portal for employees to obtain their check stubs and W-2s. This may help minimize labor and paper waste and increase the security of sensitive information.

Prepare Year-End Documents Required for Tax Filings

• CARES Act Employee Retention Credit: This tax credit was created to support employers who paid their staff throughout the pandemic, starting with wages paid after March 12, 2020, and through September 30, 2021, for most businesses (a Recovery Startup Business could claim the credit on qualified wages paid through December 31, 2021). Businesses can claim the credit retroactively and must file amended returns for all applicable quarters of 2021 by April 15, 2025. For wages paid in 2021, a credit of up to 70 percent of $10,000 in wages per quarter per employee is available.
• FICA and FUTA reporting: Note filing deadlines and various tax responsibilities for your end-of-year HR checklist. For example, per the IRS, if your FUTA tax liability is more than $500 for the calendar year, you must deposit at least one quarterly payment. If your liability is $500 or less in a quarter, carry it forward to the next quarter.
• Affordable Care Act requirements: Companies that must comply with the ACA must prepare and file Forms 1094-C and 1095-C with the IRS and distribute 1095-C forms to applicable employees.
• Independent contractor payments: In addition to preparing employee tax forms, make sure that qualifying independent contractors who earned more than $600 in the calendar year receive their correct statements for tax purposes. You must typically report these amounts using form 1099-NEC. In addition, Paychex HR Coach Jarryd Rutter emphasizes that this is also a necessary time to evaluate the relationship with your independent contractors to ensure potential changes at the federal, state or local level haven't impacted the classification of these workers to the degree to which independent contractor is no longer a proper classification.

Update Payroll Tax Rates for the New Year

• Conduct a year-end tune-up of payroll tax rates for 2025 to ensure accurate payroll processing and compliance
• Set any new wage base limits to take effect on January 1, 2025

• Check FUTA, SUTA, Medicare, Social Security, and all federal, state, and local employment tax requirements

   

Employee Benefits Compliance Review

Open enrollment will be here before you know it. Include the following tasks on your HR compliance checklist to help refresh your benefits packages and meet compliance requirements.

Review Coverage Plans and Health Insurance Policies

• Group health plan renewal: Many group health insurance policies renew on December 1 or January 1. Review coverage plans and pricing to determine if changes are needed.
• ACA requirements: Review the provisions of the Affordable Care Act for ongoing compliance, including:
  • Employer Shared Responsibility (ESR) provision under which companies employing an average of 50 or more full-time employees, including full-time equivalents, during the prior year must offer affordable and adequate medical coverage to full-time employees and their dependents or risk a potential assessment if at least one full-time employee receives a premium tax credit.
• IRS 2024 Employer Health Plan Affordability Threshold change: The tax year 2024 health plan affordability threshold, which is set by the IRS and used to determine if an employer's lowest-premium health plan meets the ACA affordability requirement, is 8.39% of an employee's household income for plan years beginning in 2024. This will increase to 9.02% for plan years beginning in 2025.
• Open enrollment: Prepare communications with employees and schedule informational meetings as part of your end-of-year HR checklist.
• FSAs: If you plan to establish different types of flexible spending accounts, allowing employees to set aside pre-tax money for medical or dependent care expenses, your business needs to set up the plan, and employees must enroll before the new year.
• Review healthcare plan filing requirements and deadlines.

Gather Payroll Records

Gather payroll records if your workers' compensation policy mirrors the calendar year. An auditor may want to review payroll records in accordance with its policy period to verify if any adjustments need to be made to your initial premium.

Audit Dependent Eligibility

Include a dependent eligibility audit on your HR compliance checklist to verify the eligibility of all employee dependents enrolled in your benefits plan, including healthcare, dental, and vision. This includes asking employees for documentation of their relationship to the dependent, such as a birth certificate, marriage certificate, or adoption document.

Auditing dependent eligibility can help ensure that your benefits plan functions as it should, helps reduce costs, and verifies compliance with insurance carrier requirements.

Review Fringe Benefit Policies

Voluntary fringe benefits such as 401(k) and retirement plans, wellness programs, company stock options, dental and vision insurance, and many others can help you attract quality talent and engage employees. At the end of the year, review your policies based on employee feedback and budget considerations and update them to ensure compliance with tax regulations and meet current workforce needs.

Compensation Policy Review

The new year is a great time to review employee compensation and evaluate whether you are competitive with the 2024 hiring market based on your industry and your employees' geographic locations.

Confirm Year-End Bonuses

If your business awards year-end bonuses, work with your payroll provider to issue the checks as a separate line item or in separate checks (additional bonus taxation may apply). "Non-discretionary annual year-end bonuses also have additional taxation requirements," Rutter states. "Non-discretionary bonuses may impact overtime previously paid to non-exempt employees, which should also be addressed as part of the year-end bonus process."

Review Wage and Hour Updates

If your applicable state or local minimum wage rate is increasing as of January 1 or on a different date in 2025, ensure the updated rate is reflected for applicable employees' pay as of the effective date. In addition, review your obligations under applicable state and local laws concerning wage and hour matters. Check out what's happening in your state.

Review Updates To Wage Base Limits

Resetting wage base limits should also be part of your year-end human processes. For the upcoming year, budget for the taxes you may not be paying now if employees have already met wage base limits. Wage base limits start every January 1, including federal and state unemployment tax, Medicare, Social Security, and state employment taxes.

Please note the 2025 increase in individual wages is subject to the 6.2 percent Social Security tax, also known as the Old Age, Survivors, and Disability Insurance (OASDI) tax. The cap is set at $168,600 for 2024 and will increase to $176,100 for 2025.

Evaluate Compensation

To help ensure fair compensation practices, analyze payroll data to identify potential discrepancies:

• Evaluate minimum wage rates and compensation requirements to ensure compliance.
• Review payroll data for accurate reporting purposes, such as the EEO-1 report, which private sector employers with over 100 employees typically must file.
• Conduct internal assessments to review payroll policies and wage practices and engage legal counsel should concerns be identified.

Review Overtime Policies and Compliance

Review your overtime policies to ensure compliance with the Fair Labor Standard Act (FLSA) and any other applicable state and local wage and hour regulations. This is crucial for avoiding compliance issues.

This is also a good time to evaluate the FLSA-exempt/non-exempt status for any employees that may have seen changes to the roles and responsibilities of their positions to help ensure compliance with applicable wage and hour requirements.

Staffing and Training Processes Review

With ongoing hiring challenges, it's important to ensure employees are trained appropriately and that you are conducting any mandated training moving into the new year. Your end-of-year HR checklist should include a plan for updating training processes to reflect new guidelines and build awareness of policies.

Create or Update Your 2025 Training Calendar

As you look ahead to next year, consider developing a calendar of required training for managers and employees. Examples include harassment prevention training, hiring practices, workplace safety, and effective management. You may also want to schedule time to update managers and staff on protocols and compliance to help ensure continued compliance with OSHA, CDC, and local guidance.

Review Employee Time Off

If you have a self-service portal, remind employees to review their vacation, discretionary, holiday, sick, and other paid-time-off banks, especially if you have a "use-it-or-lose-it" policy or caps on carryover amounts (where permitted). If your business tracks this for employees, you may wish to let them know about their balances.

Review Your Business Continuity Plan (BCP)

Check your company's severe weather, natural disaster, and health emergency policies and have a BCP in place in case an emergency impacts your business operations at year-end or in 2025.

Update Your Employee Handbook

An annual employee handbook review should be included in your year-end HR checklist if not conducted earlier in the year or on an ongoing basis. All new policy updates should be included in the handbook and communicated to employees. You may also want to review any remote or hybrid work policies you have implemented in the past few years. Rutter shared a few helpful tips on updating employee handbooks, including updating policies to reflect changes in employment and labor law, as well as desired changes in company benefits, culture, and employee expectations.

Year-End Performance Reviews and Goal Setting

Conduct year-end performance reviews to help employees evaluate their strengths, weaknesses, and opportunities for improvement. With this information, coach employees in setting goals within their career path and that will help them align with business expectations and goals for the new year.

Evaluate Skills Gaps and Plan Training for Next Year

Use performance review data to identify skills gaps in your workforce. For example, employees may need additional technical expertise, role-specific skill updates, leadership skills, communication skills, and team-building strategies to succeed. Plan training programs to address these gaps in the new year.

Review Staffing Needs for the New Year

Evaluate staffing needs and distribution to identify skill gaps. Review hiring needs at every level, from the C-suite to entry-level roles, and plan for adjustments as needed to align the workforce with business goals for 2025.

How To Keep Track of Compliance Reporting Deadlines

An HR compliance checklist is a great way to stay on top of key due dates related to applicable federal, state, and local laws and regulations. Consider that there are certain compliance matters with specific deadlines you can anticipate and will need to handle every year. A few examples of these predictable compliance deadlines include:

• Filing W-2s: Generally, by January 31, employers must provide Form W-2 to employees to file their federal and state taxes. A copy of each employee's W-2 must also be sent to the Social Security Administration (same deadline).
• Affordable Care Act (ACA) reporting: Applicable large employers must furnish Form 1095-C to applicable employees by March 3, 2025. The deadline for filing paper Forms 1094-C and 1095-C with the IRS is February 28, 2025, or March 31, 2025, if filing electronically. Please note that these are expected due dates, as the IRS has not officially issued due dates for forms due in 2025.
• EEO-1 reporting: Certain employers must report demographic workforce data, including data by race/ethnicity, sex, and job categories. All EEOC updates about data collection will be posted as they become available.

Other deadlines may be more unpredictable or triggered by certain events, such as when you bring on a new hire or an employee leaves the organization. In such cases, knowing what's required and the window of time to meet your responsibilities is the best way to prepare. Regardless of the type of deadline, an HR compliance checklist is an effective way to have visibility into your business's HR compliance-related tasks.

Start 2025 HR Compliance on the Right Path

Preparing now with an HR compliance checklist can help your business run more smoothly during holidays and beyond. Remember to use available resources such as assistance with legislative and regulatory compliance, payroll, human resources, and time and attendance management to make preparation much easier.

Could you benefit from personalized HR advice and compliance support? Paychex offers HR solutions that simplify processes and provide you with peace of mind to help you navigate HR compliance and safety regulations.

¹ 2025 Priorities for Business Leaders, Paychex.