Payroll Compliance 15-Point Checklist: Ensuring Accuracy and Timeliness

From the outside looking in, payroll seems straightforward. Employees work, then get paid. But behind every single paycheck is a complex system of deadlines, calculations, and rules that your business has to get right. Payroll compliance isn’t just about keeping employees happy; it’s also about avoiding penalties, protecting your business, and maintaining trust with every single person on your team.

For small and mid-sized businesses, the payroll stakes are even higher. A single missed deadline or misclassified employee can create ripple effects across benefits and tax filings. A clear payroll process is a must-have for your long-term success, and Capstone Accounting & Tax is here to help. Below is a 15-point payroll compliance checklist designed to keep your team happy and your business moving forward.

1. Verify Employee Classification

Correctly identifying employees as exempt, non-exempt, or independent contractors is critical. Misclassification can lead to tax liabilities, wage disputes, and even costly penalties.

2. Maintain Employee Records

You need up-to-date, comprehensive records for every single employee. That means:

• Start dates
• Tax withholdings
• Pay rates
• Benefits elections

Incomplete or inaccurate files can cause significant issues come tax time, or in the event of a business audit.

3. Calculate Wages, Overtime, and Deductions Correctly

It’s imperative to apply federal and state overtime rules correctly. All deductions, from benefits contributions to court-ordered garnishments, must be precisely and properly documented.

4. Comply With Minimum Wage Laws

Federal. State. City-level. There may be different wage laws depending on the location of your business. Regularly reviewing these laws helps protect your business by ensuring you’re paying at or above the required minimum rate.

5. Adhere to Paid and Sick Leave Regulations

It’s not just states you have to keep up with–many municipalities now mandate sick leave, paid time off, or family leave. To ensure your company remains compliant with all applicable laws, familiarize yourself with the laws in your region and carefully track accruals.

6. Ensure Proper Record-Keeping for Hours Worked

Your business must accurately track all hours, overtime, and time-off balances–but that’s easier said than done. Digital timekeeping systems can help reduce manual errors and simplify reporting.

7. Compliantly Process New Hires and Terminations

From filing new hire paperwork to delivering final paychecks, there are regulations you must follow. Failing to do so could mean you’re not compliant with federal and state laws. Timeliness is key here.

8. Issue Timely Paychecks

Your team relies on consistent, on-time paychecks. Establish a clear payroll schedule and stick to it.

9. Maintain Confidentiality and Data Security

Payroll data is full of sensitive information. Protect it with secure systems, restricted access, and regular data security reviews.

10. File Forms and Pay Taxes on Time

Late or missed submissions can mean costly fines for your small business. Carefully track all federal, state, and local deadlines and submit tax payments and filings on time.

11. Provide Year-End Forms

From W-2s to 1099s, distribute all required year-end forms accurately and on time. Doing so not only means you avoid penalties but also helps employees stay compliant with their own tax filings.

12. Stay Current on Local, State, and Federal Laws

One of the biggest challenges when it comes to employment laws? They change frequently. Regularly review laws and updates to ensure your payroll processes are still compliant.

13. Conduct Regular Payroll Audits

Even with the best systems in place, mistakes can still happen. Periodic payroll reviews can help identify errors early and keep your processes on track.

14. Give Employees Access to Their Payroll Information

Offering your team members digital access to their pay information, such as pay stubs, can help prevent confusion and reduce administrative burdens.

15. Review and Update Payroll Policies Annually

Your policies should reflect current laws and your company’s practices. A yearly review helps ensure consistency while verifying that you’re still compliant with all applicable laws.

Consider Your Larger Financial Picture

As a business owner, payroll compliance is just one of the many financial aspects you need to consider. Instead of looking at each aspect individually, work with Capstone Accounting & Tax for a more comprehensive and holistic approach. Our client accounting services consider everything from day-to-day bookkeeping to accounting, payroll, and virtual CFO/controller support. You’ll get confidence, clarity, and control over your numbers–without having to handle the tedious, time-consuming work yourself.

Take the Stress Out of Payroll

Running a business is demanding enough without worrying about missed deadlines or compliance risks. Follow this payroll compliance checklist to protect your business or take payroll completely off your plate by partnering with Capstone Accounting & Tax. After all, your focus should be on growing your team–not dealing with their payment details.