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A Challenging Compliance Landscape & the Impact on Your HCM System

Employers throughout the U.S. are looking for efficient ways to stay up-to-date on compliance requirements and changes. At the same time, they are seeking partners and solutions that will help them get the most from their HCM investments. This article explores how these two priorities impact one another and what this means for your HR and Payroll team.

The growth of HCMs: High expectations meet high complexity

Given the many complexities throughout an employee’s life cycle, HR and payroll teams are relying on HCM systems more than ever before. The market for all HCM solutions totaled $14.5 billion in 2017 and is expected to surge to more than $22 billion by 2022.

The reasons behind this increase include employers looking to offer a better employee experience with increased engagement and automation. Companies are also rolling out cloud-based solutions and mobile apps to help trim costs and support more mobile and remote workforces. Employers expect their HCM system to be the central hub of their HR platform.

More and more companies are expecting their HCM system to handle all their compliance needs. An HCM system provides a solution that, in theory, simplifies the process of keeping pace with changing compliance regulations. However, HCM systems are up against significant hurdles, as withholding laws and ACA requirements continue to become more complex. Let’s look at these challenges and their solutions in more depth.

The changing shape of ACA reporting

ACA reporting has moved to the state level. For example, New Jersey and D.C. have set up their own ACA reporting requirements.
At the same time, federal rules and regulations around ACA compliance and enforcement have also changed, leading to fresh challenges for HR & Benefits teams.

In 2020, employers are required to report on the health coverage they offered employees in 2019. This effort requires full visibility into the relevant data, as well as awareness of the draft instructions and forms in question. There were a few changes to the 1094 and 1095 forms for tax year 2019, including removal of language about individual liability for tax penalties.

Penalties related to the employer’s failure to provide minimum essential coverage still apply and in fact have become more aggressive. These noncompliance penalties, under Section 4980H(a) and Section 4980H(b), have increased substantially for 2020.

local tax withholding challenges

Current challenges in state and local tax withholding

The complex nature of the U.S. political system means there are numerous disparate state laws to keep up with for tax withholding purposes. The result is a considerable administrative burden that can necessitate hiring multiple dedicated payroll department employees to manually track a complex patchwork of laws.

Indeed, thousands of resource-hours and even more dollars can go into this enterprise every year, as payroll teams wrangle with issues like nonresident withholding and occupational licensing taxes in states such as Illinois and Kentucky.

There’s also the challenge of staying on top of updates to forms like the W-4. The 2020 W-4 form eliminates the longstanding “allowances” lingo of past iterations, which is a big change for payroll departments and a critical change for states like California, Georgia, and Massachusetts that used to allow the federal W-4 as an alternative to the state W-4. That is no longer feasible.

It may seem like an impossible task to comply with all of these rules and regulations in your HCM system. That’s where CIC Plus and our partner network can help.

How CIC Plus and our partner network can help

One approach to managing these complexities is through the outsourcing of multiple, disconnected systems, which can lead to a disjointed experience for employees and problems with data consistency. A best practice is to pursue an integrated HCM experience to ensure compliance and provide an excellent employee experience.  

Integrations offer extended HR and Payroll compliance capabilities, even in niche areas, that organizations are looking for in their HCM systems. For example, our integrations with Workday, Cornerstone and Oracle Taleo cover key areas like state/local tax withholding and detailed ACA reporting, in line with the latest federal, state and local regulations.

Together with our partner network, we’re able to help employers overcome tough compliance challenges while ensuring a holistic HCM experience with streamlined HR and Payroll workflows.

Through our integrated solutions and services, you can turn your HCM into a truly holistic platform, one that provides a one-stop-shop experience for employees and keeps your organization competitive and compliant. Learn more about how we can help by contacting our team or scheduling a demo today.

The Buyer's Guide to Employer Compliance
Tips, insights and questions to ask before selecting a compliance service partner.
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