End of the Year Payroll: Challenges and Solutions Looking Toward 2022

By: Jeff Katz, Dylan Molesky, and Anna Riggs

Non-stop. That’s how most payroll professionals feel in the middle of what most countries around the world consider the holiday season—along with the end of the traditional calendar year. Wrapping up payroll at a time when other professionals are wrapping up presents can feel like an isolating professional experience, especially when others leave work for a holiday break, and in many cases payroll professionals (unknowingly to others) are working straight through Christmas and into the New Year holiday.

December through January is the busiest season in payroll. From end of the year reports to making sure tax forms (such as a W-2 in the U.S.) are ready to be mailed, the process is extensive and can become intense.

Overall, end of the year payroll involves checking and reporting on local tax liabilities, employee wages, and bookkeeping. Your efforts may seem unnoticed, but you are keeping your company or organization from paying tax penalties, legal trouble, or unbalanced books.

As everyone’s payroll experience is different—you may be running multi-state payroll in the U.S—or you may be running payroll for 21 entities and 19 countries all at once, our team has compiled a basic list to help you beat the season—and plan for the next year.

“For global payroll, a major aspect of this will be the type of tax forms used in each country.”

Organize, Calendar, and Checklist
This is a favorite tip, especially if you are new to global payroll. Perhaps you know that the UK year-end is going to end differently than the Ireland calendar year. You’re aware of it, so you drill down what you know in a piece of communication.

If you’re managing a team, this could involve implementing a process to make sure all employees are aware of the differences. Or it may involve instilling communication for clients—about payroll expectations in different countries they operate in. The key is to “drill it down” and be aware.

  • Tax Forms
    For global payroll, a major aspect of this will be the type of tax forms used in each country. Each country is different. For example, in Canada—everyone gets a T-4, which comes out in February. Then Canadians have until May to file their taxes.But also, in addition—are you thinking about the other forms that will be needed; perhaps if a worker has a personal expense or an allowance. So once again—drill down.

Our favorite practice is to start with the countries—and specific regulations and deadlines. Then calendar everything. Create a checklist. Make sure you have all the tax forms, and always communicate! Communication is key to a streamlined efficient payroll process.

Checkpoints Throughout the Year
Having systems in place on a quarterly basis will help you audit for anomalies including tax discrepancies and off-cycle runs. During these checkpoints, you’ll help ensure a smoother end-of-the-year payroll.

  • Notify Employees
    You may need to reach out to employees, per company policy, to remind them of unused benefits, including paid time off (PTO). At the same time, you’ll be reviewing their used PTO and any deferred compensation. It’s also best to use this time to have employees verify that their addresses haven’t changed.
  • Verifications
    You’ll need to make sure your workforce hasn’t exceeded retirement savings limitations, or health savings contributions.

Overcoming Challenges
One of the biggest challenges in end-of-the-year payroll is being caught off-guard. Conversations about the end of the year should start in September or October.

In addition to planning early, here are some other aspects to consider.

Companies Shutting Down
In some cases, companies will shut down. As a result, you may not be able to get ahold of viable partners/people you need information from until after Jan. 1. Keep that in mind, to make sure you get all updates and materials before holiday vacations begin.

Stock Markets
The stock market will remain open through Dec. 31. Because of this, it is crucial to make sure you get updates for stock options or anything that may be exercised in that time period.

Employee Bonuses/COVID-19
The employee bonus is another aspect to consider—along with any additional COVID benefits that may be awarded.

Tips for January
From a U.S. perspective, the first month of the year can be rough because of the W-2 deadline on Jan. 31.

We like to use the following checklist for W-2’s before sending them to the U.S. Social Security Administration:

  • Check for errors in previous month’s payroll
  • Make sure everything is adjusted, cleaned up, and credited
  • In addition to checking for payroll errors, check for address and social security number errors

This is pretty much the same best practice from a global perspective. For example, in France, you want to make sure you are auditing your payroll and making sure that everything is paid correctly.

“January is also the best time to debrief about the previous year—while you plan for the next 12 months.”

Debrief at Beginning of the Year

January is also the best time to debrief about the previous year—while you plan for the next 12 months. Look at what just happened. Are you happy with how things went? Could there be improvements in your processes? Identify every single element that could be more efficient—and start working from there. Make sure to do this in January, as everything is fresh on your mind If you wait—something else is always going to come up. As we all know, payroll is also ever-changing, especially in a global environment where you have multiple deadlines and different types of compliance.

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