Healthcare: Managing Payroll Taxes in an Era of Transformation

For healthcare facilities, managing payroll taxes can be a tedious and time-intensive job, especially when employees live and work in multiple states. Each state and local jurisdiction has different laws and regulations, and failure to comply with the requirements of each can lead to penalties, interest and potential legal action by the corresponding state/local jurisdiction.

Managing payroll taxes in healthcare facilities can be complex and time-consuming, especially when you have employees living and working in multiple states. Each state and local jurisdiction has different laws and regulations, and when you fail to comply with their specific laws, you can easily face penalties, interest and potential legal action by the corresponding state/local jurisdiction.

Staying on top of ever-changing legislation can be one of the most time-consuming tasks associated with the filing and remittance of payroll taxes. You might also receive agency notices, which demand research and resolution.

In a time of tremendous transformation in the healthcare industry, trying to accomplish all of this on your own with an already lean in-house payroll team or a third-party provider who doesn't have the full range of services needed is often met with challenges, uncertainty and risk. But bringing in the right third-party provider with the technology and expertise to handle payroll-tax compliance can be a real game-changer.

Transformation trends that are making payroll taxes more complex

The compliance landscape is changing due to several trends that are impacting the regulatory environment in healthcare facilities. Here are several to consider:

Remote/hybrid work

Years ago, healthcare facilities typically had one main location, so the same payroll taxes applied to all employees. Even if there were a few additional locations, payroll taxes were still manageable.

However, the global health pandemic changed all that with the move to hybrid and remote work, which many organizations have opted to retain because it provides the freedom and flexibility that meet the needs of today's workforce. Many healthcare facility employees, especially those not directly involved with patient care, have opted to work remotely.

This new way of working may have increased exponentially the number of tax jurisdictions your facility must comply with. If you're using an external provider, can they keep up with your expanding needs? All of this introduces elevated levels of uncertainty and risk, while increasing the possibility of non-compliance.

Because they lack the internal expertise or time to properly administer payroll taxes, many facilities choose to turn a blind eye to remote workers in different locations, instead categorizing them as all being in the same place. While this might be easier for them to manage, it sets them up for penalties related to non-compliance. This can go undetected for a long time; however, once it's revealed that an employee is working in a state other than where they're on record as being in, widespread regulatory scrutiny may soon follow.

Payroll professionals are aging out of the workforce

Lean payroll staffs are becoming increasingly common as lifelong payroll professionals retire, and new payroll candidates are difficult to find. This will prove to be challenging for healthcare facilities that have relied strictly on an in-house payroll team to handle all tasks associated with collecting, filing and remitting payroll taxes. It will also have repercussions if you're using a third party for payroll taxes who doesn't provide the breadth of services and solutions you need to ensure compliance.

Facilities in this position will need to identify other ways to ensure payroll-tax compliance, perhaps looking for an experienced outside vendor to handle the distribution and filing of their payroll taxes.

Cloud migration

For years, many healthcare facilities have cobbled together disparate point solutions and manual processes to handle all tasks associated with payroll processing, including payroll tax collection, filing and remittance. Outdated solutions and dozens of integrations can severely impact the accuracy and timeliness of payroll tax distribution.

Healthcare as an industry traditionally lags in terms of new technology adoption. All the manual processes and multiple systems that can't speak to one another can pose a plethora of risks. An employee may update their address in one system, but then it doesn't flow through to the payroll system. Then when that person applies for unemployment benefits, for example, it's discovered that their earnings and tax records don't match what the healthcare facility is reporting. Once an audit ensues, more mismatches might be found, opening Pandora's box to additional scrutiny.

Some changes are being made due to technology transformation and migration to the cloud. Many healthcare facilities are now trying to get every process included in one seamless application for transparency and visibility, but choosing the right provider, with the right technology offering, takes time and knowledge.

A better way forward to help mitigate risk

If you're in charge of a lean payroll team for a major healthcare facility, and processing payroll taxes for hundreds of employees who may be working remotely all over the country, you and your staff are probably working plenty of overtime, and staff burnout is highly likely. Perhaps you're using a third-party provider that is doing some, but not all, of what you need as far as payroll tax compliance is concerned.

You may be acutely aware of the risks involved and know that you're barely skimming the surface in addressing your compliance issues. Where can you turn for help to ensure that you are compliant? How can you feel more confident that you're fulfilling all payroll-tax compliance requirements?

A third-party provider with payroll tax-related expertise and intelligent technology may be the answer. Here are some things to look for when evaluating providers:

Technology that integrates with your payroll, benefits or HR systems.
Integrated automated rules that can help reduce the manual efforts associated with monitoring, detecting and flagging errors or liabilities.
Reliable specialists with tenured expertise who can help ensure you're aware of the latest regulatory updates and changes that affect you
Agency relationships and connections that can help to research and resolve compliance-related issues.

Given the transformation taking place across the healthcare industry, you may need to look for a provider that can show you a better way forward and help you gain confidence over uncertainty — with reliable expertise, innovation and connectivity, and a breadth of solutions that can help reduce risk and create improvements to help you handle your payroll tax obligations.

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Payroll Tax Compliance: A Guide to Help You Comply with Confidence

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