How to Get Your HR Ready for the New Year: A Checklist

As the year draws to a close, Human Resources (HR) teams face a pivotal period to set up a seamless transition into the next year. A comprehensive year-end checklist enables HR departments to not only meet compliance requirements but also to maintain and enhance employee satisfaction, optimize workflows, and plan for future growth. Starting early with year-end HR tasks offers a strategic advantage, while delaying these activities can expose the organization to risks that range from financial penalties to employee dissatisfaction. Here’s a detailed look at each area of focus in the HR year-end checklist, the importance of early action, and the potential pitfalls of delay.

End-of-Year HR Checklist

1. Benefits Administration

Benefits administration is one of the most critical year-end activities. Early preparation helps to ensure compliance, provides employees with a smooth experience, and positions the company competitively in the job market.

Key Tasks:

• ACA Compliance: This includes calculating the number of Full-Time Employees (FTEs) to determine the company’s compliance obligations. ACA reporting requires accuracy to avoid IRS penalties.
• Grandfathered Plan Review: If your company has grandfathered health plans, review these to confirm whether they can carry over, as changes may impact compliance or benefits.
• Health Insurance Marketplace Notices: Ensure these notices are distributed to employees, as required by the ACA, to inform them of their health insurance options.
• Flexible Spending Account (FSA) Contributions: Review and consider amending FSA contribution limits if there are new allowable increases for pre-tax contributions.
• 1094-C and 1095-C Forms: Prepare for IRS reporting by organizing and verifying employee health coverage information. These forms are vital for demonstrating ACA compliance and require significant lead time to gather all necessary data accurately.
• Employee Benefits Review: Compare the current benefits package to industry averages to ensure competitiveness, potentially update the package, and finalize details for the open enrollment period.
• Dependent Coverage Verification: Confirm dependent information to ensure accurate benefit allocation and avoid potential issues with overpayment or underpayment of premiums.

Advantages of Early Start:

• Early preparation allows time for a thorough review of benefits packages and a competitive analysis, giving the company an edge in attracting and retaining talent.
• Compliance tasks such as ACA reporting and FSA contribution amendments require data collection and verification. By starting early, you reduce the chance of errors that could lead to costly IRS penalties.

Risks of Delay:

• Procrastinating on ACA reporting may result in non-compliance penalties, while late changes to FSA contribution limits can lead to inaccurate deductions, creating tax implications.
• Late distribution of health insurance cards or dependent coverage verification can frustrate employees and potentially impact their access to care.

2. Payroll Management

Payroll activities are crucial for both regulatory compliance and employee satisfaction. Accurate payroll management can prevent financial discrepancies and ensure smooth operations as the new year begins.

Key Tasks:

• Salary Review: Conduct a review of company-wide salaries to determine whether cost-of-living adjustments are necessary and ensure your salary offerings remain competitive.
• Holiday Bonuses: Schedule and issue holiday bonuses well in advance to demonstrate appreciation for employees’ hard work.
• First Payroll of the New Year: Preparing for the first payroll cycle of the new year includes finalizing the schedule and verifying that all employees are correctly classified.
• W-2s and 1099s: Ordering and preparing W-2s and 1099s in advance ensures timely distribution, a requirement for year-end tax compliance.
• Tax and Withholding Review: Confirm that employees' W-4 information is up-to-date and accurate to avoid payroll errors that could lead to tax discrepancies.

Advantages of Early Start:

• Getting a head start on payroll review prevents disruptions in compensation, which directly impacts employee morale.
• Early preparation for the first payroll of the year and timely W-2 and 1099 distribution helps avoid penalties and reduces year-end stress on the payroll team.

Risks of Delay:

• Delays in payroll adjustments or bonus scheduling can result in inaccurate compensation, tax withholdings, or missed holiday payments, which can significantly affect employee trust.
• Missing W-2 or 1099 deadlines can incur fines from the IRS and create frustration among employees who rely on timely tax documents.

3. Compliance

Compliance with employment laws and regulations is essential to mitigate legal risks and uphold organizational standards. Regular audits and updates to policies ensure the company remains compliant with evolving laws.

Key Tasks:

• Employee Classification: Conduct a review to confirm employees are properly classified (e.g., exempt vs. non-exempt) to avoid wage-and-hour violations.
• Employee Handbook Update: Update the employee handbook to reflect any changes in company policies, practices, or employment laws, ensuring employees are informed of the latest guidelines.
• Labor Law Posters: Verify that labor law posters are up-to-date and compliant with local, state, and federal requirements.
• OSHA Logs: Update OSHA logs to accurately reflect workplace injuries and incidents, if applicable.
• Annual Notices: Distribute notices required by laws such as ERISA to inform employees of their benefits rights.
• Anti-Harassment Training: Confirm that all employees have completed anti-harassment training to meet legal requirements and maintain a respectful workplace.

Advantages of Early Start:

• Starting compliance checks early helps to prevent last-minute updates that could result in missed requirements or inadequate time for necessary employee training.
• A proactive approach allows HR teams to stay informed of regulatory changes and ensure all documentation and practices meet current standards.

Risks of Delay:

• Delaying compliance checks could result in violations, fines, or even lawsuits due to inadequate preparation or overlooked requirements.
• Failing to update labor law posters or complete anti-harassment training can expose the company to legal risks and damage its reputation as a responsible employer.

4. Hiring and Staffing Needs

The end of the year is a prime time for assessing staffing needs and planning for new hires. Succession planning and job description updates support organizational continuity and readiness for growth.

Key Tasks:

• Recruitment Process Review: Evaluate the effectiveness of recruiting strategies and onboarding processes, aiming for improvements where needed.
• Staffing Needs Assessment: Encourage departments to assess current and future staffing needs, helping HR to plan for any upcoming hiring requirements.
• Succession Planning: Review and update succession plans to prepare for internal growth or unexpected vacancies.
• Job Description Updates: Ensure job descriptions reflect current roles and responsibilities, providing clarity for both existing employees and potential hires.

Advantages of Early Start:

• An early review of staffing needs allows HR to proactively address any hiring gaps, reducing stress during the typically busy hiring months in Q1.
• Updating job descriptions and succession plans in advance supports efficient recruitment and helps align future hires with organizational goals.

Risks of Delay:

• Unaddressed staffing needs or outdated job descriptions can lead to inefficiencies, impact morale, and delay recruitment processes, potentially causing a backlog in filling key positions.

5. General HR and Operational Planning

General HR activities, including performance reviews, budgeting, and policy reviews, lay the foundation for a successful new year. These tasks reinforce organizational goals and encourage a positive workplace culture.

Key Tasks:

• Annual Performance Reviews: Conduct annual reviews to provide employees with feedback and set goals for the coming year.
• Budget Review: Assess the HR budget to allocate resources effectively and support upcoming HR initiatives.
• Policy Review and Update: Ensure all company policies are up-to-date, reflecting any changes in legislation or organizational values.
• Holiday Planning and New Year’s Resolutions: Organize holiday celebrations to build team morale and set departmental resolutions to foster growth and improvement.

Advantages of Early Start:

• Starting performance reviews and budget planning early enables more accurate and actionable feedback for employees and clear resource allocation.
• Early policy reviews ensure that the company’s guidelines remain aligned with legal standards and best practices, promoting a healthy workplace culture.

Risks of Delay:

• Rushed performance reviews can reduce the quality of feedback, affecting employee development and satisfaction.
• Inadequate budget planning or policy updates may lead to under-resourced HR functions and expose the company to potential compliance issues.

Conclusion

The end of the year is a critical time for HR departments, and addressing these tasks proactively provides distinct advantages. Early action allows for thorough, accurate completion of each task, helping the company avoid penalties, boost employee satisfaction, and maintain competitive advantages. On the other hand, delaying these essential HR tasks can lead to financial penalties, diminished employee morale, and potential legal consequences. An organized approach to the HR year-end checklist not only closes out the year effectively but also sets up a strong foundation for the coming year’s success.