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Jarret Pazahanick's End-of-Year Payroll Checklist for 2013

by Jarret Pazahanick and Ken Murphy, Editorial Director, Data & Analytics

November 6, 2013

HR expert Jarret Pazahanick gave his some tried-and-true tips for closing out end-of-year payroll,  some key changes for 2013 and a look ahead to 2014.

Ken Murphy: Hi, this is Ken Murphy with SAPinsider. Today I’m speaking with Jarret Pazahanick, managing partner of EIC Experts, an SAP mentor, and an SAP and SuccessFactors consultant who has specialized in HR Technology since 1998. Jarret, welcome to the podcast. 

Jarret Pazahanick:  Thanks for having me, Ken.

Ken: Jarret, I’d like to start out by asking what’s on your checklist to close out payroll for 2013. Is there anything that has changed dramatically this year in terms of US regulations? 

Jarret: I think the exciting and sometimes challenging thing about US payroll is that It’s constantly changing and there always seems to be new laws and regulations that customers need to be on the lookout for. Looking at 2013-2014, I think some of the big hitters that customers should be on the lookout for are things like:

  • Defense of Marriage Act (DOMA) – Customers will want to use their Q4 941 or 941X to correct overpayment of employment taxes.
  • Additional Medicare tax, effective in January of this year for people who make over $200,000 – Customers are going to want to review OSS Notes 1845468 and 1886008
  • Health Care Reform Bill – Customers will want to understand the impacts and check out OSS Note 1869937
  • The State of Illinois has decided to be a little unique, and is requiring mandatory monthly reporting for SUI although is still in discussion regarding New Hire Reporting. Customers will want to check out OSS Note 1803358 and 1750051.
  • Changes around SUI out of state wages for Michigan, Minnesota, and Massachusetts and customers will want to check out OSS Notes 1847809 and 1909533.
  • Updates for multiple states for New Hire Reporting and details are contained in OSS Notes 1871428, 1893484 and 1898307

As you can tell, quite a few OSS notes that customers are going to want to take a look at. Looking into the future, one of the big things I’ve noticed is that SAP and BSI have announced that BSI 10.0 will become available in mid November of this year and BSI 9.0 will be decommissioned as of November 30, 2014, so it’s really important that customers have this on their roadmap for next year because they will need to get to BSI 10.0 by the end of November.

One of the things that jumped out at me as well is that Employee Central Payroll, which is hosted SAP Payroll; one of the neat things for customers using that is that most of the changes I just mentioned will be handled by SuccessFactors, and that’s one of the advantages of using a SaaS based solution.

Ken: A lot of changes and updates to keep track of. Also, Jarret, are there any lessons you’ve learned that you would be willing to share, or pitfalls that payroll teams in general should avoid? 

Jarret: Due to the changing tax laws and complexities of US payroll, there is really no silver bullet that will make year-end simple. But I think there are definitely some things customers can do to make it a lot easier. The biggest one for me is to stay informed. Smart customers are going to make smart decisions when it comes to things that affect their year-end.

Mani Kak and the rest of the SAP Payroll team do a great job of providing information, starting in October of each year when they do a presentation for ASUG members, and they also take that ASUG presentation and they put it out on the SAP Marketplace. I make sure that on a weekly basis I check the SAP marketplace starting in October through February for any new content, anything that’s changing because a lot of times some of the states and even the federal government will change regulations and rules right up until the end of the year, so it’s really important that you stay on top of things, you check the American Payroll Association on a regular basis, just do all these things to keep yourself informed.

The other thing I do is I pay extra attention to the major Phase 1, Phase 2, and Phase 3 notes that SAP releases. The first one comes out in October, the second in December and the third in January, and they always contain crucial information.

One of the great things I heard recently is that there are over 7,000 companies that are using SAP Payroll. The great thing about that is when you have 7,000 companies covering all the various countries, and a large portion of those are in the United States, it helps ensure that SAP is going to know about the changes that are out there, and I think historically they’ve done an excellent job of coming to market with the changes for their customers.  And the last thing I think is just to keep your eye out for podcasts such as this and just general information out there. The more information you have at your fingertips about year-end, the better off you’re going to be.

Ken: Also Jarret, do you have any other specific advice for SAP customers for completing their end of year payroll?

Jarret: I think one of the big things is to try to be proactive. That always seems to pay big dividends for my customers. You don’t want to start your year-end processes at the end of December.  I always encourage my customers to start in late September or early October at the latest. A few of the items that should be on every customer’s yearly checklist – these are going to be the ones you’ll probably want to do every single year, are going to be things like:

  • Load the appropriate Base Level HR Support Packs (HRSP) and then any Country Legal Changes (CLCs) recommended by SAP
  • Load appropriate BSI Tax Factory TUBS.
  • Apply any necessary OSS Notes (Tax Reporting, IRS Levy, 401K Limits) when they are released
  • Ensure that any new applicable wages types that you’ve created during the year are mapped correctly to the W2
  • Generate Work Schedules and Payroll Calendars
  • Update Payroll, Posting, and deduction model periods each year
  • Clear any outstanding claims
  • Review any uncollected taxes
  • Process all stock options before the last payroll of the year
  • And the biggest thing you can do is test, test, test - especially when it comes to things around tax reporting. The more time you can put in to test and ensure that everything is working as you expect, the better off you’ll be.

Another thing that’s really important as well is for customers to stay on top of their payroll data, so they are not spending the last few weeks scrambling and trying to fix data errors that have occurred throughout the year. Unfortunately, for a lot of organizations, the first time they realize they have a problem is when they go to balance their W2’s and their various tax reports and then all of a sudden they’re scrambling to try to figure out what caused that. And a lot of time what caused it could have happened months ago, and the longer it is away from the cause of the issue, the harder it is to typically fix. Starting earlier always gives you the advantage because you have lots of time to fix the issue before the end of the year.

Ken  That’s a very thorough year-end checklist.  Also, a lot of companies are often looking for some year end help in this area— for payroll consultants specifically. Do you have any advice for those companies in terms of recruiting or hiring these consultants?

Jarret: This is an area I am very passionate about. If a U.S. customer needs a payroll consultant, it’s really important to find someone that really has experience in US Payroll, who has been through multiple year-ends, and has really strong troubleshooting skills. I always strongly recommend that customers do a detailed technical interview and check at least two customer references. Sadly, there is currently a lot of fraud and people lying about their skills and experience to try to get their foot in the door and learn on the job. This is a topic where I’ve written several blogs on ASUG News and SAP Community Network on ways customers can help ensure they get a good consultant.

At the end, I’d just recommend that customers do a lot of due diligence, because at the end of the day a good consultant and a poor consultant are going to cost you about the same amount of dollars. But a poor consultant is going to come in and is really going to struggle to help you with your end because it takes a very specific skill set. The year-end I think takes one of the highest caliber payroll consultants, just because you have to have been through multiple year-ends before, you have to really understand payroll inside-out. You have to understand tax reporting. You have to understand all the integration points between payroll and master data, payroll and benefits, etc., to really help trouble-shoot your issues because no two issues are the same.

So, that troubleshooting skill just takes a lot of time and experience to master that skill-set and it’s a skill-set that I don’t think is out in the marketplace as much as people think. It’s just important that customers, when they really need someone to come in for a short-term assignment, that they really find someone who’s been there and done that before.

Ken:  – Certainly not a learning on the job type scenario. Finally, Jarret, is there anything new and exciting coming for Payroll Customers in 2014?

Jarret: SAP has some neat stuff planned during the 2014/2015 timeframe, and this is probably the first time in years I’ve been able to say that. They have something called the new Payroll Cockpit on HANA, which is – I got a briefing on it a couple of weeks ago and it has some really exciting functionality that’s coming that’s going to bring a lot of processes in SAP Payroll that are stand-alone today into one common cockpit engine to be able to process. So some really exciting stuff, but a little early to talk about in a lot of detail but its’ definitely something that I think we should have a follow-up podcast maybe mid-next year and talk about some more.

Ken:  Absolutely, that’s one we will look forward to. Jarret, you’ve given us plenty of great tips and advice, and thanks for you time. I’ve been speaking with Jarret Pazahanick, managing partner at EIC Experts, and an SAP mentor. Jarret, thanks again for joining us.

Jarret: I appreciate it, Ken. Thank you.


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