Insights

Guide to Navigating Year-End Payroll

Furey Team

Year-end payroll tasks can quickly pile up during the holiday rush. However, a well-crafted gameplan can make things much easier and set you up for success in the new year. 

We caught up with Cathy Kruse—our rockstar payroll service manager—for tips and real world examples to ensure a smooth transition into the upcoming year. 

Let's jump right in:

1. Start preparing early

Don’t let the end of year catch you off guard. Develop a strategic plan well before December rolls around! Make sure all your taxable earnings and wages are accounted for by December 29th. And remember to input all that taxable data into the payroll system by the last workday of the year. If your office plans to close for the holidays or if you're taking some well-deserved time off, adjust your timeline accordingly.

2. Set internal deadlines before payroll deadlines

Crucial reportable and pay data—like holiday bonuses, commissions, taxable fringe benefits, awards, and owner’s draws—often hinges on our collaboration with managers, accountants, and third-party sources. Given that these tasks might not be their top priority, they may not always get done on time. Be intentional with due dates and set them a few days prior to the provider deadline to account for delays. 

Let’s look at real-world examples to guide you through the trickier scenarios. 

Example 1: Holiday Bonus

Let's look at two cases involving a holiday bonus payable on December 22nd. In the first scenario, your service provider has a two day processing window. The pay file needs to be submitted by December 20th. Set an internal deadline of December 15th to receive all bonus data. This gives you a three business day window to follow up with those chronically late offenders. 

We can look at the same scenario but with a four day processing window. In this case, the pay file needs to be submitted by December 18th. Set an internal deadline of December 13th to receive all bonus data. Again, give yourself that three business day window as a buffer. 

Example 2: Timesheets

The holidays are a big disrupter to the payroll processing schedule. It’s hard enough to chase down employees and managers alike to complete and approve timesheets on 'normal' pay schedules. The end of year tends to be even more disruptive with extra PTO and holiday closures. So plan accordingly. 

Example 3: Reviewing W2s

Let’s say your payroll provider sets December 20th as the deadline to review and update draft W2s. It’s a good idea to gather necessary information from your team as soon as possible. Give your employees at least a week to verify and update personal details in the payroll system (names, addresses, social security numbers, etc.).

Now’s also the time to ensure payroll transactions paid outside the system are correctly reported as off-cycle payments. Keep in mind, the year-to-date wages on the draft W-2s will only capture payroll activity that has already been processed. The 'final' W-2 is typically wrapped up in the first week of January. Stay proactive to ensure a smooth process!

3. Pay attention to provider updates 

Most payroll providers send year-end communications with important information and deadlines, including details that are often overlooked, like owner’s payments, benefits for S-Corp 2% shareholders, recording exercised stock options, and more. Think of these as your guiding star during year-end chaos. Just remember they’re meant to cast a wide net so not everything you read will be relevant to your business. 

4. Create a checklist with clear due dates 

Which brings to our next tip: clear the clutter. Determine what’s relevant for your business and weed out non-applicable tasks right away. Create a checklist with crucial tasks and corresponding due dates, and use service provider deadlines to set internal due dates.

5. Keep relevant tasks top of mind 

Set clear expectations from the get-go and make everyone aware of their roles. Don't be shy about over-communicating—it’s better to over communicate than risk missing deadlines! 

When it comes to communications, use email and calendar reminders to your advantage. Send a preliminary email outlining the year-end plan and responsibilities. Follow up with auto-send reminders to keep the team on track with your established timeline. Simultaneously, set up calendar reminders to keep tasks top of mind for everyone during the busy holiday season.  

How Furey can help

You don’t have to take on year-end payroll on your own. If you're navigating the holiday bonus maze, battling timesheet chaos, or dealing with unique challenges like owner's draws, don't hesitate to reach out. Our payroll team is here to help get your year-end on track. Learn more about Furey payroll here

Furey Team