December 12, 2024

The start of a new year is a great time to hit the reset button on your payroll process.

Getting everything in order now will help you avoid costly mistakes and ensure a smooth year ahead for you and your team. Here’s a straightforward checklist to get your 2025 payroll up and running the right way:

1. Double-Check Employee Info

Ensuring correct employee data is the first step in running accurate payroll. Before you process your first paycheck of the year, take a moment to:

• Look for missing or incorrect details: Check that all addresses and Social Security numbers are current.
  
  
• Remove terminated employees: Clean up your records by removing former employees and ensuring no outstanding balances for loans, garnishments, or PTO.
  
  
• Review payroll access: Keep things secure by ensuring only authorized staff can access your payroll system.
  
  
• Review HR Employee Classification: Keep the employee classifications updated for your CPA (e.g., Assistant, Clerical, Hygiene).
  
  

New year, new rates! Be sure to review these key areas to avoid surprises:

• Earned Income Credit (EIC): Double-check that the EIC coding is correct for qualified employees.
  
  
• Check your TWC rate: Update your Texas Workforce Commission unemployment tax rate for 2025. Please don’t assume your payroll company automatically updates it, as it could cause a cumulative deficit or surplus that you may not be aware of.
  
  
• Run a quick tax test:
   
  • Social Security withholding = (total wages - excess wages) x 6.2%
  • Medicare withholding = total wages x 1.45%
    
    
• Match your taxes: Confirm that your practice’s Social Security and Medicare matching amounts are accurate.
  
  
• Balance your tax forms: Make sure the numbers reported on Form W-3 match your tax deposits (Form 941 totals).
  
  
• Review Section 125 plans: Double-check contributions and distributions for cafeteria plans like medical or childcare reimbursement accounts. Always ensure the employee portion that comes out of payroll is pre-tax and not post-tax (which eliminates much of the benefit of having a cafeteria plan).
  
  
• Check for excess contributions: Ensure no one (especially highly paid employees) exceeds limits on 401(k) or other qualified plans.
  
  
• Update benefit deductions: Apply any changes employees requested for their benefit deductions in the new year. Double-check the simple arithmetic when dividing out the employee and employer costs in the total pay periods. We have seen clients let their benefits to terminated employees continue for long periods until we have the chance to catch it.
  
  

3. Prep for Special Payroll Tasks

There are always a few extra things to consider for payroll at the start of the year. Don’t forget to:

• Plan for bonuses: If you’re handing out bonuses, schedule those runs separately to keep everything clear and compliant. Present any net-to-gross adjustments for holiday bonuses well in advance to your CPA.
  
  
• Double-check closing dates: Ensure month-end and quarter-end close-out dates are accurate.
  
  

4. Confirm Your 2025 Pay Schedule

One detail that’s easy to overlook is making sure your pay dates don’t fall on weekends or holidays. Skipping this step could lead to delayed paychecks, frustrated employees, and even compliance issues. Here's what to do:

• Review the calendar: Look at all pay dates, period-end dates, and quarter-close dates for the year. You must adjust if a payday lands on a weekend or federal holiday.
  
  

• Shift pay dates as needed:
  
  

1. • If a payday falls on a Saturday, move it to the preceding Friday.
     
     
   • If a payday falls on a Sunday, move it to the following Monday, unless that’s a holiday too, in which case you’ll move it to the preceding Friday.
     
     
   • If a payday coincides with a federal holiday like New Year’s Day, Independence Day, or Christmas, plan to pay employees a day early.
     
     

• Communicate changes: Once you’ve finalized the schedule, let your team know about any shifts in pay dates. Clear communication prevents confusion and builds trust with your employees.
  
  
• Update your payroll system: Adjust the schedule in your payroll software or share it with your payroll provider so everything runs smoothly throughout the year.
  
  

Maintain transparency by having an easily accessible payroll/HRM system that empowers the team to access their own portal and self-serve as many options as possible.

Planning ahead ensures that your employees always receive their paychecks on time, no matter the calendar quirks. It’s a small step that makes a big difference in keeping morale high and avoiding payroll headaches.

Taking a little time now to review your payroll details can save you tons of hassle. Whether verifying taxes, cleaning up employee info, or aligning pay dates with the calendar, these steps will help you stay compliant, keep your team happy, and set your practice up for success in 2025.

Not sure where to start? Contact us today!