Conquer the Worst Parts of Small Business HR: Benefits and Taxes

The biggest pain points of small business HR are employee benefits and payroll tax filing, according to a survey by HR software company Justworks and Harris Poll.

Julia D’Amico, the VP of benefits at Justworks, commented in an interview that the most common reason why payroll taxes become a stumbling block for small business HR pros is manual processing errors — which are sometimes followed by a scary letter from a government agency like the IRS.

Seventy-one percent of the survey respondents agreed that business tax rules are too complicated and confusing for most people to understand.

“When you’re doing things that are related to compliance with state and local authorities, if you make one mistake then the process by which an HR professional has to fix it is not clear and it’s not straightforward,” she said.

D’Amico noted that a lot of her company’s customers are small business owners who opted to outsource tax expertise because they’re too busy to keep track of important year-over-year legislative changes that directly affect them, such as tax law and the dozens of state paid family leave laws.

“Technology is … a great way to make sure that those state and local regulations — and then all of the rules that carriers impose upon benefits — are [followed] and … you don’t have to be an expert on them,” she said.

Benefits Administration Help for Small Business HR

Among the small business owners who participated in the survey, 67% said managing health benefits was more difficult than they thought it was going to be when they first went into business. For instance, they may not have anticipated navigating compliance with Employee Retirement Income Security Act of 1974 rules that regulate health plan transparency and accountability.

“The way that technology solutions like Justworks can help [is by] putting guardrails [in place for small business HR] that make it so that those laws are codified in the software and that … the employer’s … [not] hoping the math aligns with the law,” D’Amico said.

She added that keeping the software in sync with the law involves behind-the-scenes collaboration between experts in the field and the software company’s legal, public affairs and tech teams. Best-in-class tech vendors will proactively reach out to their small business HR customers when a regulatory change is coming and say something like, “Hey, you might read something unexpected in the news. Don’t worry, we have you covered. Here’s what it means, here’s what you have to do and here’s where we already took care of it.”

Technology solutions on the market can also help small business HR pros design and administer a competitive benefits program.

“By using … simple and intuitively-built technology to explain to an HR professional … this is what they’re really signing up for and this is what is available to them. They’re able to decide … this is the right set of plans while still taking care of their teams,” she said.

“And so it’s really about simplifying all of the confusing terminology, like co-pays and deductibles, so they can make a decision with confidence, and that they can know that the decision that they made both takes care of their team and is compliant with [Affordable Care Act] law.”

Best-in-class platforms will be backed by a team of humans that:

• curates what D’Amico called “the right sets of partnerships” related to employee benefits
• makes the details available to small business HR leaders, and
• negotiates a competitive rate with benefits carriers — maybe even a special rate that was previously unavailable to small businesses.

Advice for Businesses Afraid to Commit

Small business HR might not have the budgetary resources to invest in technology that can solve the pain points of tax compliance and benefits management.

D’Amico had these words of encouragement for making a business case for a tech investment: “Instead of focusing on the cost of the software, think about all of the hours [the software] will give [you] back that can be put toward growing [your] business.”

BetterBuys.com has valuable info on payroll and HRMS system vendors that can help, and don’t miss the HRMorning webinar “HR Tech for Small Businesses: Ditch the Paper Chase for Good” on July 18.