Payroll Insights
January 21, 2021

HCM compliance trends for 2021 (or 2020 part II?)

From an HCM compliance perspective, the year behind us will continue to set the tone for 2021. Holly Jones, Ceridian Product Counsel, outlines what may be in store.

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Depending on how you look at it (and when you’re reading this), we’re now a few weeks into 2021 or we’re somewhere around day 384 of 2020. In either case, in my previous article I promised to provide a peek, however cautious, into the potential compliance trends and developments for 2021. And, well, I can only procrastinate (and wait for some good news to share) for so long.

As reluctant as I am to suggest the year ahead will bear any similarity to 2020, the current reality is that the ongoing COVID-19 pandemic will continue to set the tone and trends for 2021, at least in the early months. On the bright side—and I am adamant that there is one—we now have a much clearer understanding of how the year behind will shape the challenges ahead.

So, here’s what may be in store, at least from a compliance perspective, for our much wiser selves in the days ahead.

Continuing COVID-19 response

As I indicated above, the “real” compliance trends of 2021 may be unable to emerge until 2020’s 500-pound gorilla moves out of the way. Yes, that would be COVID-19. In the short term (at least, we hope it’s the short term), we may continue to see extended, expanded, and even brand new federal, state, and local COVID-19 response legislation, including further tax benefits and leave entitlements specifically for needs related to COVID-19.

(As of this post, the federal paid leave mandate under the Families First Coronavirus Response Act (FFCRA) had not been extended past the law’s Dec. 31, 2020, expiration date. However, the massive new Consolidated Appropriations Act of 2021 did extend access to the leave-related tax credits provided by the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, essentially incentivizing covered employers to voluntarily extend remaining leave entitlements into 2021. In response to the expired federal mandate, some California localities have opted to extend and expand coverage of their leave laws. Other jurisdictions may wait to see what additional COVID-19 response needs arise as vaccines roll out and the federal administration transitions, particularly since an initial COVID-19 relief plan proposed by President-elect Joe Biden includes additional paid leave mandates and fiscal support.)

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Further, as many states prepare for fresh, new legislative sessions with the gained wisdom of a full year of the “new normal” created by COVID-19, we may also see longer-term initiatives to address the issues and disparities that were so clearly highlighted by All Things 2020.

For example, through the rapid adoption of stay-at-home and shelter-in-place orders, workplaces had their agility tested as they shifted workers to virtual and remote settings. Though many of us have since built a library of clever Zoom backgrounds for our virtual meetings, some state agencies—in particular, tax and unemployment insurance authorities—were not quite so agile.

Throughout 2020, as states and cities passed new laws that were meant to outlast the pandemic, coverage questions arose more than ever. “Does that new paid sick leave law apply to my employees who are only working remotely because of the pandemic?” Though the remote workforce isn’t brand new, the pandemic has highlighted to lawmakers and enforcement agencies that they will need to be more specific in whether and how they intend their laws to apply to, for example, employers with now fully virtual workforces. State lawmakers must now consider how to address tax implications for the displacement of workers from previously clear application of their state and local enforcement jurisdictions.

The pandemic also highlighted gaps in supporting work-life balance—for example, providing employees with leave and job protection to handle circumstances, such as closures of schools and care facilities, that would not otherwise be covered by existing family and medical leave laws. While laws addressing and expanding paid family and medical leave benefits were appearing on more state legislative agendas before the pandemic, in the past year the practical challenges of balancing work with life’s unpredictable moments affected far more workers in far more visible ways.

We may also see more guidance on compensation issues that were highlighted by, but not exclusive to, the pandemic—for example, reimbursement of business expenses for remote workers and compensation for time spent obtaining required testing or vaccines.

New Presidential Administration

Of course, it’s a fairly safe prediction that the Biden administration, particularly when coupled with the shift of the U.S. Senate from Republican to Democratic control, will set a dramatically different compliance agenda for workplaces in 2021 and beyond.

While Democratic administrations do typically bring an increase in labor regulation, such regulation can also provide welcome consistency, clarity, and guidance in policy areas otherwise left to state and local governments. For example, much of the complexity in state and local paid leave laws has arisen out of the absence of federal standards.

The benefits of supporting work-life balance, providing paid leave to support healthy workers and families (particularly during a global pandemic), and establishing livable wage standards are well-documented and need not be a source of political conflict. After all, many competitive organizations find that their internal policies and best practices to support their workers already far surpass minimum regulatory standards, particularly those that manage to survive the federal legislative process. Yet, the multi-state legislative patchwork is challenging for even the most progressive workplaces and the most resourceful employers. So, federal efforts to establish consistent minimum requirements in the workplace could simplify (or at least delay) some of the multi-state complexity.

Once lawmakers are able to focus on matters other than COVID-19, key topics to watch at the federal level will likely include healthcare benefits, paid leave requirements, and wage standards (including increases to both the federal minimum wage and the white collar exemption salary thresholds). Of course, absent (and perhaps in spite of) federal developments in the areas of paid leave and wage increases, state and local lawmakers are likely to continue their local pushes for higher minimum wages; increased salary exemption thresholds; and paid sick, family, and any reason leave entitlements.

Pay data reporting

One area in which federal action and clarity could still stave off a potential multi-state patchwork is that of pay data reporting. Once the EEOC announced that it would suspend further collection of Component 2 pay data, California’s previously pending initiative gained new momentum, eventually resulting in the nation’s first state pay data reporting requirement.

Given other states’ efforts to combat wage disparity—for example, the continued trend of salary history bans—we can’t necessarily assume this to simply be another case of California being a compliance outlier. After all, Colorado, not California, was the first state to pass an Equal Pay Law requiring employers to support pay transparency by proactively disclosing compensation and benefits, or a range of the compensation, in certain job postings. Further, numerous reports have suggested that the pandemic has exacerbated income inequality in and outside the U.S., placing even more momentum behind remediation efforts and equal pay policymaking and legislation.

Yet, if federal pay data reporting efforts are revisited in the new administration, as some early reports suggest, states such as Colorado, Washington, New York, and even California may be more than happy to let the federal government assume the administrative burden of collecting, compiling, and distributing that data on their behalf.

Unfinished business

Finally, seeing as how 2020 stole the momentum of several emerging legislative trends, once we are able to move into a post-COVID world, the stalled efforts we’d previously predicted for 2020 may resurface. For example, we may see laws requiring predictive scheduling resume their prior place in the spotlight.

In addition to these trends and changes affecting HCM compliance, employers may also see increased legislation and agency guidance affecting permissible (and impermissible) policies and practices within the workplace. For example, further data privacy regulation, efforts to eliminate workplace discrimination and harassment, expanded health and safety protocols, and guidance on workplace drug testing and vaccine mandates are likely. While these topics are beyond the scope of this article, additional thought leadership on these and other workplace themes is emerging.

Interested in developments outside the U.S.? Stay tuned for future articles exploring the HCM compliance and legislation year ahead for Canada, the United Kingdom, and Australia.

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