Nearly one-third of SMBs incurred fines for noncompliance in 2013

ROSELAND, USA: ADP, global provider of Human Capital Management (HCM) solutions, reveals a disconnect between midsized business leaders' confidence in their ability to manage regulatory compliance compared to the reality of keeping pace with evolving requirements.

According to a recent ADP Research Institute study, Top Concerns and Challenges of Midsized Business Leaders in 2013, 30 per cent of midsized companies reported unintended expenses, including fines, penalties or lawsuits, in the past 12 months due to noncompliance with government workforce and payroll regulations.

The study found that 83 per cent of midsized business owners are confident their firms are compliant with payroll tax laws and regulations. Similarly, 80 per cent of respondents felt the same about government workforce regulations, such as those related to 401(k) plan management and workers' compensation.

ADP's study also found that nearly one-third of midsized firms fined or penalized in the past year reported an average of six fines or penalties with an average total cost of $91,300. Interestingly, midsized  organizations processing payroll in-house received almost twice as many fines or penalties as those that outsource processing to a third party.

"Our research reveals a 'compliance overconfidence' in the midmarket that's creating costs these firms can ill afford," said Regina Lee, president, Major Account Services and ADP Canada.

"With more than 60 years of experience helping companies adapt to a changing regulatory landscape, ADP's dedicated team of compliance experts and integrated HCM platforms empower organizations to reduce compliance risk and unintended expenses."

Complex legislation, such as the Affordable Care Act (ACA), and growing pressure from global competition make regulatory compliance even more challenging for companies of all sizes. The same ADP study found that 70 per cent of midsized business leaders expressed confidence that their firms would be in "complete compliance" with ACA, yet less than half expressed confidence in their firms' understanding of all the new ACA regulations.

As midsized companies expand operations into multiple countries, they need integrated HCM tools to simplify compliance with diverse payroll laws and streamline reporting, the report added.