The Crucial Role of Payroll Testing During Open Enrollment

Open Enrollment is a critical period for employees to make changes to their benefits packages, ensuring they have the coverage they need for the upcoming year. Amidst the hustle and bustle of these changes, one aspect that must not be overlooked is payroll testing. Testing the payroll system during open enrollment is not just a routine task; it’s a crucial step that ensures a seamless and error-free transition for both employees and the organization. In this blog post, we’ll delve into why payroll testing is of paramount importance during Open Enrollment.

Reason #1: Ensuring Accuracy

Payroll accuracy is paramount, especially during open enrollment when employees may be making changes to their benefits selections. Any miscalculation or error in the payroll process can result in incorrect benefits deductions, leading to frustrated employees and potential legal and financial implications. Payroll testing allows organizations to verify that the changes made by employees are correctly reflected in their paychecks, leaving no room for mistakes.

Our recommended first step would be to review the period schedules and make sure that next year’s period schedules are ready, but there is more to this. Not only do you want to have your payroll department update the period schedule for you prior to your OE go-live, but they can also see how many deductions will be deducted in a year. There are two ways that deductions can be configured:

• Looking at the Period End Date or at the Pay Date (Benefits Enrollment Rules vs Pay Component Configuration)
• Special Scheduling (for example: take deductions on 1st and 2nd check of the month, Pay Component Configuration)
• Override Frequencies (Pay Component Configuration)

Note: you will also want to review the current year’s period schedule to make sure that you have the correct number of periods happening in the current enrollment period. For example, you may have a 27th biweekly period in the coming year for which you do not want deductions to be withheld.

Reason #2: Preventing Disruptions

Open Enrollment often involves modifications to various benefits plans such as health insurance, retirement contributions, and flexible spending accounts. These changes can impact an employee’s net pay and tax withholdings. Through thorough payroll testing, organizations can identify any discrepancies or glitches that might arise due to these changes. Addressing these issues before they affect employees’ pay ensures a disruption-free payroll process during open enrollment.

If you use the benefits module or import the amounts via payroll input, you want to make sure that you have a matching pay component for every benefit type. The payroll team along – with the coordination of the benefits team – can audit the current pay components. Some items to consider include:

• Ensuring all benefit plans are attached to a pay component (for those that use Workday Benefits module)
• Creating any new pay components for any new benefits

Reason #3: Compliance and Legal Considerations

Open Enrollment involves not only benefits changes: it also includes potential changes in tax withholdings and other legal requirements. Incorrect payroll calculations could lead to non-compliance with tax laws or benefits regulations. Comprehensive testing ensures that the payroll system considers all legal and regulatory aspects, minimizing the risk of compliance issues. Be sure to:

• Review Pay Component Limits: while Workday will maintain any Workday owned limits, custom limits will need to be reviewed for accuracy
• Check for employees that have an override limit entered for the current year to make sure it is either going to end or will continue as needed

Reason #4: Mitigating Financial Risks

Errors in payroll calculations can result in financial repercussions, ranging from fines and penalties for non-compliance to over- or under-payments to employees. Effective payroll testing helps organizations identify and rectify issues before they escalate into significant financial risks.

It is recommended that you run a test payroll during your Open Enrollment cycle that’s equal to the same period the new enrollments will be effective. While this typically is the first of the year for a lot of our clients, it could be a different cycle for your company. The important thing to remember is that you would want to run the first pay period in your new benefit enrollment period. This will catch a great deal of common issues including:

• Incorrect benefit rates
• Incorrect payroll limits
• Non-active benefits continuing when they shouldn’t

Reason #5: The Employee Experience

A smooth Open Enrollment process enhances the overall employee experience. Employees who see their benefits changes accurately reflected in their paychecks feel reassured and valued. On the other hand, errors in payroll can lead to frustration and confusion among employees, tarnishing their perception of the organization.

In Summary: Make Payroll a Priority

As organizations prepare for open enrollment, payroll testing should be a top priority. It’s the linchpin that holds together the entire process, ensuring accuracy, compliance, and employee satisfaction. By investing time and effort into comprehensive payroll testing, organizations can navigate open enrollment with confidence, knowing that their payroll system is primed to handle the changes seamlessly. In doing so, they create a positive and hassle-free experience for both their employees and their HR teams.

Do you need help with your Open Enrollment process? Don’t wait, contact us today!