Paychex, Inc. released its predictions for regulatory changes in 2012 that could affect small businesses. “Some of these issues will lead to changes that are made legislatively, and others may be changed through simple rule modifications. Regardless of the level of attention they receive, changes to each of these issues could require business owners to make significant adjustments to the way they manage their businesses,” said Martin Mucci, Paychex president and CEO.

Here are a few of Paychex’s predictions that could affect compensation managers:

Worker Classification—The misclassification of workers is an issue that promises to receive more scrutiny in 2012. The IRS recently unveiled an opportunity for eligible employers to voluntarily reclassify workers as employees in exchange for partial tax relief from past federal employment taxes. In late 2011, the U.S. Department of Labor agreed to work with the IRS, as well as several states, to share information and coordinate enforcement to ensure that employees receive protections they are entitled to under federal and state law.

Health Care Reform—The Supreme Court is expected to rule in 2012 on the constitutionality of the individual mandate provision in the Affordable Care Act. The court’s decision, and the potential fallout, could have broad impacts to businesses.

Unemployment Insurance Implications—Congress is contemplating the reinstatement of the federal unemployment surtax, which would result in virtually all businesses seeing higher unemployment insurance taxes. Companies in many states could see higher taxes due to the repayment of outstanding federal loans that were taken to allow for continued payment of benefits and to replenish depleted state unemployment trust funds. Many states are also contemplating additional or more extensive employer reporting requirements in an effort to decrease unemployment insurance fraud.

401(k)—In 2012, additional fee disclosures will be required by 401(k) service providers to plan sponsors, and by plan sponsors to participants, with the intention of providing greater transparency around retirement plan fees. The limits for contributions to those plans will increase in 2012. Other regulations that will be enacted in 2012, or are under consideration, include those that would broaden the definition of who would be considered a plan fiduciary, make investment advice more accessible to plan participants, and restrict the number of loans an employee can take from their 401(k).

Taxes—2012 will bring a number of important tax changes, including a higher Social Security wage base and changes to transportation and adoption assistance benefit limits. The accelerated depreciation benefits available to most businesses for certain asset purchases which were in place in 2011 may expire or be scaled back in 2012. All employers will need to keep an eye on what are likely to be additional tax changes as the year progresses.

Form W-2—The IRS further delayed the requirement for smaller employers to report the cost of employer-sponsored health coverage on employee Forms W-2, indefinitely postponing it until further guidance is issued. However, employers filing 250 or more Forms W-2 in 2011 are required to include this cost on the W-2 starting in tax year 2012. The health care amounts reported on the W-2 will be strictly informational and not taxable to the employee.

Employment Law—Employers will need to keep current with federal and state legislative and regulatory developments that are likely to impact human resource practices. Many states now restrict the use of an employee’s credit information in employment-related decisions or are considering doing so. Additionally, the U.S. Department of Labor and many states have enacted or are considering regulations to provide greater transparency to workers. These regulations specifically focus on the amount and calculation of workers’ pay, especially as it relates to minimum wage and overtime requirements.

Job Creation —President Obama will continue working with Congress in 2012 to jump start hiring. While the President’s Jobs Bill wasn’t passed in the same form it was proposed, legislation was passed in 2011 to provide tax credits for hiring veterans and relief for the long-term unemployed. Additionally, after much debate, the temporary reduction of employee payroll taxes, due to expire on December 31, 2011, was extended for an additional two months and includes a new “recapture” provision, which applies only to those employees who receive more than $18,350 in wages during the two-month period. Pending further negotiations, the tax cut could potentially extend through 2012. Additional provisions that could be considered as part of the job creation effort include elements from the President’s proposal that have not yet been passed, including: earmarking funding for infrastructure projects and measures to help entrepreneurs and small businesses access capital and grow.

For more information about Paychex, visit www.paychex.com.