You’ve probably heard the old adage that “nothing in life is certain but death and taxes.
Ever since the Sarbanes-Oxley Act (SOX) was passed in 2002, following a spate of high-profile corporate scandals, companies have had to take a wide range of precautions to ensure that their financial statements are well audited and accurate. SOX requires a company’s senior management to attest to the accuracy of their financial reports, under penalty of law. While critics claim that the SOX Act increases the cost of doing business for American companies, and has introduced onerous restrictions that reduce their global competitiveness, supporters contend that the law has ushered in credibility and transparency into the financial world. Several large countries have also introduced laws with similar scope and reach, which indicates that these regulations were, in fact, long overdue.
Onus on HR Departments
How does SOX affect a company’s HR department? HR departments are finding that Section 404 (the costliest, most time-intensive aspect of the SOX Act) has a big impact on their operations and procedures, as it strongly mandates financial reporting accuracy. Since a company’s workforce, salaries, benefits, incentives, and training typically account for 40–60% of most HR budgets, these are significant expenditures that must be painstakingly accounted for under Section 404.
As a result, SOX has made it crucial for HR departments to account for paid time off, which consists of any time not worked by an employee for which a fixed (or prorated) amount of pay is accrued and paid out, often as vacation time or paid holidays. Financially, this time is a liability on a company’s balance sheet, hence it must be stringently accounted for. Striving to comply with Sec. 404 of SOX and avoid potential litigation and penalties are among the main reasons why many companies are adopting automated time and attendance solutions such as TimeOff.
HR departments using TimeOff are able to quickly and accurately account for their paid time off liabilities and obtain up to the minute reports, because the centralized, cloud-based system provides workforce-related information anytime and anywhere internet is available. Moreover, its reporting capabilities can be integrated with all leading business ERP applications, eliminating the hassle and time taken for HR departments to comply with SOX and other workforce regulations under FLSA and FMLA.