Payroll & Tax Issues for Healthcare Employers

Two women in medical attire analyzing data on a tablet screen.
By Mary Walsh | 10/19/2023 | 15 min read

Navigating payroll and tax compliance in the healthcare industry presents unique challenges due to sector-specific regulations and frequent workforce changes. Whether it’s managing turnover, staffing, overtime, regulatory concerns, or handling regular payroll and tax calculations, healthcare providers must remain adaptive, informed, and engaged with tools that support efficiency and legal compliance. By leveraging specialized solutions, healthcare employers can ensure accurate and timely payroll practices; return focus to patient care and business growth; and remain tax-compliant in the process.

Staffing, Turnover, and Scheduling

One of the most common payroll and tax issues for healthcare employers is managing staff shortages, turnover, and scheduling. Since the healthcare industry has an average staff turnover rate of nearly 26% -- with recent increases to RN turnover in particular – it’s essential for healthcare employers to possess the HR tools necessary to support talent acquisition and onboarding, as well as accurate payroll and tax processing for existing staff, temporary employees, or on-call staff who must work overtime due to dynamic staffing needs.

Payroll and tax management in the healthcare industry is further complicated by the multiple pay rates used for different roles, positions, shifts, etc. Fortunately, using payroll software from a qualified provider can streamline, simplify, and automate this process, ensuring consistently accurate calculations and payment for employees. When healthcare employers utilize scheduling and time and attendance features, as well, they improve workforce management, employee self-service options, and employee experience.

According to a study by Nursing Solutions Inc. (NSI), an average hospital can save up to $262,300 annually for each dropped percentage of RN turnover; this figure omits additional cost savings from retaining other roles within a healthcare organization. One of the key tools to strengthen employee retention in the healthcare industry is HCM technology for payroll, tax management, and time & attendance. With the right software and expert support to keep HCM processes intuitive and user-friendly, organizations can significantly improve employee experience, organization-wide transparency, and create trust in the reliability of payroll processes that regularly affect personnel.

Tax Concerns

Healthcare organizations, whether large-scale, tax-exempt, or otherwise, must pay a wide range of taxes: from excise taxes and employment taxes to income taxes and local or state payroll taxes. While working to fulfill these tax obligations, healthcare employers must also stay up-to-date with local, state, and federal regulations that are specific to the healthcare industry, or requirements that uniquely apply to the jurisdiction(s) where they operate.

With the support of a qualified payroll and tax management provider, you can enjoy compliance and payroll peace of mind whether your organization operates locations in multiple jurisdictions, employs a range of employee types (full-time, temporary, on-call, etc.), or has unique tax obligations as a large-scale employer. We help your organization streamline everything from new hire reporting and state & local withholding to federal and state unemployment returns and much more.

Data Security, Recordkeeping & Compliance

Beyond healthcare payroll regulations and taxation requirements, healthcare employers are also obligated to responsibly handle a wide range of sensitive and confidential data (patient, employee, and organizational). Regarding regulatory compliance, employers are required to properly secure this data while ensuring that their staff can easily access their personal data and even make changes or updates as needed. When it comes to payroll, scheduling, or time & attendance, an employee’s ability to update direct deposit information, request/confirm a shift change, or review other important employee resources, is critical to supporting employee retention and engagement.

When healthcare employers utilize HCM software, they enhance employee self-service and grant employees greater agency and transparency when managing their employment information, while likewise enhancing the security of their data by using an encrypted, cloud-based platform that enables them to set and readjust data access permissions as needed.

Payroll, Tax, and HR Support

Troubleshooting staffing shortages, payroll taxes, timely employee payments, and regulatory compliance is infinitely easier with the support of a qualified HCM provider with years of experience supporting healthcare companies. We offer the technology and professional guidance you need to simplify payroll, taxes, and other HR processes, adapting to the specific needs of your healthcare organization based on the size of your company, the jurisdictions where you operate, and the long-term goals of your organization.

Facing payroll and tax hurdles in the healthcare sector? Learn more about how our specialized solutions can streamline your processes and ensure long-term compliance for your healthcare organization. Schedule a consultation today!

DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting, or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.