To change the subject slightly, the golden rule of payroll is to KEEP YOUR BOSS IN THE LOOP. You should NEVER surprise your boss.
I have never had a boss who knew a tenth of what I do about payroll, but my boss is still my boss, and has every right to be keep in the loop and make decisions. Even (IMO) dumb decisions.
Also, buy a copy of the Payroll Source Book. This is the payroll bible. You need a fantastically good reason to not do what that book says. Also, if you are in a lot of states, get one of the paid payroll library services (APA, BNA, CCH, RIA). If you pay a big league labor law firm for an answer, 9 times out of 10 it is just a copy of what of those services say.
Ask them to cite THEIR opinion. A long time ago someone told me if you cannot support your answer, you do not know the answer.
Any payment not based on hours worked in the pay period is legally supplemental wages. This includes bonus payments, vacation/PTO buyouts and pretty much everything else. Employers are not required to use flat tax but are required to use a legal method. Flat Tax is easy. Everything is (a lot) harder. Only dumb employers go out of the way to make work for themselves. I would need a very good reason to consider using a method other then Flat Tax. Generally the reason is my boss tells me to.
Payroll is hard on a good day. Smart employers do nothing to make it harder. I am huge believer in the KISS principle.
Yes, since they were given in the employment relationshiip and the employer would owe their portion of taxes (sui, futa, fica and possibly other benefits that are based off of pay such as workers compensation premiums, etc)
btw, this is a terrible precedent to set.... is there going to be any type of discipline/consequence at all?
You do what can do. Presumably your payroll service or software provider who will handle the update. You will send the new form to your employees, who will ignore it and you. The key is your company is not doing W-4s out of the goodness of your hearts. This is a legal requirement. Do EXACTLY what the law says. No more. No less. If some employees end up in the soup at year end, that was their decision.
It is not payroll's job to help employees with THEIR W4s or otherwise give tax advice. There are legally very good reasons to stay out of it.
At our two locations with timeclocks, I ask the managers to input when the employee has missed work and why as a time edit. It shows up at .01 of an hour if they do it correctly and shows who edited it. Our software allows us to pull time between any two dates so it is the best way we have found to capture it. So I can pull that report on any single (or group of) employee(s) and get a good idea on how much time was missed by a specific person or during a specific time frame.
We've tried pretty much every paper method and every time management changes, we lose it and the data and have to start over with no history on absenteeism/tardiness. At least this way it says in the timekeeping system historically. We don't really have an HRIS system beyond payroll and that timekeeping system.
I'm a little late for this but before we switched to a hand scanner/time clock we used to use an old fashioned time clock/timecard system. Each manager would review the timecards and input the hours onto the excel sheets for payroll and then forward the cards to us for our records. My payroll is only half of your size and I am cringing at the thought of having to run payroll that way now.(we made the switch in 2009)
Find out the source of the errors to avoid a repeat but do your research to convert to automated timekeeping. It can prevent a whole host of problems as well as make your life a whole lot easier.