Pay Transparency, Tax Write-Offs, and AI Wishful Thinking

Hey everybody, it's Gene Marks, and welcome to this week's episode of the Paychex THRIVE Week in Review. This is where we take a few items of news that impacts your small business and mine, and we talk a bit about it as well. Hey, before we get started, just want to remind you it is tough enough running a small business. Even with AI we all have to wear a lot of hats and do a lot of things. That's why it's so important to have a partner in HR that can help you do a lot of the things tasks so that you can make your employees more productive and hopefully more profitable for your company as well. Partner with Paychex. Paychex will undertake a lot of the HR responsibilities that you're doing right now and save you a lot of time. If you'd like to learn more, go to paychecx.com/MeetPaychex that's P-A-Y-C-H-E-X.com/M E-E-T-P-A-Y-C-H-E-X. There'll be a link to this in the notes of this episode.

Okay, let's get to the news. The first item comes from Mercer. Mercer is a large health care consulting firm. They released a report that said that only half of U.S. employers are ready for paid transparency rules. A new Mercer survey finds that while progress is being made, only about 54% of U.S. employers are prepared to comply with emerging pay transparency regulations. That's up from 39% the prior year, which is good. Only 17% have fully implemented enterprise-wide strategies, highlighting a major execution gap. Compliance is the primary driver, that's 93% say that, not employee engagement or trust building. Meanwhile, expectations are rising. Most employers plan to disclose salary ranges in job postings by 2026. The bigger issue is structural. Many organizations lack consistent compensation frameworks and communication strategies. Only 13% have protocols for handling external pay inquiries, creating reputational risk. Mercer emphasizes that companies treating transparency as a strategic tool, not just a compliance exercise, will see gains in employee trust, engagement, and retention.

So here's the takeaway. There's no federal law or rule about pay transparency. And remember, just generally, pay transparency means when you have a job post, either internally or externally, you want to make sure that you're giving a range of what that salary is. You're transparent with the pay. Now I realized that could open up a can of worms with certain employees, employees, or whatnot. But at the same time, being transparent is a good practice. The other thing is is that we want to make sure that people from all genders that are, that are applying for jobs know what the salary ranges are, so there's no discrimination. I think it really does help to protect employers. It's not just, you know, just some kind of a compliance thing. Now, many states have pay transparency laws, but many states do not. For those states that do have those laws, Mercer is saying that a lot of employers are not keeping up with them. My advice to you regard, regardless of what state you're in, whether you have a law about pay transparency or not, I just think it's a best practice to, you know, to practice pay transparency. When you list a job on any job search site or if you post a job internally, make it a practice to give us salary ranges as to what you know, what it is, make sure it's a competitive salary and it's, you've looked it up to benchmark it the right way. But you know, whether or not there's a law that's pushing you to do it, I think it's just good employer practice. If there is a law in your state and you're not complying with it, it could be big trouble. And it's not the kind of reputation, you know, reputational thing you want your business to be dealing with. So, employers, you know, bottom line, from the Mercer study, employers are still trying to keep up with these pay transparency rules.

The second news comes from 1-800Accountant. They had a survey that revealed, are you ready, because it's tax time. 57% of small business owners admit questionable tax deductions. A survey by 1-800Accountant reveals that 57% of small business owners admit taking deductions they believe are questionable, underscoring widespread confusion around tax rules. Based on responses from over 300 owners, the study highlights uncertainty or uncommon deductions such as vehicle expenses, home offices, and meals. Many entrepreneurs are navigating gray areas without professional guidance, driven by concerns about overpaying taxes or making errors or triggering audits. The findings suggest that complexity, not intent, is the root issue. Business owners are juggling operations, payroll, and compliance, increasing the likelihood of mistakes. The takeaway is clear. There's a strong need for clear guidance and professional support to help small businesses maximize legitimate deductions while staying compliant.

So, a few items of advice here from a CPA. Okay, you know, taking deductions for things that you know are not business expenses is not a great idea. And I have many clients that do this and it is not a good practice to do. Not only if you get audited and the IRS finds it could you be, you know, fined for it or owe more taxes, but it really has a big problem about your trust and credibility, and kind of opens up the door to the IRS asking even more questions or digging even deeper into your accounting practices. I don't think that's a road that you want to go for just to save a few bucks on taxes. So, the bottom line is that you really want to try and be compliant and make sense of your business deductions. Now, you know, you have the intent of complying, but sometimes there are gray areas. I get that as well. You know, check out with a CPA or a tax professional, go to AI and ask for questions as well, but have it verified by other sources too. And if you do decide to take a tax deduction that's in a sort of questionable or gray area, have a basis for doing it, have a reason for doing it, and also make sure you're doing it consistently over time. So, it's not like it's, it's... There's a perception where you're just using it to save money this year but not saving money next year. That's also not a good thing. Being consistent is good. So again, not a great practice to take tax deductions that are questionable. If you think you have an argument for it, you think that you're in compliance, obviously, check with tax experts, check with AI, verify what AI tells you. But at the same time, it's better to be conservative than not. You have a lot of other things to worry about than whether or not the IRS is going to find fault with an audit that they might do on your business. And finally, there's our AI news of the week and our AI story of the week here. This is a Goldman Sachs study that found that small businesses love AI, but most actually aren't using it very well. This is a study that showed that AI adoption among small businesses is widespread but pretty shallow. And I'm seeing this too. About 76% are using AI, and 93% report positive results, mainly improved efficiency and productivity. However, ready, only 14% have fully integrated AI into their core operations, revealing a significant gap between experimentation and real business impact. Many firms are using AI for basic tasks like content creation or customer service, but far fewer applying it to revenue-driven activities like analytics or supply chain optimization. Key barriers include lack of technical expertise, tools overload, and data privacy concerns. Notably, more than 70% of owners say they need training and implementation support. The bottom line, small businesses aren't asking whether to use AI anymore. They're struggling with how to operationalize it effectively. You know what? I am going to take issue with this Goldman Sachs survey. They see the key barriers are lack of technical expertise and overload of tools and data privacy concerns. I get that those are all some barriers, but how about the barrier of it just not working very well? How about the barrier of a lot of AI still hallucinating even in our daily world? Right now, the AI agents and the AI automation that we are seeing among our applications as it comes trickling down from larger corporations, it's still very early stages. It's still very unreliable. There's still a ways for it to go. The bottom line is this, if you're a small business owner like myself, you should be digging into AI. You should be using generative AI tools like ChatGPT and Claude, and you know, Grok and Google, Gemini and Copilot. That's all great. You should be using IT to analyze contracts, create policies, give you some business advice as well.

When it comes to actually relying on it for your core business operations to actually lean into the AI agents that are starting to come out to actually perform functions in your business, I kind of get it if you want to wait, and I think you should wait a little bit because eventually you're going to be using it. But we really do want to make sure that it works well and that we can rely on this stuff before we actually start employing it into the core operations of our business. Large companies have the resources to take these risks and lose money on it. Small businesses don't. So, work with AI, try it out, get used to it, get familiar with it, train your employees on it, all that stuff, and wait a little bit until some of the agentic AI tools start rolling out and become actually something that returns ROI for your business.

My name is Gene Marks, and you have been watching or listening to this week's episode of the Paychex THRIVE Week in Review. Now, if you need any help or advice or tips in running your business, please sign up for our Paychex Thrive newsletter. Go to paychex.com/Thrive. And if you need help in running your HR operations, employ Paychex as a partner or at least consider it. Go to paychex.com/MeetPaychex, M-E-E-T-P-A-Y-C-H-E-X and you can find out all the things that Paychex can do for you to help you run your business more productively. Thanks for joining us this week. We'll see you again next week with some more news that impacts your business and a few thoughts on that news. Take care.

Do you have a topic or a guest that you would like to hear on THRIVE? Please let us know. Visit payx.me/ThriveTopics and send us your ideas or matters of interest. Also, if your business is looking to simplify your HR, payroll, benefits, or insurance services, see how Paychex can help. Visit the resource hub at paychex.com/WORX. That's W-O-R-X. Paychex can help manage those complexities while you focus on all the ways you want your business to thrive. I'm your host Gene Marks, and thanks for joining us.

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