Obvious admission: I’m a CPA. What in the world am I doing talking about HR compliance?
It’s simple. When a small business owner violates HR rules, it can result in inaccuracies and costly penalties or fines, deeply impacting the business’ bottom line. We’re business advisors as much as anything else, so a little HR compliance advice is definitely warranted. Understanding your HR responsibilities and utilizing the right HR tools and resources allows you to focus on the growth of your business and avoid costly mistakes.
Small business owners with just a few employees typically rely on themselves instead of an experienced HR manager to handle compliance. And that’s where it gets overwhelming. Human resources rules and regulations are often as complicated and cloudy as tax rules and regulations. Having a deep understanding of them can feel like a (burdensome) full-time job. 1 in 5 businesses owners actually reports lacking confidence in various aspects of human resources. The top three misunderstood or breached regulations are youth employment standards, employee classification laws, and overtime laws.
When I speak with clients about HR and compliance, I often find they’re making the same 5 mistakes over and over. Do these issues resonate with you?
- The fast and furious hiring process
Poor job descriptions that give the wrong impression of what’s needed (experience) and what’s desired (attitude and cultural fit), hurried and haphazard interviews that don’t convey the job expectations well, a “good enough” attitude that makes you settle for the wrong candidate...they’re all part of a too-fast hiring process that leads to expensive trouble --more than $50,000 for just one bad hire, in fact. In addition, you’re setting yourself up for all sorts of headaches down the line -- wrongful termination and discrimination suits just a name a few. Who needs that?Create a consistent hiring process and stick with it. Start with an accurate job description that also details the must-have experience that’s needed to get the job. This will weed out unqualified candidates. Be sure to accurately describe your company culture as well so that candidates have a clear idea of whether they’ll fit in or not. Finally, hire as a team. Bring your partners and employees into the hiring process. The new candidate will have to work well with everyone.
- Misclassification woes
Employee vs. contractor is the million dollar question, and the one small businesses often get wrong. The IRS knows this, and it likes to target small businesses to find out just who is misclassifying their workers. Then it levies penalties.
To avoid a financial nightmare, be sure you know the difference between an employee and an independent contractor. In general, a person is considered an independent contractor when they fit the following categories:
Behavioral: The company does not and cannot control what the worker does or how they do their job.
Financial: The company does not control the financial aspects of the worker’s job. It does not reimburse expenses or provide work materials, workspace, etc.
Relationship: The company provides no benefits to the worker and does not have a written contract describing the business relationship between the two parties. - What employee handbook?
A well-written, regularly updated, readily available employee handbook reduces employee violations. There are no two ways around it. Businesses of all sizes need to have some form of an employee handbook. Not having company policies in writing is asking for trouble.
If you can’t write it yourself, contract it out. Just get it done. And make sure you have each employee sign an acknowledgment form stating that they have read, understand, and promise to comply with everything in the handbook. Just do it.
- Training schmaining
A good training program starts with a thorough onboarding process for new hires and continues with professional development programs and events for current staff. By providing new hires with the tools they need to be successful, and current employees with opportunities to grow, employers can rest assured that employees at all stages are performing at peak performance and understand expectations.
- Undocumented issues
Eventually, the day will come when you have to fire someone. No termination is pleasant, but a messy one can lead to unwanted lawsuits. Preparing for termination starts by addressing and documenting performance-related issues when they arise. By all means, give the offending employee time to remedy the issue, but document your discussion and expectations clearly in a letter you both sign. This will serve as valuable evidence that can protect you if termination becomes the only solution.
Now, are you completely overwhelmed? I don’t blame you. Like I said, HR rules are long and detailed. But compliance is necessary to avoid financial disaster.
Get help. One of our best pieces of advice is to automate your HR functions as much as possible, from onboarding to time tracking to training to termination. Automation saves times and reduces the risk of human error. Not sure where to start? Give us a call. We can recommend the programs that best fit your business. We may be accountants, but we have your HR issues covered, too.
What are your biggest HR concerns? How can we help you solve them? Leave your comments below.
