HR Compliance For Small Businesses

Are you a business owner wondering if you’re ticking all the right boxes regarding HR compliance? It’s a jungle out there, with countless rules about paying employees, discrimination, safety, and more. Compliance failures can lead to severe penalties, employee turnover and potential legal challenges.

But fear not! This blog is your HR 101 guide to HR compliance for small businesses and it simplifies the complex world of compliance. Read on to learn more about these topics:

What is HR Compliance?
Key Areas of HR Compliance and Legal Requirements
Common HR Compliance Challenges for Small Businesses
HR Compliance Checklist for Small Business Owners
Partnering with an HR Compliance Expert

Grab Your Complimentary HR Checklist For Small Business Owners

What is HR Compliance?

HR compliance refers to performing business operations in adherence with federal, state, and local laws. These laws can pertain to employment, discrimination, wages and payroll, overtime pay, and leaves of absence, among other topics. The goal of HR compliance is to protect your business and employees, making sure that the work environment is not only productive but also equitable. Failing to meet HR compliance standards can lead to hefty fines, turnover, and potential legal action, so you’ll want to stay on top of all the compliance factors relevant to your business.

Key Areas of HR Compliance and Laws

It takes a lot of effort to treat everyone in the workplace fairly. Let’s dive into the main areas of HR compliance for small businesses and the laws that go into supporting fair employment practices:

1. Hiring and Onboarding: The hiring process must comply with anti-discrimination laws such as Title VII of the Civil Rights Act, which prohibits discrimination based on race, color, religion, sex, national origin, and quite a few other “protected classes”. The Americans with Disabilities Act (ADA) and the Age Discrimination in Employment Act (ADEA) are also crucial to keep top of mind in the hiring stage.

2. Wage, Hour, and Leave Management Laws: The Fair Labor Standards Act (FLSA) sets the Federal minimum wage, overtime pay, and child labor standards. The Family and Medical Leave Act (FMLA), a Federal leave of absence, provides eligible employees with unpaid, job-protected leave for specific family and medical reasons. The California Family Rights Act (CFRA) is a leave of absence that protects California employees. The two leaves of absence can run concurrently or separately, depending on the reason for the leave.

3. Employee Classification and Benefits: Correctly classifying employees as either exempt or nonexempt (salary or hourly) under FLSA rules is vital, as is compliance with the Employee Retirement Income Security Act (ERISA) for benefits plans. Classifying contractors correctly, especially within California, is critical.

4. Workplace Safety: The Occupational Safety and Health Act (OSHA, and Cal-OSHA in California), requires employers to provide a safe and healthful workplace. All employers need an Illness and Injury Prevention Plan with a Covid Prevention Plan as part of the overall plan.

5. Discrimination and Harassment Prevention: Keeping a workplace free from discrimination and harassment requires adhering to laws like Title VII of the Civil Rights Act, the ADA, and ADEA, as well as implementing comprehensive policies and training. Many states, including California, require periodic Unlawful Harassment Prevention Training.

6. Record-keeping: Accurate and compliant record-keeping practices must be maintained, including but not limited to employment records, wage and hour documentation, and safety reports.

7. Termination Practices: The termination process must comply with laws to avoid wrongful termination claims, ensuring the process is fair and documented correctly. This is especially important in 2024, as laws have recently changed.

8. Wage and Hour Laws: California employers have the added burden of complying with onerous wage and hour laws like, meal periods, rest breaks, on-call time, and reporting for work time.

HR Compliance for Small Businesses | Most Common Challenges

Keeping up with ever-evolving labor laws, rules, and regulations is a real challenge when it comes to HR compliance for small businesses. When you already manage so many other aspects of running a company, keeping up with these new changes can sometimes feel overwhelming. Here’s a breakdown of some common challenges and mistakes in HR compliance:

Evolving Labor Laws: Laws and regulations regarding employment are constantly updated and expanded, requiring vigilance and adaptation from business owners. Failing to keep up can lead to violations, even if unintentional.

State and Local Regulations: Small businesses also often struggle to understand varied laws across different areas, especially when employees live in other states. This requires being mindful of not only federal rules but also specific state and local laws, which might offer stronger employee protections than federal guidelines, such as higher minimum wages or stricter anti-discrimination measures.

Misclassifying Workers: One of the most frequent errors businesses make is incorrectly classifying employees as independent contractors or misidentifying exempt and nonexempt employees, leading to issues with wages, taxes, and benefits.

Neglecting Data Privacy and Document Storage: Small businesses often underestimate the importance of data privacy and proper document storage, which can become problematic, especially during an audit.

Failing to Follow Specific Employment Laws: Every small business must adhere to the Fair Labor Standards Act (FLSA), Occupational Safety and Health Act (OSHA), and the Consolidated Omnibus Budget Reconciliation Act (COBRA), among others, which set standards for Federal minimum wage, workplace safety, and health insurance continuation, respectively.

HR Compliance Checklist for Small Business Owners

Creating an HR compliance checklist can help you stay caught up with requirements and satisfy all important compliance domains. Your checklist should cover the major rules and regulations your company needs to follow, establish who is responsible for managing each requirement, how records will be managed, notes of important dates or deadlines, and the contact info for regulatory agencies. Reviewing this checklist regularly (at least every six months) will help you stay on top of any regulation changes. Here are a few key areas you should focus on when it comes to HR compliance for small businesses to make sure you have all your ducks in a row:

Hiring Practices: Hiring processes must be fair and comply with anti-discrimination laws. Use various sources to find candidates, write accurate job descriptions, use core interview questions consistently, and train supervisors to conduct compliant interviews.

Employee Policies: Create a handbook that outlines your company’s policies to support compliance requirements regarding benefits, leave, pay, and nondiscrimination. Update this handbook annually at a minimum and train employees and supervisors to be familiar with it.

Equal Employment Opportunity (EEO): Your practices should be free from discrimination and harassment. Have clear policies in place, provide training, and promote equity and inclusion in the workplace.

Compensation: Align your compensation strategy with your business goals while considering compliance with laws on paid sick leave, wage payment, payroll requirements, overtime, and pay equality. Be transparent with employees about how pay is determined.

Performance Management: Training is important to help employees perform their jobs effectively. Communicate performance goals clearly, provide regular feedback, and allow employees the necessary resources to meet objectives and correct poor performance.

Record-keeping: Keep accurate records as required by law, including new hire paperwork, performance issues, and employee files. Sensitive information should be stored securely with access only to authorized employees.

Partner with an HR Compliance Expert

Partnering with Next Level Strategies HR is an excellent opportunity to protect your business through our expert advice. Our HR compliance services help you evolve to a well-structured, compliant, scalable business without losing your unique culture. We help you find and attract excellent employees, onboard them effectively, support you to manage their performance, pay them timely and accurately, implement essential policies, create compliance materials like employee handbooks, and guide you safely as you scale and grow.

Feel free to contact us today by filling out the form below to begin our discussion and take your business to the next level without the hassle.

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