hr compliance

4 Crucial Stages of HR Compliance for Small Business Owners

By Rachel Fausnaught

Human resources is the glue that holds your tightly wound small business together. This critical business function handles everything from hiring, administration, and training of your staff. HR keeps you compliant, and importantly, keeps your employees happy.

As a small business owner, you might not have the need for a full HR department. If that’s the case, here are some crucial components to know about HR compliance.

Stage 1: Before Making a Hire

First impressions are everything. The best way to make a lasting impact is with an impactful and compliant job description.

Keep these tips in mind:

  1. Do a job analysis to find out what exactly you need out of the open role.
  2. Craft a catchy title – most job seekers scan this first.
  3. Include the necessities. These must follow requirements under: the Americans with Disabilities Act (ADA), Family and Medical Leave Act (FMLA), and the Fair Labor Standards Act (FLSA).
  4. Describe how the role fits in with your company culture.
  5. Don’t put an exhaustive list of requirements into the description. It’s important not to overwhelm the job seeker. That being said, be sure to include the following: summary, minimum required qualifications, essential job functions, benefits, a disclaimer, and exempt vs. non-exempt.
  6. Give clear instructions on how the candidate should apply to the job.

Of course, a well-constructed job description is only the very beginning. Interviewing for the role takes some preparation on your end as well.

Consider asking behavioral questions to asses the candidate’s problem-solving and communication skills. For example: “What’s the most difficult decision you’ve ever had to make? How did you arrive at your decision and what was the result?” Look for a positive attitude in your candidates and ensure you actively listen and take notes. Remember, the candidate is likely interviewing you and the company as much as you’re assessing them, so preparation will go a long way.

Once you’ve found your ideal candidate, and they accept your offer, well that’s when the real work starts.

Stage 2: Successful Onboarding Tactics

Job. Offer. Accepted. What a relief! After all of the effort you put in to get this candidate on board, it’s critical that you onboard them in an enjoyable and impactful manner.

First thing to consider: Should you run a background check?

Considering the high cost of employee turnover, you want to have full confidence in your hiring choice. But before you decide to implement background screening, ensure that your process is in compliance with the Fair Credit Reporting Act.

Consider issuing a background check post job offer – this will help you avoid any sort of discrimination issues.

Next, successful onboarding.

According to O.C. Tanner, up to 20 percent of employee turnover happens in the first 45 days. To steer clear of becoming a part of that statistic, you’ll want to implement an engaging onboarding program for your new hires.

If you haven’t considered moving this to a digital platform, here are a few reasons you might want to consider it:

  • Less paperwork for you and your employees
  • Can help you avoid human error in filling out tax forms
  • Can be cost-saving if it integrates with your other processes
  • Can allow for more personal and engaging experiences – like microlearning and gamification

Remember, engaged employees are happy employees – and that’s what your small business needs.

Stage 3: Employee Lifecycle

There are hundreds of small business HR regulations to keep on your compliance radar. And each one is complex, so it’s always a good idea to reach out to a trusted advisor before making decisions.

We’re all humans (hence human resources). So mistakes do happen. Here are a few common HR compliance issues that small businesses face. The more you educate, the better off you’ll be – no matter the size of your HR budget.

Wage and hour rules

Wage and hour rules include everything from minimum wage and overtime, to meals and breaks and hiring minors. Pay rules are extremely complex and can get as specific as the township you operate in. Make sure you’re staying up-to-date on any location specific regulations.

Benefits

If you can afford to offer benefits to your small business employees, you’re already on the right track. But with benefits comes compliance issues – like issues with paid sick leave FMLA, Employee Retirement Income Security Act (ERISA), or Consolidated Omnibus Budget Reconciliation Act (COBRA).

Data entry mistakes

Even if you do use a digital onboarding platform like mentioned above, data entry can still be an issue. Check, and triple check that any vital employee data you must enter is done correctly.

Misclassification

Knowing the difference between independent contractors, full-time, and part-time employees is mandatory for complying with DOL and IRS guidelines. You’ll want to consult the IRS for this one.

Stage 4:  Post-Employment

When an employee hands in their resignation letter, you’re likely hit with a flurry of emotions. While you want the absolute best for the people you’ve grown to respect, you can’t help but wonder how this is going to affect your business.

One way to find out – conduct an exit interview. Sure, it might seem uncomfortable, it but can give you insight into how you can make your small business operate more smoothly.

Here are a few things to consider:

  • Start with a survey, and keep it completely anonymous. It’s the best way to glean honest feedback.
  • Consider a phone call rather than an in-person interview. It allows the person to be in control and say what’s really on his or her mind.
  • Always be positive. The sole purpose of the conversation is to make improvements at your business (not get anyone in trouble).

Don’t forget about the other compliance factors associated with an employee leaving. Did you offer them retirement benefits? Have you thought about COBRA?

It’s a good idea to go over all of these items mentioned in each stage with a trusted advisor before making any decisions. After all, HR is the main component to keeping your employees happy and your business compliant. 

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Rachel Fausnaught
Rachel is the Corporate Communications Specialist for PrimePay. Before starting her career in the marketing world, she worked for a local TV news station writing for the website and handling the station’s social media platforms. A creative writer at heart, Rachel loves to insert her style into any of the copy she creates. Outside of work, you can find Rachel playing soccer, or cheering on her Steelers with a Starbucks in hand.

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