HR compliance is making sure that your small business is compliant with not only the laws pertaining to HR, but also your own internal policies and procedures. In my opinion, this is the most important aspect of your HR department. You need a human resources expert, someone who stays on top of the changes and interpretations of the different laws.
If your organization cannot afford an experienced HR Manager or HR Director, then we recommend you utilize the services of a strong HR consultant that can work with your internal team to help you when you have specific questions or there are interpretation concerns on new laws, etc.
HR Compliance for Small Businesses: What Every Owner Needs to Know
All of them, that is why it is important to either have a good HR team or hire a knowledgeable consultant. If I had to pinpoint the top 5 issues that companies miss, they are:
- Required federal and state posters. All-in-one federal and state posters are easy to purchase, yet outdated postings are one of the first issues uncovered during an HR audit.
- Employee classification. Misclassifying workers as exempt versus non-exempt, or treating staff as 1099 contractors, can create serious financial and legal problems for employers.
- Outdated handbooks. Employee handbooks are not legally required, but any handbook a business uses must be current. One business owner proudly shared a 50-page handbook that turned out to be 10 years old. The company was still following policies that had since become illegal, simply because no one knew the laws had changed.
- Required onboarding and separation documents. New hires must receive specific documents on their first day, and departing employees must receive others on their last day.
- Final paycheck mistakes. Many employers don’t realize how strict final pay rules are. In California, for example, terminated employees must be paid immediately, and employees who give at least 72 hours’ notice must be paid on their last day.
What Challenges Do Small Businesses Face With HR Compliance?
When it comes to managing people, there is no telling what might come up. Staying compliant with labor laws tops the list, and treating employees fairly and consistently is a core business best practice.
Laws change often, and new requirements can take effect with little notice. Business owners who aren’t closely tracking these updates can easily miss them, and without a clear understanding of employee and employer rights, they expose their business to significant risk. A relationship with an HR consulting firm, or a subscription service that provides legal updates, helps close that gap.
What Can Small Businesses Do to Stay HR Compliant?
Not every business needs a full-time HR team. For smaller companies, an experienced HR Generalist with five to eight years of experience can often handle day-to-day compliance. The right person brings solid experience, but just as importantly, knows what they don’t know and has access to experts when a situation calls for it.
Anything Else a Small Business Owner Should Know About HR Compliance?
Whether or not a business has an HR position in place, a comprehensive HR audit is one of the smartest investments it can make. Optima HR conducts audits for less than $1,200, giving business owners a clear picture of where they stand. From there, each business decides which recommendations to act on. The goal is simple: give business owners the knowledge they need to make confident, informed decisions.
