HR and benefits can be an intimidating topic for a small business owner. You must navigate federal and local employment laws, avoid cumbersome fees and fines, ensure your policies are both compliant and beneficial to your company all while providing enough benefits to your employees to keep them happy.
But, some creativity in your HR & benefits packages can help you attract high performing employees and incentivize them to grow your business.
This HR & Benefits Starter Kit will help you turn your HR & benefits compliance challenges into your business’ strategic advantage. It addresses five key areas:
- Policies & Procedures
- Performance Management
Discrimination is the number one legal risk through the hiring process. This includes unintentional discrimination.
- Age (Age Discrimination in Employment Act)
- Race, sex, religion, national origin (Title VII, Civil Rights Act)
- Criminal background (Fair Credit Reporting Act)
- Genetic information (Genetic Information Nondiscrimination Act)
- Disability (Americans with Disabilities Act)
The list above includes a small sample of “protected” classes in which the laws prohibit discrimination in the hiring process.
A good starting point to ensure you aren’t running afoul of these laws, intentionally or unintentionally, is to review and implement the Equal Employment Opportunity Best Practices for Employers and Human Resources/EEO Professionals. The EEOC’s Best Practices include:
- Diversifying your pool of candidates
- Conducting self-analyses to determine whether current practices disadvantage certain people
- Ensuring your selection criteria does not exclude certain groups of people
- Opening jobs openings to all eligible employees
- Clearly stating the criteria for promotion
- Making sure outside agencies don’t search for candidates based on race or color
Studies show that diverse workforces are more productive and achieve more than just legal compliance. Build your team with a focus on different backgrounds that can lead to a competitive advantage.
Because a diverse workforce is the most productive, you can avoid discrimination and improve your company’s output by proactively fostering inclusivity in your hiring process.
Wage compliance includes two elements:
Classification divides your workforce into three categories (independent contractors, non-exempt employees, and exempt employees).
Independent contractors are not your employees. They are different businesses. You owe independent contractors only what you contractually agree to.
Independent contractors are attractive because business owners have no obligation to withhold taxes, pay benefits, track hours, pay minimum wage, nor any other obligations that an employer owes its employees.
However, in recent years, state governments and the federal government have heavily scrutinized independent contractor classifications. Many independent contractors have been granted employee status, leaving employers with large penalties.
Depending on the state, courts have issued different tests to determine whether a worker is an independent contractor or an employee. California, for example, has specifically stated that independent contractors who rely on a company as their primary source of income, must re-classify those contractors as W-2 employees.
Most of the tests use the concept of control as the deciding factor. No single factor automatically creates employee status.
If you can answer “yes” to any of the following questions, you likely have an employee, not an independent contractor:
- Do you control working hours, conditions, and equipment?
- Did you issue the worker a company email address?
- Does the worker work solely for your company?
- Is the worker subject to the same policies and procedures as your employees?
- Does work for your company preclude the worker from obtaining work from another company?
In most cases, the burden of proving independent contractor status falls with the business. Keep this in mind when classifying a worker.
Employees are either non-exempt or exempt. Non-exempt employees are paid hourly. You must ensure that their time is tracked correctly, and overtime paid for any time worked beyond 40 hours in any given work week.
Most employees are non-exempt. There are six employee categories considered exempt from minimum wage and overtime laws:
- Executive Exemption
- Administrative Exemption
- Professional Exemption
- Computer Employee Exemption
- Highly Compensated Employee Exemption
- Outside Sales Exemption
To learn more details of each exemption, review the Department of Labor’s Fact Sheet. You are responsible for tracking time and paying employees per their classification, not the employee.
Misclassification leads to lawsuits. If you treat non-exempt employees as exempt employees, you risk paying back wages, taxes, penalties, interest, and attorneys fees for your misclassification.