2018-09-14 04:00:53HR and ManagementEnglishWhile legal compliance in HR & benefits is a must, compliance areas can be used as a strategic advantage in employee recruitment and...https://quickbooks.intuit.com/r/us_qrc/uploads/2018/09/HR-Benefits-Starter-Kit_features.jpghttps://quickbooks.intuit.com/r/hr-and-management/hr-benefits-starter-kit/Human Resources & Benefits Starter Kit for Small Business

HR & Benefits Starter Kit

11 min read

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:

  • Hiring
  • Wages
  • Policies & Procedures
  • Benefits
  • Performance Management

Hiring Employees

Legal Compliance

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

Strategic Advantage

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.

Employee Wages

Legal Compliance

Wage compliance includes two elements:

  • Classification
  • Payment

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.

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A recent study by Seyfarth Shaw LLP showed that wage and hour settlements are the number one exposure for companies in 2018.

Strategic Advantage

Proper classification and wage compliance are challenging. But, if you get creative with compensation, you can rally employees around your mission and increase productivity.

Wages are traditionally limited to an hourly rate or salary. But, alternative compensation models include profit sharing, equity, and performance-based bonus programs. Unlike standard wages, you can base these alternative compensation models on the overall success of the company.

If the company is successful, employees earn more money. Structure bonus programs so employees focus on company performance.

Think beyond monetary compensation. Set up social spaces, ping-pong tables, reading rooms. Company culture is an attractive alternative to cash alone.

A Glassdoor study found that a positive culture is more valuable to many employees than compensation and benefits. Keep this in mind when considering your compensation strategy.

Workplace Policies & Procedures

Legal Compliance

Policies and procedures are standard in any modern business. The list of such policies is long, and it continues to grow:

  • Employee Handbook
  • Anti-Discrimination & Anti-Harassment Policy
  • Social Media Policy
  • Leave and Time Off
  • Code of Conduct
  • Safety and Health
  • Reasonable Accommodation Requests
  • Business Travel and Expenses

Most company policies aren’t required by law, but the actions required or prohibited by such policies are.

For example, no company is required by law to maintain an Anti-Discrimination & Anti-Harassment policy. However, laws prohibit employers from discriminating against employees for protected characteristics or facilitating a hostile work environment full of harassment. As a result, many employers set expectations for the company and employees through an Anti-Discrimination & Anti-Harassment Policy.

While such policies aim to comply with the law, they risk unintentionally violating other laws. A policy that prohibits profane language or the display of political or religious paraphernalia, you have likely violated your employees’ rights under the First Amendment rights and the National Labor Relations Act.

Further complicating the company policy discussion, keeping policies current with legal changes and consistently enforcing policies are difficult goals to achieve. Follow two best practices when it comes to company policies:

  • Draft and review policies with an expert in the policy field
  • Don’t create policies that you aren’t going to follow and enforce

Strategic Advantage

Move beyond the tension that creating and maintaining legally compliant policies causes, and your policies can strategically promote your company as an attractive place to work.

Consider time off and vacation policies. Many employers have eliminated time off and vacation policies. As long as work gets done, the employer doesn’t care when employees take a vacation. This aggressive approach to time off could be enough to win quality employees from other companies, even if you offer less salary than other employers.

Remote work policies are another policy-driven attraction to the modern workforce. Do you have positions that can be performed remotely? If so, your employees may appreciate working from their desired location, during the hours that best suit their lifestyle.

Policies can be painful to manage. But, create policies that focus on employee satisfaction and policies become an opportunity to win the trust and dedication of employees

Employee Benefits

Legal Compliance

The Affordable Care Act (ACA, or Obamacare) has become the most popular and controversial benefit-related legal compliance issue in the past few years. Employers with 50 or more employees are required to offer their employees healthcare that provides “minimum essential coverage.”

While the ACA continues to be the most discussed topic in benefits compliance, HR professionals must keep many benefits related laws in mind. Others include:

  • Employee Retirement Income Security Act (ERISA) – applies to employers of any size that offer retirement or pension plans to employees
  • Consumer Credit Protection Act (CCPA) – applies to companies of any size
  • Family and Medical Leave Act (FMLA) – applies to all public employers and private employers with 50 or more employees

If you think you may be required to offer benefits under any law, or you offer benefit plans that might be governed by law, consult an expert to ensure compliance. The penalties associated with non-compliance far outweigh the cost of a consult.

Strategic Advantage

Healthcare and retirement benefits are strictly regulated by law. However, many benefits or perks fall outside the scope of federal and state laws. Such perks, both free and paid, help attract and retain employees

Perks at work offers a free platform where employers can improve company culture with over 30,000 unique discounts for their employers.

At the local level, explore business partnerships with local restaurants, health clubs, apartment complexes, and other amenities. Local businesses are often willing to offer special discounts for your employees, at no cost to you, because increased business volume justifies the discount.

Consider low-cost perks for employees. Small tokens of appreciation towards your employees can build strong rapport, with a small cost to your business:

  • Free stuff: concert and movie tickets, T-shirts, snacks
  • Subsidized subscriptions: meal plans, health club memberships, home, and car maintenance services, dry cleaning
  • Rewards: presidents clubs, employee of the month, sales SPIFFs
  • Office environment: pet-friendly, catered lunches, onsite gym

Many companies use performance-related discounts for government-mandated benefits. Wellness plans grant employees discounts on their health insurance premiums for meeting certain health goals or participating in health-related activities. Examples include:

  • Joining a weight loss program
  • Joining a tobacco cessation program
  • Attending a certain number of workouts per year
  • Receiving a yearly medical exam

Alternative benefit plans and incentives within the required plans are popular methods to enhance your company’s benefits package.

Performance Management

Legal Compliance

Similar to hiring, discrimination is the main legal concern in performance management. It typically shows up in the form of retaliation.

Retaliation, whether intentional or unintentional, occurs when an employer takes action against an employee for a protected characteristic. Protected characteristics include everything listed in the hiring section plus more, including:

  • The right to discuss wages and working conditions (FLSA)
  • The right to report discrimination, or a hostile work environment (Title VII, Civil Rights Act, ADEA, ADA)
  • The right to request a reasonable accommodation based on a disability (ADA)
  • The right to take leave for qualified medical or family reasons (FMLA)

Retaliation is commonly claimed in the context of performance reviews. Managers who dislike giving reviews, and shy away from conflict, don’t give honest performance reviews. Underperforming employees commonly receive satisfactory performance reviews, until the employer is ready to part with the underperformer.

While the manager understands the employee’s poor historical performance, satisfactory performance reviews provide the only objective record of the employee’s past performance. The employee concludes that performance could not have played a role in his or her termination.

With performance off the table, what are the other options? The employee and his or her lawyer look to protected characteristics. The employee claims he or she was fired because of race, gender, disability, reporting a hostile work environment, etc.

The list of legally protected characteristics is long. And, it continues to grow. Honest, consistently held performance reviews are the best way to avoid retaliation in performance management.

Strategic Advantage

While you need to avoid retaliation in the performance management process, a quality performance management program can be an effective tool for advancing your workforce through improved productivity.

A good performance management program includes four elements:

  • Planning and expectation setting
  • Development
  • Monitoring
  • Consistent review

Through planning and expectation setting, you educate your employees on your expectations for their performance and growth. By clearly stating such expectations, you minimize the possibility of surprises and conflict.

A development plan is customized to the individual employee. A development plan goes beyond tangible goals and achievements that may be used for bonuses and satisfactory marks. A development plan focuses on skills development and career planning. A development plan shows the employee that the company has a vested interest in his or her growth.

A plan must be monitored to be effective. If you write down the plan and never look at it, it’s useless for the employee and the company. Monitoring keeps the employee and the company accountable and ensures that the plan is appropriate to achieve the goals intended.

Finally, the plan needs to be reviewed and updated on a consistent basis. Frequent review creates an objective measure to judge an employee’s performance and pushes the employee to continuous improvement.

Compliance with employment-related laws is necessary for any human resources department. While attention to compliance is required, successful companies creatively supplement requirements with elements that improve employee recruitment and retention.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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