When you started your business, you probably thought you’d spend your time doing what you do best—like selling jewelry, creating apps, or running a bakery.
But now that you’re running a full-fledged business, that means taking on new employees. It’s a huge responsibility. How can you treat them so well they’ll want to keep working with you, while also making sure you’re following the labor laws?
It can be tricky to navigate, which is why we’ve put together a checklist of six labor laws and tips you absolutely must consider when bringing on employees:
Labor Law Tip 1: 1099 vs W-2 Employees – Accurately Classify Your Workers
Under the Fair Labor Standards Act (FLSA) which also includes guidelines on minimum wage, overtime and child labor, there are two ways to classify the people who work for your business.
- 1099: 1099 workers are independent contractors who are responsible for handling their own taxes. As an employer, you are not responsible for paying the employer’s portion of Social Security or Medicare taxes, nor do you have to pay the premiums for workers’ compensation or unemployment insurance. You also are not responsible for paying overtime, unless that is part of the agreement with your contractor. You are however responsible for reporting the contractor’s income through a 1099 form filed at the end of the year.
- W-2: W-2 employees are guaranteed various protections that 1099 contractors are not. For W-2 Employees, you are responsible for handling Social Security and Medicare withholdings, paying state and federal taxes and other applicable payroll taxes, and paying for workers compensation and unemployment insurance. You are also required to pay at least minimum wage and overtime. Failure to meet any of these requirements can result in fines and sanctions from the IRS.
Likewise, if you’re currently unsure of which kind of worker will be better for your business, here’s a more detailed breakdown of the difference between 1099 and W-2 employees to help you on your way.
Labor Law Tip 2: Ensure Your Labor Law Poster Is Visible
Businesses of all sizes are required to have federal and state labor law posters at every location, in a highly visible location where someone might work. This includes your garage, home office, or anywhere else work might happen.
Many business owners use a Poster Compliance Service to get automatic deliveries of up-to-date federal and state posters when laws change. With an average of 75 law changes a year, it’s nice to have someone else keeping track of the ones that apply to you.
Labor Law Tip 3: Make Sure You’re Following All Anti-Discrimination Laws
Anti-discrimination laws must be considered through the hiring, management, and termination lifecycle of an employee. Violation of these laws come with hefty fines.
- Sex (including pregnancy, gender identity and sexual orientation)
- National origin
- Age (40 or older)
- Disability or genetic information
Labor Law Tip 4: Maintain Workplace Safety
The OSH Act requires employers to make sure their workspaces are safe for their employees and free of any known dangers.
Depending on the type of business, this can include providing safe equipment and protective wear, providing safety training, or installing compliant emergency stations.
OSHA will provide a free consultation to make sure your working environment is safe for your employees.
Labor Law Tip 5: Find a Great Workers’ Comp Policy
If OSHA is about preventing emergency, workers’ compensation is about what happens in the unfortunate event of an emergency.
Most states require you carry workers’ comp insurance, which can protect you and provide for your employee in the event someone is hurt on the job. This handy chart tells you what you need to be compliant in your state, and Intuit’s Workers’ Comp Service can help you choose the right plan for your business.
Labor Law Tip 6: Let Employees Know About Affordable Health Care
While the “individual mandate” component has been removed from the Affordable Healthcare Act (aka Obamacare), there are still a number of requirements in effect for small business, including the need to supply your employees with information about the “Health Insurance Marketplace,” regardless of whether or not if you provide health insurance.
Read here to learn more about how the ACA affects small businesses.
Your Employees are Worth It
There’s a lot to celebrate about hiring and paying employees! It’s also a lot of responsibility: they depend on you for their livelihoods, just as you depend on them to help your business thrive.
By following the advice above, you’ll be on the right path to set your employees – and your business – up for success.