HR compliance is changing rapidly, and noncompliance could spell serious trouble for small businesses.
HR compliance is always a critical part of any sized business. However, with businesses reopening, it’s more important than ever to make sure your company’s best practices as they relate to HR are up to date and reflect these unprecedented times.
By definition, HR compliance is your company’s process for defining different procedures and policies to reflect all regulations and laws — and those laws might have changed recently due to COVID-19. Enterprises and giant corporations have full HR departments to make sure they don’t skip a step as HR compliance is changing at a rapid rate right now. But where does that leave small businesses?
It’s just as important for small businesses to abide by HR compliance, and maybe even more so. Simply put, small businesses have more to lose on a personal level. Huge corporations generally weather storms the best, even with something as major as a pandemic. Just take a look at your local news; it’s small businesses that are struggling the most with reopening. And some have already shuttered their doors for good.
If your small business has been able to survive in some capacity during the pandemic, that’s already a huge plus. However, small businesses are also on thin ice. One breaking of HR compliance could spell serious trouble for small businesses right now.
Understanding HR compliance
Your company of course has to follow all federal, state, and local laws, but HR compliance is also about redefining your company’s own regulations.
Thoroughly understanding all the laws your small business must follow (including any recent changes such as wearing masks, which might be mandated on a local level) is just one facet of HR compliance. You also need to understand your business’ big picture human capital objectives.
As we watch employment rules increase and change across the board, at the same time risks and penalties for not complying are also on the rise. Your company of course has to follow all federal, state, and local laws, but HR compliance is also about redefining your company’s own regulations.
If you’re audited from an enforcing agency, that might lead to big fines. Many small businesses would not be able to survive such a penalty. In severe cases, the penalties might include a lawsuit, and that can easily bankrupt a company of small or medium size. Ultimately, it’s not understanding or realizing your company’s compliance obligations that leads to such penalties.
HR and compliance
An outsourced HR firm can help company leaders make sure they meet overarching HR goals while simultaneously abiding by all laws and regulations. It’s common for very small businesses to not have a full-time HR person — or an HR person at all! A major role for HR professionals is to strengthen the link between the company’s growth goals and compliance practices. This can include clearly defining strategies and all aspects of the hiring process. When HR professionals define goals for a company, they think about various scenarios that might happen in the future and how compliance might be an implication.
Compliance issues directly related to HR might include any matter related to employees, such as the process for:
- Paying overtime
- Separation policies
- Rules for operating during a pandemic, such as new sanitizing practices
Many small businesses are trying to keep up with routine (pre-COVID-19) HR compliance issues while struggling to adopt new compliance musts.
HR compliance issues might include recruitment strategies — especially if some of your workers don’t feel comfortable returning to the type of work environment you’re requiring. Benefits compliance, such as understanding what you have to do in terms of health insurance or retirement plans, don’t stop during a pandemic.
When HR professionals define goals for a company, they think about various scenarios that might happen in the future and how compliance might be an implication.
Common compliance issues
Small businesses have managers and employees that have no choice but to multitask, but having a non-pro work as a compliance officer is never a good idea. Every business wants to be compliant, but it’s very rare that a non-professional is fully aware of what needs to be done to meet these requirements.
At the most basic level, every small business should be familiar with:
- Form I-9, which verifies new employees and whether they can legally work in the United States.
- Federal non-discriminatory hiring rules are also a top priority, and this includes following rules by the Equal Employment Opportunity Commission, Employment Act, and Americans with Disabilities Act.
- Understanding the differences between exempt and nonexempt status under the Fair Labor Standards Act is critical. The U.S. Department of Labor is in charge of making sure every employee is paid in a way that follows the federal wage per hour law, and this is based on exempt vs. non-exempt status.
From rules around breaks to off-the-clock work, there are countless compliance issues that an HR professional or department handles for businesses. Small businesses who don’t have the capacity to hire a team or full-time HR person might look to outsourcing this position. Compliancy within HR means peace of mind and fewer bumps to handle.