HR is undeniably one of the most important aspects of running a business, large or small. No matter the size a businesses without a dedicated HR department must have someone who is willing and able to keep up and comply with any relevant federal, state and local regulations. But consider effective HR is about more than just avoiding complications. Being effective is about anticipating complications and eliminating them before they become a problem. Here are some common pitfalls that businesses must manage:
Neglecting Employee Documentation
Obtaining the correct employee documentation is essential. Proper documentation includes the employee’s residency, job classification, tax and social security information, legal mailing address and other information as required by law. Be careful because if the information you have is incorrect, incomplete or fraudulent, your business could face financial penalties or even legal action. Department of Labor officials, IRS agents and investigators do check employment records. If you aren’t sure that you’re recording the correct information, consult with a local employment lawyer. The consequences of failing to properly document your employees could be detrimental to your company.
Disregarding the Need of a Comprehensive Employee Handbook
Employee handbooks are an absolute staple. Not only do they outline the employee’s rights, they also specify the employer’s expectations. This gives employers the ability to push back against employees regarding anything from attendance to dress code and even time off. These handbooks also give the business legal justification for termination, protection from discrimination lawsuits and cover criteria on which to evaluate employee performance. Handbooks are quite simple to produce but ensure they are written in compliance with federal, state and local laws to avoid legal complications.
Failing to Understand or Comply to Labor Laws
Labor laws can be complicating– partly because they vary by state and because multiple levels of the laws (including federal, state and municipal) can overlap. Yet it is essential that your business understands and adheres to all labor laws – especially child labor laws, non-resident labor regulations and equal rights legislation. These are 3 most important when it comes to small business violations and they cost employers millions of dollars each year. These violations are easily avoidable since state and federal agencies give away information for free.
Counterfactual Overtime Payments
OT law is another complex area that gets many small businesses into big trouble. It’s also another set of labor laws that varies greatly by state. An employee’s job classification is a critical part of calculating overtime. Hourly workers acquire overtime after 40 hours, while salaried workers are often exempt, but it is possible they are considered non-exempt. Therefore they must be paid overtime as defined by federal and state law. It’s essential that you and your HR department understand federal and state overtime laws as they apply to all of your employees – whether they’re hourly, salaried, salaried non-exempt or independent contracted.
Mismanaged Tax Documentation
One of the biggest mistakes companies tend to make is misclassifying employees, which is pertinent for tax reporting purposes. Properly documenting information for each individual employee is essential in order to make tax time hassle-free when it comes time. Incorrect Social Security numbers, names or addresses can halt the process and result in unnecessary resubmission needs.