Small businesses may typically consist of 10 to 100 employees. Most times, even while maintaining compliance among a small number of employees, you might face hurdles. Small businesses need more resources and time to build processes beyond core objectives than their large business counterparts. This is why something like a paystub creator can help streamline the workflow within a business.
HR-related regulations are constantly evolving by the minute and need to be monitored. This is to ensure the environment stays healthy and HR stays compliant. There are more regulations imposed on small businesses. Many regulations still need to be tested. So, small companies may even face trial and error, which may breed compliance and other related issues. It’s crucial to thoroughly research your sector, niche, and potential employees before you hire them. You can even place regulations according to the HR demographic in your firm. Many entrepreneurs and businesses’ focus is their growth and product. Keeping this in mind, they must look out for common compliance issues in the commerce industry.
1. Workplace litigation not being addressed
Small businesses commonly face prejudice in the form of racial and sexual discrimination. This is dangerous for your HR and reputation and even leaves a crack in your armor. This leaves your business susceptible to termination lawsuits once the alleged victim leaves the workplace. Legal costs can go up to $85,000, with plaintiffs receiving $500,000 as an average judgment.
Protect your small business capital by training employees to respect workplace regulations, rules, and other firm members. It would help if you also enforced discipline for those who do not comply while ensuring a productive and cooperative environment.
2. HR avoiding discrimination on job applications
Every candidate should have the same rights to a position on a job, provided they possess adequate skills to take on that task. The U.S. Equal Employment Opportunity Commission enforces laws against discrimination against a protected class based on race, color, religion, sex, national origin, age, disability, genetic information, etc., in recruitment processes and among employees. Thus, asking for specific information on an application may put your company at risk. Avoid asking for previous convictions, salary history, age or graduation year, citizenship, pregnancy or marital status, religious holidays, alcohol or tobacco usage, and disabilities.
3. HR classifying workers
Classifying workers as either independent contractors or employers is extremely important for the worker, the relationship with your hired workers, and the company. For instance, you withhold federal and state taxes from an employee’s paycheck and file a W-2 for them once the year ends. On the other hand, you generally do not withhold taxes from a contractor’s pay. There’s no set definition of a contractor, making it difficult to classify them. However, there are a couple of points to remember while doing so.
The first thing to check is behavioural control. If you possess the right to control your worker, this makes them an employee. Similarly, if you pay your worker per project instead of reimbursing them for job-related expenses, they are likely to be independent contractors. Finally, it would help if you also considered the longevity of your relationship with your worker. If you offer benefits, the worker will be treated as an employee.
4. Paying minimum wage
Paying your workers less than the current minimum wage, you might be responsible for back wages and steep penalties. The minimum wage has been consistent for the past ten years; a nationwide movement is in place to increase the wage to $15 per hour.
Many localities have their minimum wages higher than the U.S. Department of Labor’s (DOL) standard. So if your state’s minimum differs from the federal one, pay the higher salary among the two.
5. Benefit Regulations and Laws Not Being Followed
The cost of compliance and benefits regulations is a more considerable burden for small companies. This is because overhead expenses are contributed among a small group of employees. Small businesses will spend 80 percent more on federal regulatory compliance than larger companies will, according to a U.S. Small Business Administration survey. Poor management-related tasks make compliance even more expensive. It becomes even more difficult for small business owners to continue offering retirement, government, health, and welfare benefits while keeping up with new laws and regulation changes. Plan provisions must be applied, tests must be conducted, and all government filing must be completed.
In conclusion
Small businesses generally face 5 common compliance issues. When litigation is not addressed, or employees are not trained to avoid workplace discrimination, companies may face charges or lawsuits when an employee leaves the company. Furthermore, it’s essential to classify your workers and recognize each responsibility and compliance of an independent worker and an employee. HR’s responsibility is to avoid discrimination on job applications and avoid asking for information that may subject them to prejudice. Finally, the cost of compliance and benefits regulations is a significant burden for small companies. This is due to the overhead of expenses contributed by a small group of employees.
We hope this article proves insightful and helps you get past these issues for your business. Thank you for reading!