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7 Major HR Compliance Concerns for Small and Mid-Sized Businesses



HR professionals have had many concerns in recent times. For small and mid-sized business owners, these concerns may be overwhelming since they have limited capacity to deal with all of them. These can be issues relating to case flow management, building new business opportunities, creating new products, managing clients, and keeping a close eye on quality control.


So the chances that they might not even know the compliance issues facing them are pretty high. If you are a small or mid-sized business owner who happens to fall into this category, these 7 compliance issues are the most important areas you may need to focus on.


1. Anti-discrimination Laws


Anti-discrimination laws n the U.S, such as the Title VII of the Civil Rights Act of 1964 (Title VII), prohibit employers from taking adverse employment actions based on race, color, religion, sex, ethnicity, disability, or the age of job applicants and employees. These laws help protect employees from discrimination based on any of these reasons, providing an opportunity for everyone to gain meaningful employment based on merit. Some of these laws include:


2. Misclassification of workers


Many small business owners do not know this; not everyone who works for you is your employee. Wrongly classifying independent contractors as workers will not only cause you payroll issues but may land you in hot water with local and federal agencies. Working with independent contractors changes the dynamics when it comes to paying overtime and withholding payroll taxes.


Workers’ classification also determines whether or not a worker is entitled to benefits, such as pensions. HR needs to get this right, as it can put the company at risk for fines, back wages, back taxes, and other penalties. Remember that classification of workers depends on state and federal policies.


3. Benefits


Benefits laws constitute a significant concern for small and mid-sized companies. It would interest you to know that employees are even more familiar with current employee benefits laws than most employers. We have previously highlighted the most important employee benefits that employers should focus on this year and beyond. Benefits also include retirement and pension funds, such as 401(k) plans.


In addition to the above, employers need to pay attention to laws like the Affordable Care Act (ACA or Obamacare), the Employment Retirement Income Security Act (ERISA), and the Consolidated Omnibus Budget Reconciliation Act (COBRA). These will remain pretty much the same in the coming years. However, if you are too busy or do not have the internal capacity to handle this, you should consider working with a certified professional employer organization (PEO).


4. Marijuana Legislation


As of 2021, 11 states, including California and Washington, have legalized the use of Marijuana for recreational purposes. However, some limits apply to individuals and families that wish to use marijuana. Most employers are familiar with policies that support the use of marijuana for medicinal purposes. So by the same token, they need to embrace and accommodate these developments in their workplace policies.


It is in the best interest of employers to stay updated on new developments like these, including court decisions, and figure out how to factor them into company policies and business processes.


5. Asking for Salary History


Asking job applicants for their salary history or using information about their salary history to set pay can land you in hot water. More than 20 states, cities, and local jurisdictions in the U.S now have legislations prohibiting employers from inquiring or obtaining information about potential employees' past pays. Although the rules vary slightly in certain areas, they also do not allow past employers to give out information about a past employee's paycheck to a third party.


Depending on which state the employer operates in, the law may also protect the job candidates against adverse actions from the prospective employer based on this. In fact, employers can be sued for looking into the salary histories of potential hires. However, if the candidate willingly gives out the info, then that's okay.


Employers in this sort of situation may ask candidates about their salary expectations as a way of gauging what their pay was in their previous jobs. If you wish to learn about the salary history of a candidate you're interviewing, you need to make sure that salary history inquiry is not banned in that state where you're hiring.


6. Wage and Hour Laws


Wage and hour laws specifically apply to minimum wage, overtime, child labor, as well as meal and break time. The Fair Labor Standards Act (FLSA) establishes the minimum wage and overtime requirements. According to the U.S Department of Labor, the federal minimum wage for covered nonexempt employees is $7.25 per hour. However, many have different minimum wage laws and rates. If an employee is subject to both federal and state minimum wage laws, such an employee is entitled to the higher of the two minimum wages.


7. Being Ignorant of Employees’ Rights


The funny part about this is that many employees take their time to acquaint themselves with their rights. It would, therefore, be a mistake on the part of employers not to know about employees’ rights. If you have an in-house HR team, you want to ensure that you are not unduly exposed in this manner.


Understandably, it is not easy combining hiring, onboarding and training, payroll and benefits management, and a host of other HR tasks with staying apprised of compensation and labor laws or other rights that apply to employees. Therefore, it makes sense to hire a PEO, as it is the best way to reduce your compliance risks and improve employees’ overall experience.


Overcoming HR Compliance Issues for SMBs


Partnering with a PEO does not only allow small and medium-sized businesses to overcome compliance issues with ease. There are many reasons to consider partnering with a professional employer organization today. Let us know if you have more questions surrounding HR compliance issues in your business. The Mission HR is a leading partner in the PEO, HR, payroll, and benefits outsourcing marketplace. In addition to that, we are leading growth strategists, sales, and digital marketing experts. We take through every step to creating smart digital marketing goals and achieving them.


We provide result-oriented services for small and medium-sized organizations and government contractors, serving as a trusted partner in integrated human resource compliance, risk management, employee benefits, employment practices liability insurance (EPLI), and payroll processing. If in doubt or still unsure of what next steps to take, contact us today at The Mission HR to schedule a consultation.