HR is a critical department in any organization, saddled with the never-ending responsibility of sourcing, interviewing, hiring, onboarding, training, and managing employees. In general, certain risks come with managing people, but there are best industry practices for navigating these HR liabilities. By and large, successfully managing HR liabilities allows a company to navigate and take advantage of growth opportunities while keeping the risks as minimal as possible.
For small and mid-sized businesses, HR concerns typically include the liabilities that come with managing a team of diverse individuals from different backgrounds. The same goes for startups, especially if they lack a solid in-house HR team to accurately oversee HR affairs. But not to worry. In this article, we’ll discuss the most common and critical HR liabilities that companies need to pay extra attention to this year, as well as what can be done to mitigate the risks.
Let’s dive in already.
What Are HR Liabilities?
According to Law insider, HR Liabilities refer to the different obligations and liabilities for wages, bonuses, variable compensations, workers' compensation, workers' compensations benefits, pension, and other benefits or any other employee claim, which includes vacation pay, in respect of any transferred employee or former employee. It also refers to all liabilities that arise out of, because of, and/or the termination of the employment of, any employee.
Essentially, the HR liabilities generally describe every cost associated with recruiting, managing, and losing or letting go of your employees.
Can HR Professionals Be Held Personally Liable?
HR professionals also have individual liability, referred to as "personal liability." It is a situation where an individual's asset is used to satisfy a financial obligation. This is applicable when an HR professional is found to be personally responsible for an employment-related judgment.
Critical HR Liabilities to Watch Out for
Certain HR liabilities shouldn't be overlooked because, when neglected, they can cost your business so many expenses. As already mentioned, HR liabilities arise from the employment or the termination of any employee in a company. Employees may file a legal action against a company for many different reasons. It is important for a business to carefully consider the various rights of their employees to avoid violating them, as it could easily lead to legal actions.
The United States Department of Labor has some rules and legislation protecting employees from employment discrimination, retaliation, and several other infringements. These rights protect the employees, and they are entitled to pursue those rights. But to begin with, you want to make sure that you address the challenges your employees are facing in the workplace. That said, here are critical HR liabilities that could cost your business a lot if neglected.
Punitive Employment Actions
HR management also involves risk management. If you want to take punitive actions against an employee, specific measures should be observed first and considered. Actions such as a demotion, pay reduction, disciplinary action, or termination can pose a risk to your business and organization if not done right.
An employer should take certain measures to protect itself, and specific methods should be adopted to manage HR risk and liabilities. Although in most cases there’s nothing employers can do to avoid allegations or lawsuits of wrongful employment acts, there are certain ways to mitigate HR risks and liabilities.
To avoid this risk, it is important for an employer to be proactive and consider the potential consequences of their action before executing them. You shouldn't only be bothered about being sued. Rather, you want to also consider the implications of your actions and seek better ways to treat your staff. However, you should also have a defense in case an employee sues.
Also, an important way to protect your business is to have proper documentation of every deal. HR can prevent certain risks and issues with proper documentation alone. These documents will serve as a defense for your action. Documents such as employee handbooks, policies, procedures, and forms can help your case.
Documentation clarifies and may justify why the employer took the punitive action. If an employee insists that an employer took action against them unjustly, your company will have sufficient evidence to show why it took action. An excellent option for managing these kinds of risks is by outsourcing your HR services to a professional employer organization.
Wage and Hour Issues
Wages and salary payment are critical areas of HR concerns. If care is not taken, things may get complicated and rough when dealing with an employee's money, and so you shouldn't let it go wrong. It is crucial that you hire the services of HR professionals that can provide your business with excellent Payroll and HR solutions.
Employers need to ensure that their pay practices strictly align with state and federal regulations. Wage and hour laws exist to protect your employees and ensure they earn their work hours.
The following are things that may lead to trouble for your business, which you should avoid:
Misclassifying employees as exempt from overtime whereas they were not and thus resulting in unpaid wages.
Not counting all work as "hours worked" when calculating the hours worked in a week, hence not paying the employee their full weekly wages.
Deducting money from a worker's wages for unjustifiable reasons. The worker may take action against the employer. Various states and federal levels provide different provisions and guidelines on how deductions from pay should be made.
Assuming that since you pay someone a salary, you don't need to pay them for working overtime.
It is crucial that you know your HR liabilities and follow best HR practices to avoid cases or situations that may affect the business. Ignoring the rules may cost you and your company some serious amount of money. For small and medium-sized businesses without the structure of fully-fledged HR services, partnering with a PEO company.
A PEO Partnership Can Shield You from HR liabilities
A PEO co-employment relationship is an ideal solution that relieves you of your most bugging HR issues. With a PEO partnership, businesses can focus on core business goals, while the PEO company handles all HR matters related to compliance, tax filing, employee benefits administration, and so on. Download the Ultimate Guide to PEO free ebook to learn more about how a PEO can help you.
At Mission, we provide small businesses with top-notch HR solutions and best HR practices to scale their businesses and help them avoid HR liabilities. We bring our years of experience and rich insight to the table, helping you easily navigate top HR issues, especially if you’re looking to expand your business. Mission also provides your business with answers to all your bugging HR outsourcing questions. Don't hesitate to get in touch with us if you have further questions about partnering with a PEO company or mitigating HR liabilities.