“You don’t know what you don’t know.”

Most small and midsize businesses want to stay compliant, but the truth is, it’s harder than it seems. They simply don’t know everything there is to know about HR compliance.

If you’re looking to gain more knowledge on the topic, you’re in the right place. In this article, we will look at the following:

  • What is HR compliance?
  • What makes HR compliance so difficult for small and midsize businesses?
  • The most common compliance pitfalls small businesses face
  • Tips to help employers maintain compliance
  • How to find a reputable partner to help navigate HR compliance requirements

What is HR compliance?

HR compliance, also known as labor law compliance, is the act of understanding and adhering to federal, state, county, and city regulations regarding existing labor laws and creating workplace policies and practices to make sure that your company is meeting the compliance standards that have been set at all levels.

HR compliance includes staying up to date on all federal and state laws and how they may impact your company and implementing policies and practices that keep your organization compliant with all of the laws and regulations that apply to your organization. Legislation and regulations change frequently, and it is essential to stay on top of these developments to remain in compliance and avoid costly penalties.

What makes HR compliance so difficult for small and midsize businesses?

Small and midsize businesses simply don’t have the HR staff that would be required in order to “cover their bases.” For example, the average small company likely has just one person wearing all the hats related to compliance. Small businesses don’t have the funds to hire HR experts for every field, but the need doesn’t just go away—someone has to handle compliance! Here are some common issues small businesses face in regards to compliance.

  • Noncompliance with state and federal laws and regulations can be extremely costly for an employer.
  • Maintaining compliant policies and practices can be a heavy burden for HR departments.
  • As regulatory mandates change, new compliance issues arise constantly.

Six Common HR Compliance Pitfalls

1. Mismanaging the “alphabet soup” of human resource compliance

HR compliance really is an “alphabet soup” of confusing acronyms: ERISA, ACA, FLSA, FMLA, ADA, ADEA, EEO, COBRA… the list goes on and on. Small business owners have to understand all of them. Many of these regulations are based on headcount and the business owner needs to identify which ones apply to the business and when. In fact, many require employee notifications, policy language, and reporting. Fairly to comply comes with consequences, from employee dissatisfaction to hefty fines from government agencies. You don’t get a pass if you simply don’t understand!

2. Underestimating The Breadth And Depth Of The HR Compliance Landscape

Here’s a look at where compliance may come into play every day:

  • Recruiting. For example, employers have to correctly run background checks, and they need to know what questions they can and can’t ask during interviews. (Did you know that in Massachusetts, you can’t ask candidates their current pay?)
  • Onboarding. New employees must fill out state-specific forms; omitting or improperly completing them could put the business at risk of penalties and fines.
  • Performance management. Employers must ensure documentation is clear, consistent and fair—which can be confusing if you aren’t well versed in the compliance angle of performance management. A terminated employee may be able to use non-compliance against you in a dispute.
  • Employee communication. You must properly communicate with your employees about what is required of them; this information is typically codified in your employee handbook. (Find out what else should be in your handbook here.)
  • Timecards. Wage & Hour laws require employers to maintain records on hours worked for all hourly employees.
  • Establishing pay. Pay Equity requirements exist and must be taken into consideration when hiring and promoting employees.
  • Payroll processing. Understanding when an Employer can and cannot change time cards or pay without notice, or how overtime pay is calculated.
  • Record retention. Certain records must be retained for specific periods of time; it’s your job to know those time frames and maintain this practice. (Check out this article for more details.)
  • Benefits. Even benefit administration has a compliance angle thanks to HIPAA requirements.

3. Mismanaging Paid Family Leave

As of 2021, California, Colorado, Connecticut, Massachusetts, New Jersey, New York, Oregon, Rhode Island, Washington and the District of Columbia offer—or will offer—paid family and medical leave. Hawaii provides paid medical leave in the form of temporary disability insurance. Understanding these state specific requirements and how they may interact with FMLA and/or coordinate with disability insurance benefits.

4. Ignoring State Poster Requirements

Certain federal and state laws and regulations require that employers notify employees of workplace laws in a physical form. Sometimes this simply means displaying posters; other times employers are required to have employees acknowledge these notices. As remote work becomes more widespread, we can certainly anticipate new changes being made to compliance requirements like this.

5. Skipping Harassment Prevention Training

Six states and some municipalities require employers to provide harassment prevention training to employees and/or managers. Ignoring this requirement will result in non-compliance and can place the business at a disadvantage if they had to respond to a related employee complaint.

6. Ignoring Paid Sick Leave & COVID-19 Leave Requirements

Many states and municipalities have specific requirements around employers providing paid sick leave to employees. Additionally, many states have enacted their own COVID-19 sick leave requirements, which go beyond the federal government requirements. These requirements are continually evolving as the pandemic continues, and require monitoring.

4 Ways To Maintain Your Small Business’s HR Compliance

  1. Subscribe to HR organizations like the Society for Human Resource Management (SHRM) so you can learn about and keep up with upcoming laws and regulations.
  1. Sign up with your local and state regulatory agencies to stay up-to-date with evolving requirements. For example, in Massachusetts, the Department of Family and Medical Leave has a newsletter that will keep you up to date on that department’s regulations.
  1. Employ a trusted law firm to help you interpret what new laws and regulations mean to your organization.
  1. Partner with a PEO who will handle HR regulatory compliance for you. Gathering information from a variety of sources can be time-consuming and tedious. You also need to ensure that you’re gathering accurate, up-to-date information, which is a challenge when using the Internet. Misinformation and confusion will not be an acceptable excuse if you are fined for noncompliance with government regulations, so finding a good source of information for HR support is crucial. A PEO is positioned to keep you in the know and a step ahead of all compliance matters.

GenesisHR: Your authoritative source on compliance.

As your IRS-certified PEO advisor, we know you and your company by name, and we offer solutions that are tailored to your needs and growth goals, all while handling your compliance needs for you.

At GenesisHR, a client-PEO relationship is a partnership in every sense of the word. Not only do you gain our expertise in administration, but you also gain a committed business partner who is equally liable for the compliance decisions and actions of your company. For GenesisHR, that means we have “skin in the game”—we are in business with you, and your success in all areas of the HR world is also our success (and responsibility).

Give us a call today to learn more about how we are a people-first PEO dedicated to serving our clients in all areas of HR, including compliance.

Download our free PEO ebook