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Solution Add OnsPayroll & HR Compliance Guide
Compliance is the term businesses use to describe policies and procedures that are put into place to ensure federal, state and local laws are adhered to. Modern businesses are highly regulated and closely scrutinized, and the penalties for falling afoul of the rules can be harsh.
Innocent mistakes are sometimes punished as severely as intentional wrongdoing, but there are steps employers can take to stay on the right side of the law and avoid harsh sanctions.
Wages and Working Hours
Many of the rules that employers still follow today were put into place by the Fair Labor Standards Act. The landmark 1938 law introduced the federal minimum wage and established the 40-hour workweek, and it also banned employers from hiring children to perform dangerous work. Other important wage and hour laws include the 1935 Federal Insurance Contributions Act, the 1939 Federal Unemployment Tax Act and the 1963 Equal Pay Act.
Discrimination
Employers are expected to base hiring decisions on merit and ability, and Title VII of the 1964 Civil Rights Act makes sure that they do. The law prohibits workplace discrimination based on race, ethnicity, religion or national origin, and the Age Discrimination in Employment Act protects against discrimination based on age. When these laws are violated, employers can face lawsuits filed by the Equal Employment Opportunity Commission on behalf of workers who have been treated unfairly. These lawsuits can do a great deal of reputational harm even when they are unsuccessful, so they should be avoided at all costs.
Employee Leave
Most companies offer some sort of paid vacation benefit to nurture loyalty and attract and retain talented employees, but federal law does not require them to offer this perk. While American workers may not be entitled to paid vacations, the Family and Medical Leave Act does allow them to take up to 12 weeks off following the birth or adoption of a child or when a close family member becomes seriously ill. Employers are not required to pay workers who take FMLA leave, but they are expected to offer them their old jobs back when they return.
Benefits Administration
The laws dealing with health and retirement plans protect workers when they are most vulnerable, so they are rigorously enforced. These laws ensure pension funds are administered by qualified professionals and invested wisely, and they make sure that workers have access to health care when they change jobs. Rules for administering workplace benefits can be found in:
Safety in the Workplace
Even workplaces that most people would not think of as dangerous are covered by health and safety regulations. Slips, trips and falls can happen anywhere, and they can become thorny problems if employers knew about a potentially dangerous situation and did nothing about it. No matter what kind of business you run, you should check with the Occupational Safety and Health Administration to find out about important regulations that apply to your industry. You should also make sure that your workers receive proper safety training and equipment.
Immigration and Working Rights
When Congress passed the Immigration Reform and Control Act in 1986, knowingly hiring an undocumented worker became a criminal offense. Employers are now expected to verify that all job applicants are either American citizens or have visas that allow them to work legally in the United States, and the penalties for failing to do so can include jail time if violations are intentional and persistent.
Union Rights
Unions are not nearly as common in American workplaces today as they used to be, but the right to organize is still protected by the National Labor Relations Act. The 1935 law gives workers the right to form unions, but it does not allow unions to make membership a condition of employment. Workers can decline to join unions if they wish, and they can also discuss their pay and working conditions on internet forums and social media platforms.
Most Common Business Compliance Mistakes
Many compliance errors are innocent mistakes, but that does not make the consequences of making them any less severe. Official investigators and auditors know the rules are complex and change often, but they are unlikely to take a lenient approach when a “mistake” saved an employer a large amount of money.
If you would rather avoid an uncomfortable situation, here are some common mistakes that you can watch out for.
Misclassifying Employees and Independent Contractors
Payroll taxes cover the costs of providing Social Security and Medicare benefits, and they are paid by both employers and employees. Independent contractors do not pay these taxes, which makes employee misclassification very tempting for employers. This can be a grave error as the rules for independent contractors are quite clear, and the law tends to come down heavily on companies that skirt them even when they are industry leaders.
In 2015, FedEx agreed to pay $228 million to settle a case filed by misclassified delivery drivers.
Workers' Compensation Errors
Avoiding liability for workplace accidents and injuries is another common reason for misclassification as independent contractors are expected to have their own coverage. This may save a little money in the short term, but it can leave employers dangerously exposed. Workers’ compensation programs were put into place to provide financial assistance to employees who are injured in on-the-job accidents, but they also protect employers from personal injury lawsuits.
Equal Pay Act Non-Compliance
It was once quite common for men to be paid more than women who performed the same tasks, but Congress put an end to the practice in 1963 when it passed the Equal Pay Act. The law applies to benefits like bonuses and stock options as well as salaries and wages, and employers that violate it have to contend with the Equal Employment Opportunities Commission. When several workers are paid unfairly, Equal Pay Act complaints can turn into class actions.
Exempt vs. Non-Exempt Employees
Separating exempt from non-exempt workers isn’t always easy, but here are some easy ways to differentiate the terms exempt and non-exempt, along with salaried and hourly:
- Exempt: An exempt employee is a person who is exempt from the Fair Labor Standards Act (FLSA) provisions. They are classified as administrative, executive, professional or outside sales employees that meet the criteria for the exemption. Sometimes computer professionals are classified as exempt. With a few exceptions, exempt workers must be paid a salary, not hourly.
Exempt employees are not entitled to overtime pay, meaning they can be asked to work more than 40 hours a week without receiving overtime compensation. These employees are also exempt from other hour and wage and hour laws, such as minimum wage.
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Non-exempt: A non-exempt employee is an employee that does not meet the criteria to be exempt from FLSA provisions. They are usually classified as hourly workers who must be paid at least the minimum wage for all hours worked, and they are entitled to overtime pay (time-and-a-half) for all hours worked over 40 in a workweek.
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Salaried: A salaried employee is an exempt employee that is paid a salary instead of hourly wages, and it is the same pay from week to week, no matter how many hours worked. Salaried employees typically work more than 40 hours per week.
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Hourly: An hourly employee is a non-exempt employee that is paid by the hour. They are entitled to overtime pay for all hours worked over 40 in a work week.
Tax Compliance for Businesses
Local, state and federal lawmakers all put strict deadlines in their tax codes and impose stiff penalties on those who file or pay late. Employment related taxes are paid a minimum of monthly, if not sooner in many cases. The reporting is often quarterly but the payments must be made sooner, which is where companies run into trouble. In addition to submitting their own paperwork in a timely manner, employers must also make sure that workers receive the documents they need to file their personal tax returns.
Business Operations Compliance
Successful businesses make compliance a core component of their corporate culture. They have policies and procedures that are designed to prevent discrimination, misclassification and unfair pay, and they make sure that all of their operations meet or exceed legal requirements. To emulate these companies, employers should take worker complaints seriously and make sure that everybody knows the rules.
Tips for Maintaining Compliance
Compliance issues can lead to fines, lawsuits and unwelcome media attention, but they can often be avoided. Sloppy recordkeeping and a slapdash approach to HR compliance would be a recipe for disaster, but maintaining accurate records, knowing about pending rules changes and avoiding common mistakes could keep officials at bay.
Payroll and HR Solutions for the Modern Workplace
Workers know that wage and hour legislation was passed to protect them, so they tend to be happier and more enthusiastic when they know these laws are being adhered to. Avoiding official sanctions and boosting workplace morale are two of the major benefits of automating payroll and HR compliance, and Horizon takes things one step further with feature like:
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Proprietary software: There is no software to purchase when you sign up with Horizon as our proprietary solution is cloud-based and can be accessed with any connected device.
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Fast setup: Setting up an automated HR system does not have to involve upheaval and stress. Our professionals understand that time is money, which is why many of our clients are up and running in under 48 hours.
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Pay as you go: If getting locked in does not appeal to you, Horizon’s “no contract” option could be just what you are looking for. We provide this option for clients who like to pay monthly and avoid a long commitment.
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Custom reports: In addition to a wide range of standard reports, Horizon clients can create their own reporting criteria based on information used in their industry.
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Alerts and reminders: You won’t have to worry about missing an important deadline if you sign up with Horizon because we send out regular alerts to all of our clients.
Contact Us Today for More Resources
If you would like to find out how Horizon Payroll could help your business to stay in compliance with national, state and local HR laws, you can contact us in a couple of ways. You could call (888) 434-8244 to speak with one of our tax and HR professionals, or you can use our online form to get a quote or schedule a demonstration.
Sources:
(1) https://sescomgt.com/resources/staff-recommendations/managers--assistant-managers--exempt-or-non-exempt/61
(2) https://www.allenmatkins.com/real-ideas/2022-labor-and-employment-law-update-for-california-employers.html
