HR Stuff Every Employer Should Know

Employment laws are plenty and most start-ups are no strangers to employee related legal issues.  To decrease your liability, we cannot stress enough how absolutely critical it is to have a strong HR team with experts in payroll and HR law.

In this brief posting, we share with you some of the most recent and common issues we’ve encountered while working with our startup clients.  Our goal is solely to educate you and remain open-minded, while the decision on level of compliance is completely yours.  For most companies, especially growing companies, the risks are deathly.  For some, it may be okay to skip a few HR pointers here and there.  Read and choose.

W-2 or 1099?  The question comes up often and the confusion is widespread.   As per Department of Labor, a W-2 is an employee, a 1099 is a contractor.  These are very different things!  An employee is your responsibility; this is where all of the employment laws come in, and taxes, and personnel files.  A contractor, on the other hand, is just an expense for your accountant to deal with.  This is somebody working on a project basis, usually out of their own office, and rarely if at all takes any direction from you as to how the work should be done.  View it similarly as paying a company to re-do your website.  You tell them what you want, and they provide you the result and charge you a fee.  You don’t monitor the contractor’s attendance, or fix his computer when it’s broken, or pay overtime.  Whereas, if you would have an employee do the same job, the situation would be very different.  Be very careful when you decide whether someone is an employee or a contractor.  When suddenly, a contractor mistakenly files for unemployment, and the state agency determines that they were classified wrong in the first place and should have been an employee, it will be too late.

Exempt vs. Non-Exempt is not the same as Salary vs. Hourly.  The first is a classification based on government law.  The latter is often just choice.  An exempt employee is exempt from overtime pay, the non-exempt is not.  Your managers, your outside sales, your professionals are usually exempt.  The administrative assistants, inside sales, and marketing team may not be.  Consult with an HR professional, before you put together an offer letter or discuss pay with your new hire.  Every employee who is eligible for overtime pay must be paid accordingly.  Don’t assume that if they are salary and paid a flat rate every week, they are automatically disqualified.  More information about exemptions can be found here

Form I-9 or Employee Eligibility Verification Form is the most important document you should have on file for every employee.  When an audit comes around, this form is your confirmation to the Department of Homeland Security that you do not hire illegal aliens.  Not only does the federal government mandate that you complete this form for every employee, but it also mandates that it be done accurately and within the first three days of employment.  As proof of employment eligibility, be careful not to accept copies or laminated documents. Another important note here is that as an employer, you are not to suggest which supporting documents your new employee should present, because you do not want to imply discrimination or favoritism.  As long as the documents the employees present meet stated I-9 requirements listed on page 3 here and are authentic (not copies), you are good to go.  

Labor Law Posters are posters mandated by both state and federal government that display employment laws and regulations your employees should know.  It is important to order these posters (you can use Amazon) and place them in a location visible to all employees, such as an entrance area or the kitchen.  Once posted, make sure to update as often as laws, such as minimum wage, change, which is usually about once a year.

Travel Pay is a confusing topic, even for many HR folks, so I can see why a lot of companies get this one wrong.  Basically, if an employee travels for work during hours that they usually would have been working, you must pay them just as you would if they were in the office.  To give you an example, let’s say your hourly employee John leaves the office on Monday mid-day to get on a plane at 3:30 pm for a training that doesn’t start until the following day.  John must still be paid his regular day on Monday, so if he usually works 8-5, you must pay him until 5 pm that day, even though he left early and his plane doesn’t land until 7 pm.  Now, for the training on Tuesday, you would just pay him based on attendance, so if the training is from 11 to 6, you would only pay for those seven hours.

New Hire Reporting is a state specific requirement for the purposes of unemployment recordkeeping.  In the state of Michigan for instance, the Department of Employment Security requests that every new hire is reported within 20 days of the beginning of employment.  Usually your payroll software will do this for you, but double check to make sure.

Different States Means Different Forms for the Personnel File.  The Acknowledgement of Pay Rate form of New York and the various Withholding Forms of Arizona are just a couple examples.  Although the personnel files have a lot of optional materials, such as performance reviews and background checks, some items are mandatory.  As you expand your business to different geographical locations, keep this in mind.

Running a business is hard and being a leader is even harder.  On top of that, navigating ever changing employment law is not easy.  There is a lot to think about.  One thing is certain, you will avoid many costly mistakes by setting your growing business up with professional HR support and we hope that when you are ready, you will think of us.  In the meantime, the most valuable advice we can give you is to be nice to your people.  This alone will go a long way in protecting you as an employer.

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