With compliance challenges becoming more complex, small businesses have plenty of reason to grow their HR function.

As a small business owner, you've perhaps been content to oversee your own HR function, or leave it to family and friends who have helped get your business off the ground. But as your business grows, your HR practices need to mature with it.

It's never too soon to start thinking about small business compliance, says Elizabeth Mazza, Vice President, Managing Counsel, Human Resources Outsourcing and Small Business Services at ADP.

"Small businesses always need to be aware of their HR function and compliance responsibilities," says Mazza, who has expertise in multiple areas, including employment and business law, employment counseling, benefits, compliance and litigation.

Small Business Compliance Has Many Layers

Small businesses should consider how their HR function will support compliance requirements at the state, local and federal level in order to address ongoing compliance concerns, Mazza explains. She points out, for example, that even small businesses need to comply with white collar exemptions within the Fair Labor Standards Act (FLSA). Effective Jan. 1, 2020, the U.S. Department of Labor (DOL) will increase the salary threshold for white collar exemptions to $684 per week — the equivalent of $35,568 annually for a full-time employee.

Many small business owners will therefore need to evaluate positions that may be affected by the new overtime regulations and determine whether or not to reclassify currently exempt employees to non-exempt.

And even though a small business is less likely to be a target of a DOL investigation, the impact of a misstep in compliance on a small business "could really be catastrophic," Mazza says. To mitigate risks, Mazza advises business owners to develop their HR function to handle compliance requirements at the inception of the business or from the first employee hired.

Small Business Compliance Challenges Addressed

Mazza finds that stepping up the HR function is critical even at the smallest of businesses. A solid HR administration will help ensure that you're fulfilling all the requirements for your business in traditional HR areas, such as payroll and tax compliance.

A mature HR function will also lessen more modern risks involving workplace conduct or workplace harassment. This is especially important in the wake of the #MeToo movement. Mazza has seen an increase in the number of employees asserting a harassment claim or making it known that they have been treated in an unacceptable manner.

To protect your business, Mazza says, it's essential that small businesses have a proper code of conduct and train employees to identify harassment. Furthermore, a number of states and local jurisdictions now have requirements for harassment prevention training.

Mazza says keeping the HR function at the forefront and having a professional ensure that the business is using tools and resources to stay informed of ever-changing requirements — and to verify that the business is meeting those requirements — is an investment in time that can go a long way.

Mazza suggests that you can stay on top of compliance risks by having someone that is internally trained to deal with small business compliance concerns, or by outsourcing more of the HR function. This will enable you to have the right policies in place, as well as a handbook with a code of conduct readily available.

Moreover, a dedicated HR resource can ensure that you have reporting mechanisms established for people to be able to file a complaint of conduct or harassment, as well as ensure that employees at the management level have the proper training to investigate these incidents.

Why It's Worth the Investment

For the small business owner, HR may not be front and center as they are thinking about starting a business. However, Mazza says keeping the HR function at the forefront and having a professional ensure that the business is using tools and resources to stay informed of ever-changing requirements — and to verify that the business is meeting those requirements — is an investment in time that can go a long way. Mazza adds that the cost of having the proper training and an HR function in place pales in comparison to overtime violations or having to defend a claim, as being hit with a lawsuit can be "truly devastating to a small business."

In addition to having sound policies and practices, according to Mazza, a developed HR function can help create a positive workplace environment, which can be a significant attraction and retention tool as small businesses are competing for top talent.

For more ways to solidify your small business, listen to the ADP HR{preneur} podcast, Strategies to Maximize Small Business Saturday or click here for information on ADP's solutions for small business.

Tags: HR Administration and Outsourcing Risk and Compliance Employee Classification Employee Handbook Outsourcing Small Business Research & Insights Articles HR

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