Seven HR Things Your Business Might be Doing Wrong
One of the assessments I conduct to help clients strengthen their businesses is to ensure that they have protected themselves from having cash go out the door for government penalties, back pay, or employee lawsuits. Below is a list of some of the more common ways that companies can set themselves up for a loss.
1. Classifying employees as salaried (exempt) when they should be hourly (non-exempt). This is A BIG ONE. It happens a lot and the back pay and penalties can hurt a company; willful violations could result in civil penalties and even criminal prosecution. The laws are complicated, and both Federal and State laws are getting stricter. In brief, federal law requires you to pay overtime for any hours over 40 in a standard workweek, unless very specific criteria are met. You must pay them a consistent salary, regardless of hours worked and they must perform certain duties/have certain responsibilities. Neither an employee’s desire to be classified as salaried/exempt nor their title has any bearing. Private employers cannot compensate employees with “comp time” instead of paying overtime.
2. Classifying people as Independent Contractors rather than employees. This is another big one, and federal and state laws are also getting stricter on this. Many factors are taken into account, but in general, if the person performs the work of your business (in other words, creates the product/service that you provide), is under your control regarding when/where/how they do the work or are provided training and or equipment to do the job, even on a temporary or part-time basis, they may be your employee. Just like Salaried/Exempt, the employee’s desire to be classified as an IC does not relieve you of the requirement to pay them as an employee.
3. Failure to comply with wage garnishments – and/or not having a solid process to handle them. Having garnishments go to a manager who is not properly trained in how to handle them and/or a payroll person could backfire, especially if the garnishment is for that person! Failure to comply with a wage garnishment can result in the garnishment being transferred to the company. I’ve seen garnishments as high as $60,000.
4. Failure to comply with the Immigration Reform and Control Act of 1986. This includes:
a. Not completing the I-9 in a timely manner – Day 1 of employment for part 1, and Day 3 of employment for part 2.
b. Asking for specific documents (or getting the wrong combination of documents from lists B and C).
c. Not completing the entire form or signing it in required locations.
d. Not securing these documents in a locked cabinet or password-protected file
e. Not retaining the document for the required period after termination (at least three years from the first day of employment or one year from the date employment ends, whichever is later). On the other hand, discarding the documents as soon as you are legally able to do so eliminates the possibility of them being included in an audit.
f. Not auditing your files regularly. This will catch any errors that have been made and allows you an opportunity to correct them before an audit.
5. Telling employees that they can’t talk about their pay or other conditions of employment with fellow workers. Federal law and Virginia Law make it illegal for employers to discharge or otherwise retaliate against an employee because the employee discussed their wage information with other employees.
6. Not having a handbook, as well as some policies outside of the handbook, that employees are required to acknowledge –updating it regularly, and collecting signatures.
7. Asking interview questions that are not job-related, and are tied to a protected status. While it is not illegal to ask a question about race, gender, religion, marital status, etc, it creates an opening for someone to later say that they were not hired because of one of those protected factors – which is illegal. If it’s not job-related, you really shouldn’t ask about it. On a similar note, a miss-hire can be extremely costly. Most companies interview to determine if the candidate has the skills to do the job, but neglect to do an “HR” interview, where you determine if they have any “red flags” that will make them a bad fit for your company.
Often, business owners and leaders are so focused on growing the business that they miss these smaller, important employment matters that can ultimately cost them.