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What Small Businesses Need to Know About HR Compliance

If you operate a small business, you know size doesn’t define success. Maybe your operations just got off the ground or you’ve been working with a close-knit team of less than 100 employees for decades. Your organization’s capable of accomplishing big things. In fact, the U.S. Census Bureau describes small businesses as a vital part of the economy and a “primary driver” of national financial growth.

But when you’re working with limited resources, you can’t afford to overlook HR compliance. Preexisting laws and a constant stream of new rules means you have to stay on top of:

  • taxes
  • audits
  • certifications
  • remote employees
  • health care coverage
  • state-specific employment laws
  • and more

You’ve got a lot on your plate even without compliance concerns, but staying compliant doesn’t have to keep you from reaching your goals. With a solid strategy — and the right technology to help handle the administrative lift — you’ll keep your dreams alive and comply with confidence.

Why is HR compliance important for small businesses?

Small businesses do a lot with little. And when each moving part makes a huge difference, the cost of noncompliance stops growth in its tracks. One inaccurate piece of data or a missed deadline can derail an organization. For a small ""business owner interviewed by Business Insider, one missed tax deadline cost them $600 and compelled her to reevaluate the company’s HR compliance strategy.

Yet many companies of this size may have only one HR professional — if any — helping ensure compliance. On top of the many unique responsibilities small business admins face, they also need to consider:

Failing to address any one of these issues is costly enough. Outdated, paper-based processes make compliance even harder to maintain. Unfortunately, Deloitte reports 60% of small businesses rely on a minimal to medium amount of tech to ease complex processes. The same study reveals 40% of growing small businesses attribute their momentum to digital tools.

The right HR compliance software and self-service technology helps companies comply by:

  • automating data flow
  • generating insightful reports
  • monitoring legislative updates
  • empowering employees to manage their information
  • adding an extra layer of review
  • pulling HR professionals out of tedious data entry
  • scaling with business needs

Small businesses must navigate the evolving compliance landscape to stay afloat. Strong HR tech empowers them to stay agile and adapt to current and unforeseen obstacles.

What are the most common compliance mistakes for small businesses?

Despite their different sizes, small businesses have to avoid the same compliance pitfalls as midsize companies and enterprises. According to recent Ernst & Young data, keeping up with regulatory changes is the second-highest concern for organizations worldwide. Again, the difference comes from how negatively any one misstep affects them.

Common compliance mistakes for small businesses may include:

  • missing an important deadline
  • failing to file required reports
  • filing inaccurate taxes
  • being unaware of industry regulations or other employment standards

All businesses stumble if they don’t address these issues, but small businesses may fall even further.

What laws and regulations matter to small businesses?

Given compliance shifts across states and industries, small businesses need to identify and understand the specific laws that affect them. Even so, nearly every small business must follow these three:

""1. Fair Labor Standards Act (FLSA)

FLSA sets requirements for:

  • minimum wage
  • overtime
  • hours worked
  • record-keeping
  • child labor

Keep in mind these factors are susceptible to change. Even if they don’t, the Department of Labor may still raise the cost of failing to comply. Plus, several states have their own laws affecting employment, especially minimum wages.

2. Occupational Safety and Health Act

Not to be confused with the agency it created — the Occupational Safety and Health Administration (OSHA) — this law establishes requirements for safe and healthy workplaces. There are several methods for enforcing OSHA standards, like:

  • on-site inspections
  • routine audits
  • regular reviews
  • conferences about complaints

OSHA penalties range from fines to outright shutting down noncompliant workplaces. Needless to say, either of those consequences could spell disaster for a small business.

3. Consolidated Omnibus Budget Reconciliation Act (COBRA)

COBRA lets employees and their qualifying dependents keep their health insurance due to:

  • involuntary job loss or change
  • reduced hours
  • divorce
  • death
  • other life events

Employees are still obligated to pay up to 102% of their premiums, and coverage may be extended by 36 months in some circumstances.

The biggest challenge with COBRA is knowing when it strikes. COBRA administration software helps small businesses identify important deadlines and evade the law’s bite.

How do small businesses stay compliant?

Compliance has to be top of mind for small business owners. With current and emerging laws, their small to one-person HR teams need to be just as vigilant.""

The right HR tech is invaluable for companies with limited resources, helping them understand complex regulations and easing significant administrative requirements. Here are five HR tech factors small businesses should keep in mind:

1. Automation

Small business HR pros are already busy. Outdated and paper-based processes add exponentially more to their responsibilities. That’s not even considering how manual data entry is error-prone and inconsistent.

Self-service HR tech empowers employees to enter their data while allowing it to seamlessly flow between tools. In turn, HR spends less time managing this data and more time focusing on strategies and programs to fuel the company’s growth.

2. Record-keeping

Endless stacks of paper are a massive security concern — not to mention an organizational nightmare. Self-service HR tech helps employees easily locate the exact documents they need, all from the same convenient place they manage their entire HR life cycle.

3. Manager training

At a small business, every employee has the potential to lead. Managers and general staff alike should be aware of compliance risk and how to approach it. A powerful learning management experience engages employees with relevant, insightful training, so they’re ready to respond to any situation.

4. Risk identification

Small businesses need to stay ahead of potential audits and inspections. A government and compliance tool paired with regular self-audits help build awareness around current or upcoming concerns.

5. The right support

Compliance is too high a priority to rely on inadequate processes. Find an HR tech provider that’s committed to your success and certified by the highest industry standards, including:

  • ISO 27001
  • ISO 27701
  • ISO 9001
  • ISO 22301
  • SOC 1
  • SOC 2

Doing so gives a small business peace of mind, so they instead focus on what matters without compliance exposure.

How does Paycom help small businesses comply?

With so many compliance pitfalls, small businesses need a steadfast digital partner. Paycom’s government and compliance tools help small businesses by:

  • monitoring relevant legislative updates
  • keeping data seamless and consistent
  • alleviating the burden of payroll tax management
  • generating robust reports to meet evolving demands
  • securing important data in a single system of record

Faulty payroll is a compliance pain point for any business, but it’s detrimental for employees, too. Imagine if a payroll error forced an employee to choose between refilling a prescription or buying groceries. Or if an employee couldn’t purchase a plane ticket home for the holidays because PTO wasn’t correctly applied to their check.

Beti®, Paycom’s proactive payroll experience, guides employees to find and fix errors before payroll runs. Workers help catch missing tax deductions and other mistakes in advance, decreasing liability and boosting efficiency. This allows small HR teams to strategize around compliance at a higher level and develop value-adding initiatives.

Explore Paycom’s single, easy-to-use app for HR and payroll to see how it helps your small business succeed.

DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.