The 5 Biggest HR Mistakes Small Businesses Make and How to Fix Them - PowerPoint PPT Presentation

The 5 Biggest HR Mistakes Small Businesses Make – and How to Fix Them August 13, 2017 Patricia Milian Jaime Lizotte Senior Vice President HR Solutions Manager

About the Presenters Patricia Milian is Senior Vice President of ComplyRight, Inc. (www.complyright.com), where she leads the company’s efforts to demystify employment laws for small businesses through education and outreach. Jaime Lizotte , HR Solutions Manager at ComplyRight, is an experienced HR professional who applies her expertise to support the company’s education efforts and develop solutions that make sense for small businesses.

What We’ll Cover • 5 common HR mistakes that can lead to trouble • Red flags to watch for in your clients’ businesses • Practical tips on how to comply • Free tools and resources to help clients understand and address the issues • A very special announcement !

Mistake #1: Treating independent contractors like employees What’s the problem?  Very common for small businesses to use independent contractors (ICs)  Avoid overhead cost and ‘hassles’ of hiring employees  Hassles = administrative tasks & legal risks  Many don’t realize there is a distinct difference under the law!  Can’t call worker an IC if he/she meets definition of employee  Guidelines are complex, and can vary by state & agency  30% of businesses misclassify (intentional or not) Why does it matter?

Mistake #1: Treating independent contractors like employees What’s the problem?  Government agencies are watching  Tax authorities: IRS & state tax agencies  State workers’ comp agencies  Employee rights agencies: DOL, EEOC, state agencies  Agencies have bias toward treating workers as employees  Harder to collect employment taxes from ICs  ICs are not covered by workers’ comp insurance  ICs don’t benefit from most labor law protections  Risks include back taxes, back wages, back premiums & lawsuits  Agencies share information

Mistake #1: Treating independent contractors like employees Red flags:  The work being done is core to the business offerings  The business owner (or supervisor) manages the worker hands-on  The worker is given a specific work schedule/office hours  The worker works full-time for the business/at the business  The worker uses equipment owned by the business  The relationship is open-ended, with no clear scope or deadline  The worker provides an SSN, not a business EIN, for tax purposes  The worker is being paid from a payroll account  The worker does not assume ‘profit and loss’ risk of a business

Mistake #1: Treating independent contractors like employees How to resolve:  Work with ICs that have a business name and EIN  Use an “Independent Contractor Agreement” signed by both parties  Define scope of work and establish deliverables/milestones up front  Require IC to use his/her own equipment/supplies and helpers  Set up IC as vendor and require him/her to submit invoices  Pay invoices out of Accounts Payable account  Issue a 1099 (not W-2) at year-end  Don’t use same contractor for indefinite periods of time  Hire employees to perform core business functions When in doubt, treat as an employee!

Mistake #1: Treating independent contractors like employees Free resources:  Tip Sheet 5 Smart Tips for Managing Your Independent Contractors  E-Guide How to Classify Independent Contractors Correctly  Webinar Independent Contractor or Employee? How to Get It Right Every Time

Mistake #2: Practicing “accidental” discrimination when hiring What’s the problem?  Discrimination is not always intentional  Hiring inherently requires subjective decision-making  Does the candidate have strong communication skills?  Does the candidate have a good work ethic ?  Is the candidate strong enough to do the physical work required?  Will the candidate be a good cultural fit for my business?  Subconscious bias can affect the screening process and final decision  Small talk and “off the cuff” interview questions can be landmines  Risk: EEOC discrimination claim or lawsuit from rejected candidate  Perception/appearance of discrimination is what matters  He said/she said

Mistake #2: Practicing “accidental” discrimination when hiring Red flags:  Hiring decisions made primarily on ‘gut’  Job descriptions/ads do not clearly define requirements  Training/education, certifications, skills, physical requirements, years of experience, etc.  Inconsistent interview questions for same position  Inconsistent pre-employment testing for same position  Excessive ‘small talk’ or personal questions in interviews  Hand-written notes made on resumes/job apps  e .g., “heavy accent” or “no Saturdays due to religion”

Mistake #2: Practicing “accidental” discrimination when hiring How to resolve:  Formalize the hiring process  Thorough job description, including requirements  Legally sound job application  Consistent pre-employment testing for the position  Pre-defined questions based on job description  No illegal/loaded questions & minimal small talk  “How old are you?”  “Are you a citizen?”  “Do you have/plan to have kids?”  Keep notes separate from application/resume  Train all who interview/hire on the above  Don’t let inexperienced employees interview candidates alone

Mistake #2: Practicing “accidental” discrimination when hiring Free resources:  Tip Sheet Interview Questions You Can Never Ask Job Applicants and What to Ask Instead  Webinar 5 Easy Steps to Prevent ‘Accidental’ Discrimination When Hiring

Mistake #3: Not properly verifying work eligibility (I-9) What’s the problem?  Form I-9 is required for every employee  Very common for employers to make errors on form  Confusing for both employers and employees  15-page employee instructions and 65-page employer handbook  Fines for errors/incomplete forms can add up  Fines range from $110-$1,100 per recordkeeping error  Enforcement is being stepped up  Even small companies can be targeted based on complaints/tips

Mistake #3: Not properly verifying work eligibility (I-9) Red flags:  I-9 forms not kept in centralized location  Missing or incomplete I-9 forms  I-9 forms kept for too long  Careless document verification process  No process for updating expired documents  Client is in industry that depends heavily on immigrant labor (restaurant, hospitality, agriculture, construction, etc.)

Mistake #3: Not properly verifying work eligibility (I-9) How to resolve:  Conduct internal audit of all I-9 Forms  Make necessary corrections  Re-verify employees whose documents have expired  Discard documents that are not required  Terminate any employee(s) not legally eligible to work in the U.S.  Tighten up verification process & recordkeeping practices

Mistake #3: Not properly verifying work eligibility (I-9) Free resources:  Tip Sheet 9 Essential Tips to Complete Form I-9 Correctly  Tip Sheet I-9 Compliance: How to Conduct an Internal I-9 Audit  Webinar Immigration Crackdown: Increased I-9 Enforcement Calls for Immediate Steps by Employers

Mistake #4: Putting employees who don’t qualify on salary What’s the problem?  Certain types of employees MUST be paid hourly + overtime (FLSA)  Depends on pay rate + nature of the job  Current salary threshold = $23,660 ($455 weekly)  “Job duties” rules are complex and easily misinterpreted  Employers pay salary to reduce OT expense, ‘make things easier’  Estimated that 70%-90% of employers get it wrong  Employees may not realize it… until it’s too late for the employer  Risks include back wages (x2), lawsuits, attorney fees  Biggest litigation risk for employers  FLSA lawsuits reached record high in 2016

Mistake #4: Putting employees who don’t qualify on salary Red flags:  EVERYBODY’s on salary… including admin & entry -level employees  Employees are put on salary based on title, not specific job duties  Workers with similar job duties are paid differently (salary/hourly)  Salaried employees are frequently required to work OT  Salaried employees are micromanaged How to resolve:  Write a thorough job description for each person/distinct role  Reclassify each person/role based on assigned job duties  If in doubt, pay hourly + overtime  Implement formal policies to control overtime expense

Mistake #4: Putting employees who don’t qualify on salary Free resources:  Tip Sheet Counting Hours Worked: 10 Common – and Confusing – Time and Pay Misconceptions  Webinar Seven Lies Employees Tell You About Time and Pay

Mistake #5: Not displaying required employee postings What’s the problem?  Most employers know certain workplace posters are required  Often postings are outdated or incomplete  Many are unaware of new local (city/county) posting laws  Keeping up with posting laws is a huge burden  Issued by multiple federal, state and local agencies  No ‘one stop’ government resource for full posting compliance  Postings change frequently & agencies don’t notify employers  Risks include agency fines & employee lawsuits  Missing/outdated postings weakens employer’s case and can even extend statute of limitations