Staying up to speed on human resources policy updates and compliance laws is a crucial aspect of running any successful business. With federal, state, and local employment and wage laws constantly shifting, it can be easy for small businesses to fall behind on policy updates and quickly become non-compliant. When it’s time to reevaluate your policies, here are three areas of HR compliance you should always consider.
Changes to Minimum Wage and Equal Pay Laws
Minimum wage and equal pay laws are two of the most fluid laws within the realm of employment legislation and can often change several times during a calendar year. States have continually pushed to pass pay-equity laws to achieve fair pay across the board, while federal legislation has had less success, creating a difficult system for employers to navigate. In July 2019, Illinois became the latest state to make amendments to its Equal Pay Act, which previously required that employers pay equally for work that required “equal” skill, effort, and responsibility and instead, now allows comparisons to those with “substantially similar” skill, effort, and responsibility. Other states that have made recent equal pay law adjustments are California, Massachusetts, New York, New Jersey, and Oregon.
When it comes to minimum wage laws, compliance can get even more confusing. In 2019, eighteen states began the year with higher minimum wages, and eight states—Alaska, Florida, Minnesota, Montana, New Jersey, Ohio, South Dakota, and Vermont, automatically increased rates based on the cost of living. Some states have opted to continually increase their wages throughout the calendar year. To put it simply, wage laws are complicated—and staying up to speed on the ever-evolving laws is nearly impossible. As a small business owner, one of the easiest ways to make sure you’re staying compliant is by leveraging an online HR platform that can be your go-to solution every time you have a labor law-related question or HR task to check off your to-do list.
Classifying Employees with Fair Labor Standards Act Compliance
Small businesses often employ many part-time or seasonal employees—which are usually classified as non-exempt employees. However, it’s possible you have a few employees who are tackling more administrative tasks, who need to be classified as exempt. The line between exempt and non-exempt is confusing—and misclassifying an employee can lead to hefty fines—so here’s what to remember.
Employees who are entitled to both minimum wage and overtime are called non-exempt, while those who are not entitled to both are called exempt. Under the Fair Labor Standards Act (FLSA), employees must receive at least minimum wage for each hour worked and overtime pay for hours worked over 40 in a workweek. Any position can be non-exempt, meaning that employees in that position are entitled to both minimum wage and overtime pay, but if you want to classify a position as exempt, it would need to qualify for one of the exemptions listed in the FLSA. While it might seem appealing to classify all employees as exempt in order to save money by not being required to pay overtime, there can be costly consequences for misclassification. Exempt employees should be performing executive, administrative, or professional tasks, make at least $455 per week, and be paid the same each week regardless of hours worked.
To make matters more confusing, state and local regulations may specify different exemption criteria than the FLSA. A good rule of thumb to avoid penalties is to abide by the law—whether FLSA or state—that is most advantageous to the employee. If you aren’t sure what to classify your employees as, it’s a good idea to seek outside HR counsel—as these laws are continually evolving and fines can cause a heavy financial burden. Each time you evaluate new HR policies within your business, take time to clearly explain each employee’s role, how they are classified, and any changes in policies that have been made.
Vacation and PTO Policies
When it comes to days off and vacation policies, many small businesses find it difficult to implement paid time off (PTO) policies that will work effectively with their business. When you only have five to ten employees, it can be difficult to operate if one or more employees aren’t available. At the same time, maintaining some kind of time off policy is important to not only ensure peak employee performance, but also to set a standard so all employees are treated equally.
While no law requires employers to provide paid vacation, 91 percent of all full-time employees in the private industry receive vacation, and 34 percent of part-time employees do. Following a time off policy will allow you to avoid any discrimination claims—the decision to approve or deny the use of accrued vacation time is up to you, assuming you do so in a consistent and non-discriminatory manner. For example, it is acceptable to deny a vacation request because approving it would leave you without adequate coverage, or because the employee asked with less notice than is required by your time off policy. You should always ensure that certain employees are not denied or permitted vacation disproportionately, or you may face discrimination claims.
Keeping consistent policies in place and updating them frequently based on shifting laws is one of the easiest ways to ensure that your business stays compliant with employment laws. Even more important than having fair policies in place is making sure they are effectively and frequently communicated to all employees. Each time a policy is updated, it’s a good idea to have employees sign an agreement that they understand and are aware that the policy has changed.
Don’t get overwhelmed by the complexities of human resources. When you integrate a complete human resources solution, you’ll have confidence knowing your business is always compliant, and that your employees get everything they need.