As a business owner, you wear a lot of hats. From head chef to chief accountant, it’s likely that human resources tasks are not at the top of your priority list. But proper payroll and employee management are imperative to the success of your business—increase employee retention and satisfaction, and avoid IRS fees by staying up to date on human resources policies and regulations.
Business owners spend on average 25 hours per month searching for HR answers. What would you do to impact your business with 25 extra hours? Our HR advisors field human resources questions from business owners every day. Read on for five HR questions they always see.
1. What are payroll taxes?
On average, 40% of small businesses get fined $845 each year for payroll-tax related issues. Understanding your payroll taxes and how they work can help you avoid incurring fees. Payroll taxes are taxes imposed on employers or employees, usually calculated as a percentage of the salaries or wages that employers pay their staff. The government collects these taxes on a pay-as you-go basis, so avoiding paying these until the end of the year can place a large financial burden on your business. There are different federal, state, and local taxes that may or may not apply to your business—your payroll provider will help you figure out which taxes pertain to your business.
2. How should employee files be organized?
Properly organizing employee files is an important step in ensuring that employee information remains confidential and secure. Depending on the type of business you have, and which benefits you offer, you should organize files into the following buckets for each employee:
- I-9 File: Store all Employment Eligibility Verification documents (Form I-9s) in a separate master file.
- Medical File: This file should contain everything related to an employee’s medical history, including health insurance enrollment forms. Keeping employee medical records confidential is required by the Americans with Disabilities Act (ADA), so it is essential to keep these separate from basic personnel files.
- Personnel File: Organize all items that were a factor in the employee’s hiring, their current employment, and future employment (i.e. resume, application, performance reviews, disciplinary action, etc.) in the Personnel file.
- Payroll Records File: Retain all the employee’s W-4s and any other payroll-related documents containing the employee’s SSN or other protected information in the important Payroll Records file.
- Injury File: Keep a file for any employee who is injured while on the job. This file should also contain workers’ compensation claim records and injury reports.
3. Do we pay the minimum wage of the state where our headquarters is located or the state where an employee does the work?
The average penalty for wage and hour violations is $10,000—staying informed on city and state wage and labor laws is an important step in avoiding hefty payroll fees. When you have many employees working remotely or at worksites in different states, it can be difficult to understand which state minimum wage they should be paid. On top of that, some cities and counties have higher minimum wages than the state requires. Simply put, employees should be paid the minimum wage for the state in which they work, whether that is in a satellite office or their own home. A good rule of thumb with most employment laws is that you should adhere to the law that is most beneficial to the employee.
4. How do we comply with labor law poster requirements with respect to remote employees?
The simplest and safest answer is to mail hard copies of any applicable workplace posters to the remote employees. If you have employees in multiple states, each employee should be sent the required federal posters, plus any applicable to the state where they work.
Alternatively, some employers may also provide these required notices and posters on a company website or intranet that employees can access. However, this is not necessarily compliant with a literal reading of the regulations—many of these laws were written decades before the internet. The safest option is to send these posters to employees to be used as they see fit.
5. Do I need to pay for working interviews and skills assessments?
If you require a candidate to complete a working interview, where you ask the candidate to work alongside a high-performing employee or complete tasks that are of benefit to your organization, you are required to pay them at least minimum wage. The benefit of a working interview is that you can evaluate the candidate’s skills within a real-life working environment. The downside, however, is that you need to have the candidate complete an I-9 and W-4 prior to the working interview.
In contrast, skills testing does not require compensation. During a skills assessment, the employer sets up an assessment, different from the work done in the organization, that tests whether the candidate has the skills required to do the job. Some examples of acceptable unpaid skills tests are writing samples, cognitive skills assessments, or other small tasks associated with the type of work the candidate would perform if hired.
Human resources is one of the most complicated aspects of running a small business. Employee salaries and benefits are likely a large part of your operating expenses, and unforeseen fines for noncompliance can be detrimental to the financial health of your business. With regulations and policies constantly changing, leveraging HR support can not only save you time and money, but add additional value and increase employee retention.
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