Noncompliance: A Big Concern for Small Business

Noncompliance: A Big Concern for Small Business

by on 29 Sep, 2016

Today, small business owners face a variety of challenges. Starting and running a business is a challenge in itself, but the myriad of labor regulations thrust upon businesses just increases the complexity. Failure to comply with local, state, and federal laws can lead to costly penalties, and in some cases, dissolution. To complicate things further, the legal landscape is constantly changing with laws being added and amended on a regular basis.

Frequently reviewing human resources policies, practices, and procedures are necessary to ensure that everything is up-to-date with legal compliance requirements. Still, as a small business, it may be hard to have the resources or knowledge necessary. Recognizing the potential pitfalls of noncompliance is the first step in avoiding costly fines…or worse.

Some of the areas which small businesses need to be aware of include:

  • Workplace safety:  Employers are responsible for providing a safe and healthful workplace. Even small OSHA violations can result in severe penalties for the company. Thus, businesses need to ensure that proper safety training and procedures are in place to minimize the occurrence of workplace injuries and hazards.New Englanders Business Owner's Guide to Streamlining HR Practices and Minimizing Risk
  • Wage and Payroll Issues: The laws surrounding fair wages vary from state to state. There are laws that not only dictate the minimum acceptable wage but also when overtime pay is applicable and for whom; illustrated by the new Massachusetts law on overtime pay which has far-reaching implications and must be considered closely. Violations of the Fair Labor Standards Act (FLSA), among other laws and regulations, could result in significant fines and employer liability.
  • Hiring: What many business owners may fail to realize is that there is also potential for noncompliance during the hiring process. Misconduct or apparent discrimination during the hiring process can lead to negative consequences and potentially litigation.
  • Licensing and Permits: Regulations vary by industry, but many small businesses face licensing and permit requirements. This can range from a license to operate a business within a city to the professional licensure of employees. Business owners need to be aware of the requirements that exist in their industry, as failure to comply can lead to expensive consequences for both the employees and the business.

How can a small business ensure that noncompliance issues are minimized? A good practice to adopt is performing HR audits. Performing regular HR audits is a proactive way of ensuring that a business stays out of hot water when it comes to legal issues. HR audits are also a way of identifying areas where an organization is doing things right and pinpointing how some things might be done differently or more efficiently. The HR audit should assess the recruitment and selection process for employees to ensure fairness. It should also assess the procedures for layoffs and terminations and the effectiveness of measures taken to maintain workplace safety. A successful HR audit will ultimately mitigate the risk of being liable for what is deemed “unfair employment practices”.

A truly successful HR audit requires expertise, the time to perform the audit, the ability to be objective in acknowledging discrepancies in current procedures, and the capacity to make organizational changes. This may be intimidating to smaller businesses that do not have a fully staffed HR department.

As a result, small business owners may choose to “roll the dice”, and deal with the consequences of non-compliance if or when they arise. This, however, is not wise. Audits and proper training may seem costly, but the costs of non-compliance are far greater. Businesses need to take proactive, not reactive, steps in dealing with non-compliance issues. Thus, taking steps to ensure your business is compliant is a worthwhile investment, whether it is done in-house with your own HR department, or with outside help.  For some organizations, it may be beneficial to have an outside consultant who has no personal stake perform the audit. This approach is especially useful for smaller companies with limited staff and time, so attention is not diverted from other key business functions.

Navigate, as a professional employment organization, is dedicated to easing the administrative burden placed on small and large businesses alike. Each of our team members has over 15 years of experience in a specialized human resources area and is dedicated to helping ensure that your organization stays compliant with constantly evolving standards, state, and federal regulations.

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Disclaimer: this article does not represent expert advice and is provided for informational purposes. Please get in touch if you would like expert HR advice.

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