Managing The Complexity: Three Tips Every SMB Company Should Know Regarding HR Compliance

Post written by

Jay Fulcher

Chairman & CEO at Zenefits

As professionals in the HR industry, we operate in a highly regulated environment that is constantly changing and complicated to navigate. And when it comes to compliance, it's not optional or discretionary. It is imperative.

The cost of noncompliance — especially for small and midsize businesses (SMBs) — could be the difference between making payroll or even staying afloat. While larger enterprises rely on big budgets and have dedicated internal teams and partners to keep them compliant and help navigate the complicated world of HR, small and midsize companies can’t afford the same luxury.

Along with needing to balance tighter budgets, most SMB owners wear multiple hats, including serving as the company’s HR department. Not only are they tasked with the stress of running the day-to-day business, but they are also on the hook to process payroll, maintain staffing needs and keep up with shifting regulatory changes — tasks that take an immense amount of time and resources. SMB owners spend, on average, $12,000 annually and more than 20 hours per month of their own time trying to comply with federal, state and local regulations, whether that be understanding recent changes to health insurance or the latest increases to the minimum wage.

Compliance doesn't have to be stressful or a standalone endeavor. Here are three tips for small business leaders to ease the burden associated with HR compliance:

1. Build A Compliant Company Culture

We describe culture as “how we do things here.” When a company doesn’t exercise good judgment and recklessly dismisses potential compliance risk, it sends a strong and sometimes unintended signal to management and employees that obeying the law, or playing by the rules, is optional.

For companies that want to be in business long-term, this can have a devastating effect. Top talent wants to work where they believe things are well organized, where no unnecessary or ill-considered risks are being taken and where they believe the business is viable. In short, they want to work for an employer they can trust. Compliance and playing by the rules are grounded in trust.

2. Know The Major Regulatory Changes Happening Now

Minimum wage increases are taking place in states and cities across the country, with subsequent raises scheduled for the coming years. Because several of these changes have been implemented earlier this year and more are upcoming, SMBs should review hourly wages for their current non-exempt employees and make necessary adjustments.

No policy is perfect, but the new Health Reimbursement Arrangements (HRA) program could have a positive impact on how SMBs engage with health care. It gives SMBs the ability to fund HRAs for their employees, so employees will be able to use pre-tax dollars to pay for their own premium insurance. This eliminates the need for an SMB to use Affordable Care Act-provided insurance in order to be qualified in the government’s eyes as providing minimum essential coverage. So, the cost hurdle is mitigated, as is the philosophical hurdle of feeling required to be part of a government program.

3. Consider Tools to Help Ease the Burden 

SMBs should know that they’re not alone and help is available. It starts with finding technologies that can help business owners manage the complexity. Digital guardrails ensure forms are filled out completely and correctly, with alerts ensuring all applicable regulations are tracked and met. Given the rate of change and the sheer number of rules and regulations to manage, SMBs face a daunting challenge given their lack of resources and relatively lean organizations. You don’t need the budget of a Fortune 500 company, but rather the right HR resources to alleviate a majority of the workload.

The cost of noncompliance is very high for any business, especially for SMBs. The peace of mind that comes from knowing your business won’t have any unexpected surprises helps keep everyone focused on the business. If there is an issue, knowing that you have access to records and expertise at a stressful time is priceless. The average money spent on compliance annually by SMBs pales in comparison to the eventual cost of noncompliance.

Compliance is essential, but it shouldn’t be daunting. Every business deserves a fighting chance and a level playing field when it comes to compliance.

Forbes Human Resources Council is an invitation-only organization for HR executives across all industries. Do I qualify?
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As professionals in the HR industry, we operate in a highly regulated environment that is constantly changing and complicated to navigate. And when it comes to compliance, it's not optional or discretionary. It is imperative.

The cost of noncompliance — especially for small and midsize businesses (SMBs) — could be the difference between making payroll or even staying afloat. While larger enterprises rely on big budgets and have dedicated internal teams and partners to keep them compliant and help navigate the complicated world of HR, small and midsize companies can’t afford the same luxury.

Along with needing to balance tighter budgets, most SMB owners wear multiple hats, including serving as the company’s HR department. Not only are they tasked with the stress of running the day-to-day business, but they are also on the hook to process payroll, maintain staffing needs and keep up with shifting regulatory changes — tasks that take an immense amount of time and resources. SMB owners spend, on average, $12,000 annually and more than 20 hours per month of their own time trying to comply with federal, state and local regulations, whether that be understanding recent changes to health insurance or the latest increases to the minimum wage.

Compliance doesn't have to be stressful or a standalone endeavor. Here are three tips for small business leaders to ease the burden associated with HR compliance:

1. Build A Compliant Company Culture

We describe culture as “how we do things here.” When a company doesn’t exercise good judgment and recklessly dismisses potential compliance risk, it sends a strong and sometimes unintended signal to management and employees that obeying the law, or playing by the rules, is optional.

For companies that want to be in business long-term, this can have a devastating effect. Top talent wants to work where they believe things are well organized, where no unnecessary or ill-considered risks are being taken and where they believe the business is viable. In short, they want to work for an employer they can trust. Compliance and playing by the rules are grounded in trust.

2. Know The Major Regulatory Changes Happening Now

Minimum wage increases are taking place in states and cities across the country, with subsequent raises scheduled for the coming years. Because several of these changes have been implemented earlier this year and more are upcoming, SMBs should review hourly wages for their current non-exempt employees and make necessary adjustments.

No policy is perfect, but the new Health Reimbursement Arrangements (HRA) program could have a positive impact on how SMBs engage with health care. It gives SMBs the ability to fund HRAs for their employees, so employees will be able to use pre-tax dollars to pay for their own premium insurance. This eliminates the need for an SMB to use Affordable Care Act-provided insurance in order to be qualified in the government’s eyes as providing minimum essential coverage. So, the cost hurdle is mitigated, as is the philosophical hurdle of feeling required to be part of a government program.

3. Consider Tools to Help Ease the Burden 

SMBs should know that they’re not alone and help is available. It starts with finding technologies that can help business owners manage the complexity. Digital guardrails ensure forms are filled out completely and correctly, with alerts ensuring all applicable regulations are tracked and met. Given the rate of change and the sheer number of rules and regulations to manage, SMBs face a daunting challenge given their lack of resources and relatively lean organizations. You don’t need the budget of a Fortune 500 company, but rather the right HR resources to alleviate a majority of the workload.

The cost of noncompliance is very high for any business, especially for SMBs. The peace of mind that comes from knowing your business won’t have any unexpected surprises helps keep everyone focused on the business. If there is an issue, knowing that you have access to records and expertise at a stressful time is priceless. The average money spent on compliance annually by SMBs pales in comparison to the eventual cost of noncompliance.

Compliance is essential, but it shouldn’t be daunting. Every business deserves a fighting chance and a level playing field when it comes to compliance.

Forbes Human Resources Council is an invitation-only organization for HR executives across all industries. Do I qualify?