Business owners feel the weight of regulations, but G&A can help avoid costly consequences
If you’re feeling buried under the growing weight of government regulations impacting your small to mid-sized business, you’re not alone. In fact, nearly half of all small business owners ranked government regulations as a “very serious” or “somewhat serious” issue in the NIFB’s National Small Business Poll.
The reality is, constantly evolving local, state, and federal regulations dictate how professional services organizations – both large and small – must treat their employees and even potential employees. Whereas a large accounting firm might have a team dedicated to ensuring human resources compliance, the owner of a small engineering firm is typically responsible for knowing what regulations apply to the company and how to maintain compliance – while also juggling the many responsibilities of running a company.
When small businesses break the rules, they aren’t necessarily being neglectful. Often, they don’t understand or know the regulations or potential consequences. But failure to comply with the applicable regulations can result in government agency reviews, costly claims, and even lawsuits.
In other words, just because you don’t know the requirements exist, doesn’t relieve you of your obligation to abide by them or protect you from potential consequences.
Partnering with G&A Partners, a professional employer organization (PEO), is the most effective way to ensure your business is complying with today’s complex employment laws. Our commitment to helping companies grow includes providing assistance to companies in meeting regulatory compliance obligations with federal, state, and local workplace requirements.
Examples of common compliance violations
Consider these common compliance violations and learn how our G&A compliance experts can help you:
A new manager steps into a supervisor role at an engineering firm. On the supervisor’s team is a senior engineer over age 60. Immediately, the new supervisor begins commenting on retirement and asks the senior engineer what her retirement plans are. Shortly after, the supervisor terminates the senior engineer. The position was then offered to a younger employee.
Potential noncompliance consequences: The senior engineer files a claim with the Equal Employment Opportunity Commission (EEOC) claiming age discrimination. The claim is followed with a lawsuit against the engineering firm. The firm is found to be noncompliant, and as a result, the firm must pay more than $50,000 in back pay and conduct training regarding the Age Discrimination in Employment Act (ADEA).
How G&A can help: Our HR experts will help your team understand the EEOC’s role in protecting employees from discrimination, harassment, bullying, and other forms of victimization. Online, anti-harassment training programs are also available for managers.
Potential savings with G&A: $50,000 in back pay
Wage payment violations
A small marketing firm owner works her hourly, nonexempt employees nearly 50 hours each week but only pays them for 40 hours. A competing marketing firm also works his employees 50 hours each week, and although he pays them for 50 hours, he only pays the regular, straight time rate rather than incorporating any overtime pay.
Potential noncompliance consequences: In both cases, the business owners have violated the Fair Labor Standards Act (FLSA). Several employees at both marketing firms file “Wage & Hour” charges to the Wage and Hour Division of the Department of Labor, which in turn lead to audits of all payroll records. Both employers are found to be noncompliant. One firm is required to repay two years of back pay, while the other firm is required to repay three years of back pay because it was determined that the violations were knowingly and willfully committed.
How G&A can help: Our HR compliance experts will assist in reviewing your employee classifications (exempt vs. nonexempt) and keep you informed of applicable federal or state wage and overtime standards. We’ll also help you maintain accurate records and put procedures in place to avoid mistakes.
Potential savings with G&A: Approximately $30,000-$52,000 in back pay per employee, based on an hourly rate of $32 per employee.
Employee misconduct and company policies
An engineering company terminates an employee for work-related misconduct. However, the company didn’t provide the employee with an employee handbook, so he never signed a form acknowledging that he read and understood the company policies and procedures. In addition, the company neglected to maintain a written file of the employee’s misconduct.
Potential noncompliance consequences: The employee files an unemployment claim against the company. Since the company didn’t document the employee’s misconduct and it can’t clearly demonstrate that the employee was aware of the company policy, the company will have difficulty disputing the claim.
How G&A can help: Our team of HR professionals can partner with company management on disciplinary and termination matters. Our experts will also review your current workplace policies and procedures and help establish best practices for addressing employee behavior and performance issues. Through this guidance, G&A will help implement systems – such as defining how managers document misconduct and requiring employees to acknowledge policies – to safeguard employers when misconduct occurs.
Potential savings with G&A: Each awarded unemployment claim can affect three years of UI tax rates. Employers often don't realize the real cost of a claim since it's spread out over a long period. The average claim can increase an employer's state tax premium $4,000 to $7,000 or higher over the course of three years.
Potential discrimination during the hiring process
During a job interview, an owner of a local IT firm casually asks the applicant if she has kids. The applicant is not hired, and the candidate assumes it is because she indicated that she has three small children.
Potential noncompliance consequence: The applicant files a discrimination claim with the EEOC and, ultimately, a suit against the IT firm. The business owner is forced to pay extensive legal fees to defend against the suit.
How G&A can help: G&A’s HR advisors can provide guidance on how to properly conduct employment interviews, so hiring managers understand best practices to use throughout the hiring process.
Potential savings with G&A: Settlement averages for discrimination claims are approximately $40,000, but litigated cases are typically six-figure payouts and may go as high as seven figures, including damages.
Preventing access to company retirement plans
At a local architecture firm, the owner prohibits part-time employees from participating in the company’s 401(k) plan.
Potential noncompliance consequences: Excluding certain classes of employees may be considered discriminatory. In this case, the owner was unable to demonstrate that these part-time employees were part of a qualifying exclusion group, and this failure to comply resulted in a failed compliance test and penalties.
How G&A can help: 401(k) retirement plans are subject to Internal Revenue Service (IRS) and U.S. Department of Labor regulations. G&A’s benefits experts consult with companies, assessing current benefit plans and recommending compliance improvements and plan enhancements.
Potential savings with G&A: Failure to correct failures in nondiscrimination testing in a timely manner may result in mandatory IRS filing and a 10% excise tax.
When you partner with G&A, our compliance team can provide assistance in navigating the complex regulatory landscape, potentially saving you from costly penalties, claims, and lawsuits, and giving you the time to focus on growing your business.