HR Compliance Checklist: Everything Small Business Owners Need to Know

A Human Resource (HR) compliance checklist is a tool that can be used to help business owners prepare for an audit. It is also a great tool to have around to help keep business practices in compliance.

Some small business owners see the benefit of conducting internal HR audits on their own business. When it comes to HR, “too safe” does not exist. Labor laws are constantly evolving and small business owners who do not keep up with these changes will be left in the dust.

Start with the basics and build from there. Every employer should have an employee handbook. The employee handbook is the best way to communicate expectations to employees. It also keeps employees and employers on the same page when it comes to policies and procedures. Because the handbook is so important, business owners should make it a priority to ensure everything is appropriately outlined and kept up to date. A well written handbook can reduce the risk of misunderstandings between employers and employees.

Consider these fundamental components when creating or updating an employee handbook.

  • Handbook acknowledgement – This is a notice acknowledging that the employee understands that the handbook is not a contract for employment and that the handbook is subject to change.
  • At will employment policy – Iowa is an at-will state, meaning that the employer or the employee can terminate the employment at any time and for any reason. At will information should be included in the handbook to avoid confusion and to ensure the employer receives the appropriate protection.
  • Benefits – The employee handbook is a great place to introduce employees to the suite of benefits that are offered at the company. Address all areas that are offered:
  • Medical, Dental, Vision Insurance
    • Life Insurance
    • 401(k) Retirement Savings Plan
    • Short-Term & Long-Term Disability
    • Employee Wellness Program
    • Employee Assistance Program

Additional topics to keep in mind when creating an employee handbook include: leave of absence, overtime, parental leave, and more.

Keep in mind that everything from an initial interview with an employee through their termination should be included in the compliance checklist.

  1. Hiring Process – The hiring process is where it all begins. Having a clear outline of the hiring process will help the employer stay consistent – and compliant. Take time to periodically review job application forms, job descriptions, offer of employment letter templates, any applicable contracts, and the onboarding process. Keep these documents and procedures up-to-date with internal changes and updates to laws and regulations. Staying current will put the business one step ahead when it comes time for an audit.
  2. I-9 Form – An I-9 form is a document that verifies if an employee is legally authorized to work in the United States. A completed I-9 should be saved for every employee. This document is kept separate from the employee’s personal file. The I-9 is generally completed during the onboarding process.
  3. Personnel File – A personnel file is a folder used for storing HR documents related to that employee. The personnel file should include the employee’s application, any recognition or disciplinary notices they have received, and copies of their performance reviews. The personnel file should not include any private or personal information regarding the employee, any information about their background checks, or any drug screens. Rather, these items should be kept in a confidential file for the employee.
  4. Working Time – What is working time? Simple. Any hours that an employee is working. Employers are required to pay employees for the time that they have worked – even if it is unauthorized. Time can also be paid in the form of reimbursements. Such as:
    1. Travel (mileage)
    1. Lodging
    1. Meals

Working time also includes overtime and hours worked off campus (meetings, working at home, etc.). This is especially important for non-exempt employees who are paid based on an hourly rate.

Employees who are classified as exempt receive a steady salary for the work they perform. Understand the difference and be sure that employees are being classified properly.

  • Exempt – Employees who are classified as exempt are not entitled to overtime pay (1.5 times their regular rate). These employees are paid a salary – never an hourly rate.
  • Non-exempt – Non-exempt employees are entitled to overtime pay (1.5 times their pay rate). These employees can either be paid an hourly rate or a salary. There is no weekly minimum that non-exempt employee must meet. However, be sure to keep minimum wage laws in mind.
  • Unemployment – Not all employees are eligible for unemployment benefits. Generally, employees who are terminated for performance reasons will receive unemployment benefits. On the other hand, employees who are terminated for conduct reasons or those who leave without cause are not eligible for unemployment benefits. Keep in mind, employees are only eligible for unemployment benefits if they have surpassed the probationary period. This period is usually 90 days from the date of hire.

This is just the tip of the iceberg.

Laws and regulations are constantly changing, which means keeping up with internal business practices is more critical than ever. Use this checklist as a starting point when creating a company specific checklist. A business that is not compliant may incur fines and even lawsuits. For small business owners who do not have a designated human resource manager on staff, outsourcing human resource administration could be the answer.

Focus OneSource is Iowa’s premier Professional Employer Organization (PEO).

What sets us apart from other PEOs is our flexibility to offer services above and beyond the competition. We understand that the PEO model may not be the right fit for every business. In an effort to better meet the needs of our customers, we have split our PEO services into a la carte options.

We offer human resource outsourcing to help our customers feel confident about their policies and procedures. Keeping our customers compliant is our top priority. Small business owners who outsource their human resource needs can focus on growing their business with the assurance that their HR needs are being taken care of. For those customers who are looking for more help with their small business, we also offer:

  • Health Insurance
  • Dental Insurance
  • Vision Insurance
  • Life Insurance
  • Flexible Spending Accounts
  • Long Term Disability / Short Term Disability
  • 401(k) Retirement Savings Plans
  • Employee Wellness Program
  • Employee Assistance Program
  • Payroll Administration
  • Benefits Administration

Focus OneSource is a one stop shop for small business owners and their business needs. Think you could use some HR assistance? Contact us today for a free HR consultation – we’ve got you covered!

Alaina Riley
Marketing & Wellness Coordinator

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