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What Are the Important HR Requirements for Small Business?

This post is part of a series called The Complete Small Business Human Resources (HR) Guide.
Small Business HR: How to Communicate With Employees Better
How to Handle Important Employees That Want to Quit

So far in this series on HR for small business, we’ve looked at important human resources topics like hiring, training, and communication.

But there are also some basic requirements you have to fulfill as a small business owner or HR officer. When people come to work for you, it’s your responsibility to provide a safe and healthy workplace, to comply with relevant employment laws in your country, to keep good records, and to pay salaries and benefits promptly and effectively.

Small business team human resources
Do you know the small business HR requirements to properly take care of your employees? (photo source)

In this tutorial, we’ll dive into these topics and show you how to comply with these important human resource requirements in your small business. They may not be the most exciting things you’ll do in your small business, but they are critical if you want to have happy, productive employees—and avoid some organizational or legal headaches down the road.

Note: When you’re reading this tutorial, keep in mind that it’s aimed at a global audience. Employment laws and other regulations vary widely depending on the country you’re based in—and sometimes there are local regulations to be aware of for your city, state, province, etc. So although we’re going to go through some general examples here, mostly based on U.S. regulations, be sure to check your local situation, and ideally get professional legal advice to make sure you’re complying with all relevant laws in your area.

1. Keep People Safe

If you think occupational safety or “health & safety” regulations are just about annoying government red tape, here’s a shocking statistic for you: in the United States in 2015 alone, 4,836 employees died from injuries sustained in the workplace. (Wondering about the number of nonfatal cases? It’s 2.9 million.)

Let those numbers sink in for a while.

It should be clear, then, that your first and most important responsibility as a small business owner is to keep your employees safe. So in this first section, we’ll go through some basic principles of occupational safety.

Note: I’m basing much of this information on the advice in the U.S. Occupational Safety & Health Administration’s excellent Small Business Handbook. The book itself goes into much more detail, and it’s free to read online or download as a PDF, so I’d recommend looking at it.

Assess the Risks

Start by analyzing your workplace and the processes your employees have to follow. Look for potential dangers and make a comprehensive inventory.

Some workplaces are more obviously dangerous than others—the risks at a manufacturing site where workers handle toxic chemicals and heavy machinery are easier to see than those at an office, for example. But in any workplace, things can go wrong.

Every year in the U.S., for example, 27 people die and over 10,000 are injured by elevators. Thousands of people injure themselves, sometimes seriously, by tripping over loose wires, open desk drawers, objects left in passageways, and so on. Poorly designed workstations and office chairs can leave employees vulnerable to back pain, repetitive motion injuries, and other serious ailments. An old or badly maintained building can create any number of hazards, from faulty wiring to loose ceiling tiles.

So start by compiling a list of potential hazards. You may be able to have an experienced health and safety professional visit your workplace and conduct a free survey as part of a subsidized government program. Or you could pay for a private consultant to do it.

Encourage employees to alert you to anything they see in their jobs that is potentially unsafe—they are the best resource to help you compile the initial safety inventory and then keep it updated.

Put Controls in Place

Once you’ve assessed the risks, try to eliminate as many hazards as you can, and where you can’t eliminate them, at least aim to control them and reduce their likelihood.

Usually this involves setting up particular procedures that every employee should follow (e.g. when you’re operating this machine, you must wear eye protection and check that the safety catch is functioning properly). Then make sure everyone knows the procedures, that they’re properly documented, and that signs or posters are in place to remind people.

Here are some other important steps:

  • Make a plan for regular maintenance of the building and of any equipment that employees use.
  • Have a plan for medical emergencies and post emergency numbers prominently.
  • Train some employees in first aid procedures and make sure people know who they are and how to reach them.
  • Have a procedure for reporting injuries and make sure people know it.
  • Train all employees in health and safety procedures to ensure they know what to do.
  • Create an emergency plan and conduct frequent drills.

The following tutorial may be helpful:

Show Your Commitment

Identifying the risks and putting controls in place is great, but what if your employees still don’t follow the right procedures? It’s critical that everyone takes workplace safety seriously, and you can set that tone by your own actions.

Demonstrating your commitment to employee workplace safety will encourage your staff to take the subject seriously too, and it may help avoid accidents. On top of that, it shows that you value them and their physical well-being, so it sends a powerful message that may improve their general happiness and job satisfaction.

So create a clear policy on workplace safety and health, and post it prominently around the office and on the intranet or company website. Hold meetings to communicate the policy in person, and hold managers and employees accountable for complying with it.

Keep reviewing and updating your policy and procedures regularly, encouraging input and suggestions from employees. And if you’re requiring people to do extra work to ensure procedures are followed, make sure they have the time and resources to do that effectively.

Following all of these steps will not immunize you from workplace accidents, but it will help reduce their likelihood and create a safer work environment for everyone.

2. Know the Law

Employment laws are a key part of small business human resource requirements and they can be very complex. These laws govern small businesses too, so you need to be up to speed and make sure you're complying with all the regulations. Again, we’re going to look at some general examples here based on U.S. laws, but be sure to check the situation for your own business, and get individual legal advice if possible.

Equal Opportunity Laws

One of the most common forms of employment law deals with the issue of equal opportunity. Essentially, you should not discriminate in your hiring practices based on gender, race, religion, national origin, age, disability, etc. And you should have clear policies in place to guard against discrimination and harassment in the workplace. You may also be required to put up notices in the workplace to inform employees of their rights and your compliance with the relevant laws.

A few examples of the laws affecting this area in the U.S.:

  • Civil Rights Act
  • Equal Opportunity Employment Commission (EEOC) regulations
  • Uniformed Services Employment and Reemployment Rights Act
  • Equal Pay Act
  • Americans With Disabilities Act

Workers’ Rights

Workers in many countries have the right to organize and bargain collectively or join a union. They often have the right to be paid overtime if they work extra hours, and to have a certain number of work breaks during the day. 

There may be rules on how much vacation time or other benefits you have to provide—and if you provide paid vacation and employees don’t use it, you may have to pay them the monetary equivalent. And there are many more rights, both large and small, that workers have fought for over the years and had codified in law.

Sometimes there are exceptions—for example, in the U.S., salaried workers are generally exempt from the laws around overtime and work breaks, and independent contractors are exempt from many of the rules that apply to permanent employees. But you need to be careful about how you classify people, because there are rules about that too, and it’s easy to fall foul of them.

Also, don’t forget about things like parental leave and medical leave. You must allow employees to take time off according to the laws in your country, and make sure their job is still available for them when they return.

Workplace Safety

We covered the principles of workplace safety in the last section, but there may also be specific laws and regulations you need to comply with and posters you need to display in the workplace. So in addition to the work you do to provide a safe workplace, make sure you’re following all the relevant rules as well.

3. Keep Good Records

Filing is not the most exciting task you’ll ever do, but it’s important. The good news is that the requirements are quite simple—you just need to keep a file (or files, as we’ll see in a minute) for each employee, containing important information about their employment. And, most importantly, you’ll need to keep these files very secure, because they contain sensitive information.

Ideally, you’ll have two separate files for each employee: one for general employment information, and another for medical information. (And in some countries, you may need to keep immigration-related records too.) Here’s what should go in each:

General Employee File

This file gathers all the information related to a particular employee in one place. You can start it when you hire them, by dropping in their resume and any hiring documents or forms they’ve signed.

Then you can add documents as you go along, such as:

  • training records
  • performance reviews
  • any disciplinary action
  • tax forms
  • payroll details
  • acknowledgement of receiving the employee handbook
  • other contracts or agreements the employee has signed

Employee Medical File

If an employee has a medical condition or disability that affects their work, you may need to keep medical records, but you should always keep them in a separate file in a very secure location.

That’s because medical information is very personal, and someone who may need to access the employee’s general file should not see their medical records. So keep this information in a separate file, and be very strict about who can access this file and why.

Immigration Records

In some countries, you may need to keep proof of a worker’s eligibility to work in the country. In the U.S., for example, this is called Form I-9. Because immigration officials can ask to check these forms, you should keep them separate from the employee’s other information, so that you can just provide them to the government without giving access to all the employee’s personal data.

4. Provide Pay & Benefits

Another basic HR requirement for every small business is to pay people on time and provide any relevant benefits. We already looked at how to set pay rates and benefits earlier in this series, but once you’ve done that, you need to make sure you do the mechanics of it properly.

Firstly, that means paying people on time, no matter what. As we discovered in my cash flow tutorial, small businesses often struggle with sufficient cash flow, but if you manage it carefully and make accurate forecasts, you can ensure you always have enough on hand. And if you need to delay any payments, employees’ salaries are not the ones to mess with. Paying someone late tells them that they’re not respected, and/or that the business is in serious trouble. Either way, it’s a sure way to get them updating their CV and looking for a new job.

But beyond that, you also need to make sure you calculate the right amount, make the correct tax deductions, keep and provide the right records, file the right forms with the tax authorities, and so on.

You also need to keep on top of benefits—give employees the right information and make it easy for them to access their benefits, and keep track of, for example, how many vacation days each person has taken out of their overall entitlement. Where benefits are provided by a third party, such as a health insurance company, you need to make sure that everybody is enrolled who should be enrolled, and that everything is running smoothly and people are able to access the help they need.

For more information on running payroll effectively, see the following tutorial:

Conclusion

In this tutorial, you’ve seen how to comply with some important human resource (HR) requirements for your small business. You’ve learned how to keep your employees safe, how to keep on top of employment laws and regulations, how to keep good records, and how to provide pay and benefits efficiently.

In the next tutorial in this series on HR for small business, you’ll learn how to deal with that dilemma no small business owner wants to face: when a key employee wants to quit. See you soon!

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