When you first started your company, HR was probably the very last thing on your mind. You had a vision, dreams, and a mission driving you to create, explore, and grow. Chances are, that strategy worked out fine for a while. When you’re small, you might be able to get away with a bare-bones, hardly-defined HR structure. But, as you grow, HR becomes less of a nuisance and more of a growth strategy that plays a critical role in your business’s long-term success.
Here’s a simple truth: your ability to stay compliant and follow the proper HR policies is the difference between growth and closure. Not only can non-compliance fines wreck your business before it has a chance to make a play in the market, but the sheer responsibility of HR administration can sap your time, energy, and resources — causing significant costs and problems. For many SMBs, HR can seem like a lose-lose. But it doesn’t have to be doom and gloom.
As you get bigger, you have to comply with additional laws and ordinances. However, as you grow, it also makes sense to outsource some of your HR functions. This will save you precious time, reduce your compliance burdens, and help you focus on achieving growth. Better yet, by working with a Professional Employer Organization (PEO), you can see a 27% ROI on average, and that number tends to grow as you do.
So, what happens when you grow? Why does HR get trickier? And how can an outsourced HR partner help you?
Learn more about what you should expect from your outsourced HR partner
Payroll Processing Gets Trickier
Payroll is tricky for businesses of every size, but small businesses have it particularly hard. The average small business owner will spend 5 hours a week dealing with payroll taxes and up to 40 hours per month dealing with HR issues like payroll. As you grow, those payroll requirements multiply.
In California, small and mid-market companies have to navigate across a treacherous regulatory landscape. Not only do you have to deal with minimum shift laws, predictive scheduling laws, and overtime laws, but California has unique pay stub laws that require extra time, patience, and paperwork each payroll period.
From the moment you hire your first employee, you’re responsible for payroll and payroll compliance. Without help, the pure complexity of payroll can put a serious damper on your growth and profitability. Outsourcing payroll functions to a PEO is a scalable solution to payroll woes that get increasingly complicated as you take on more employees. Having a trusted PEO partner in place sets you up for growth, whether you have 1 employee or 25.
OSHA Has Extra Rules
The Occupational Safety and Health Administration (OSHA) is one of the strictest, most regulatory-prone agencies in the business landscape. Last year, OSHA conducted over 33,000 worksite inspections and issued thousands upon thousands of fines. Unfortunately, these fines aren’t warning signs. They’re liquidity-sapping. A single OSHA fine can reach $134,937 per violation, making them one of the more costly fines that small businesses face.
As it currently stands, things are shaping up to be more intense in 2020 and beyond. OSHA recently received an additional $3+ million in funding that’s going to be spent directly on more Compliance Safety and Health Officers (CSHOs). According to their budget request, this will help them create a “greater enforcement presence.”
Every small business, regardless of size, must comply with OSHA safety standards. However, once you reach 11 employees or more, you must comply with OSHA record keeping requirements as well, which can be a daunting task. Not only do you have to obtain a report (e.g., OSHA Form 300) for every job-related injury or illness (requiring medical treatment), but you have to prepare supplementary records of injuries, create yearly annual summaries, and create a record retention policy that keeps critical OSHA documents for at least 5 years.
Again, the average small business operates on razor-thin margins, and there’s a good chance that you would rather spend your precious time on R&D, sales, marketing, and general growth — not on creating complex record retention strategies for a safety administration. This is another commonly outsourced compliance requirement.
Diversity and Inclusion Take Center Stage
While “diversity” may sound like a cheap business slogan for this decade, the power of having a diverse team of employees shouldn’t be understated. Diverse companies are 1.7 times more innovative, enjoy 19% increased revenue, and are 87% better at making important decisions. In other words, it pays to be diverse. However, creating diversity when you’re small isn’t easy.
When you have five employees, diversity may not be top-of-mind. However, once you have 15 employees or more, things change. Not only does creating a diverse workplace help you attract top talent and reap the growth and decision-oriented rewards of diversity, but it keeps you compliant with a swarm of regulations.
Here are a few of the many diversity and inclusion requirements your business must meet:
- The Civil Rights Act Title VI
- The Americans With Disabilities Act (ADA)
- The Genetic Information Nondiscrimination Act of 2008 (GINA)
- The Pregnancy Discrimination Act of 1978
After 15 employees, developing inclusive recruitment programs can help you remain compliant and reap the rich rewards of a diverse culture. You can tackle diversity from multiple angles. For example, Auticon — a major IT consulting firm — has seen great success in its neurodiverse hiring program. The goal at this stage should be two-fold. You need to meet strict regulations, but you also want to expand upon those requirements to build a happy, healthy, and holistic workplace.
Continued Health Coverage Becomes a Must
For small businesses, health insurance can be nightmare fuel. The average small business pays 18% more than their larger competitors for health insurance, and they often receive worse coverage. This has serious implications for hiring and retention, but it can also be a gut punch to your year-end budget. Unfortunately, it doesn’t get easier. Once you reach 20 employees, you must comply with two new health coverage requirements:
- The Consolidated Omnibus Budget Reconciliation Act (COBRA)
- The Age Discrimination in Employment Act of 1967 (ADEA)
COBRA requires you to build healthcare safety nets for employees in the case of job loss or other qualifying events, and the ADEA requires you to offer identical health insurance packages to older employees at the same cost (outside of niche exceptions). This can be tricky for small businesses.
Older employees increase your risk pool during benefits negotiations, and ADEA can directly clash with your healthcare spending. Of course, non-compliance with either of these two acts is a no-go. Even if we ignore the massive fines (e.g., COBRA fines can reach $500,000), the reputation damage done by failing to comply with these two critical acts can quickly sink your brand.
This is another area where having a PEO comes in handy. PEOs are the only outsourced HR partner that can directly reduce your benefits costs — giving you Fortune 500 benefits at Fortune 500 prices. This can help you remediate any premium increases due to regulatory requirements.
You Need Help
As your business grows, so do your HR responsibilities. You have new laws to comply with, new ordinances to meet, and new processes to establish. Luckily, SMBs with 5 to 25 employees often see the highest ROI when working with an outsourced HR partner like a PEO. Not only do PEOs provide hyper-scalable HR and compliance solutions, but they have the tools, resources, and experience to help you tackle your most cumbersome HR requirements.
