How to keep your business compliant
Noncompliance is costly in many ways, and a seemingly minor error can escalate into inaccuracies and oversights that affect your entire operation. That’s why identifying opportunities for proper compliance management, especially when it comes to staffing, should be a top priority.
Staying up to date with the latest regulations requires collaboration among the company, the workers seeking jobs and the staffing firm(s). This joint effort keeps all parties in the loop and ensures that compliance does not fall through the cracks.
Below, we explore the misclassification of employees and potential violations that could arise, as well as how to avoid them.
Misclassification of Employees
Worker classification is an area commonly misunderstood by employers. A worker’s classification refers to whether the individual is an independent contractor, an exempt employee or a non-exempt employee under the Fair Labor Standards Act (FLSA). Misclassifying an employee as an independent contractor or misclassifying a non-exempt employee as exempt can result in serious liability.
The federal FLSA requires that non-exempt employees receive at least the minimum wage and may not be employed for more than 40 hours in a week. If employees exceed that, they are legally entitled to receive at least one and one-half times their regular rate of pay for overtime hours. Scrutiny around wrongly classified employees is stronger than ever. Businesses suspected of misclassifying workers may be subject to a review of wage payments for the previous three years, and noncompliance can result in mandatory payment of owed wages and stiff penalties.
Strategies for avoiding misclassification and auditing
To avoid the pitfalls of misclassification, take steps to prevent being audited at all. A few common scenarios that can trigger IRS auditing include:
- An independent contractor filing an application for unemployment or workers’ compensation benefits
- A temporary employee failing to properly report income taxes
- A worker who reports a misclassified reporting issue to the IRS
To reduce the chance of being found liable for misclassification penalties, we recommend that companies consider the following:
- Become familiar with IRS directives about proper worker classification and ensure a staffing expert is applying them to the workers being placed.
- Utilize resources that make it easy to track the number of hours each employee works, their pay rates, schedules and other information relevant to the placement process.
- Use all of the information available – whether through reports from a software system, expert advice or participation in industry groups – to help make decisions about how to best comply with labor regulations.
Stay on track with state and federal laws
As an employer, it’s imperative that you’re following all federal and state laws. Staffing agencies can help lift some of these burdens and help you stay on track.
- Wage and hour: Staffing companies work to make sure employees are paid for all hours they work at minimum wage or above, including overtime. Trying to manage this without an expert resource, can result in failure to maintain proper records or pay the right amounts.
- Non-discrimination: Not only do staffing companies ensure their own hiring and placement policies are non-discriminatory, but also, they ensure companies are not in a position to discriminate against a worker on the job.
- State laws: Workers’ compensation laws differ from state to state, and staffing firms are there to understand how and when a business may be held liable for a worker’s on-the-job injury. Unemployment insurance is also governed by state law and is another potential source of conflict.
- Locality specific laws: Be mindful of unique state or city regulations that may affect workers only on certain job sites. Having a staffing expert at your disposal ensures that temporary workers placed in jobs across the state meet all locality specific laws.
As you can see, maintaining compliance is no easy feat. At Staffline, we protect your reputation and credibility by keeping important details like compliance in check. Our team is here to help your organization get on track and stay on track. Reach out when you’re ready.