Starting your own company, whether big or small, is an experience unlike any other. Those who make their mark in the business world this way travel a difficult path filled with complete commitment and dedication. Making the financial and personal sacrifices needed to bring forth your vision can only be known by others who have taken this journey, all in the hopes of potential success that is never guaranteed.
Smart business owners don’t want anything to jeopardize the prospect of building on fragile success, which means taking no unnecessary risks when dealing with regulatory compliance. Recruiting, hiring, payroll, management and HR issues come with many regulations, with penalties that can be extremely costly when ignored or mishandled. This issue affects every business, large or small, and can be the difference between success and failure.
In theory, compliance should be a simple concept – just follow the rules. The difficult part comes when trying to figure out why rules were created, which rules have changed suddenly and which governing bodies might interpret the rules differently than you. It can seem like a maze where the path keep changing, with no end in sight. However, ignoring these issues can come at a steep price. Audits, fines, lawsuits and even dissolution await those trying to skirt the law. Here are a few examples:
Hiring – Asking inappropriate questions, conducting inappropriate background screens and other misconduct, whether intentional or not, can result in heavy consequences for employers. Fines for committing these types of infractions vary depending on the size of the organization, but history shows that employers have been fined up to $300,000 by the Equal Employment Opportunity Commission. Failure to adhere to Federal regulations on age of employment and other minimum wage laws can also result in sizable penalties. For each employee affected, the Wage and Hour Division of the Department of Labor can fine employers a minimum of $10,000.
Wages – Neglecting proper wage procedures and overtime regulations can be disastrous for employers, and pleading ignorance to current laws is no excuse. In 2014, the Department of Labor ordered a major restaurant chain in New York to pay nearly $1 million in back wages and damages to 85 workers following an investigation by the Wage and Hour Division. The restaurant chain is also responsible for paying over $70,000 in civil penalties to the department for repeated violations of the Fair Labor Standards Act. Fines of this magnitude are particularly crippling to businesses, especially when penalties are avoidable.
Classification –The misclassification of employees as independent contractors presents one of the most serious problems facing affected workers and employers. Misclassified employees often are denied access to critical benefits and protections to which they are entitled, such as the minimum wage, overtime compensation, family and medical leave, unemployment insurance and safe workplaces. To combat misclassification, the Department of Labor’s Wage and Hour Division is cracking down and increasing the number of workplace audits. In Fiscal Year 2015, investigations resulted in more than $74 million in back wages for more than 102,000 misclassified workers.
These are just a few examples of how noncompliance can hurt your business legally. However, your image is also at stake. An entity that complies with regulations will have less legal trouble, higher employment retention and a better overall standing within the community in which it resides. And while compliance requirements can be complex, a fully educated company is one whose standing is a trusted partner other clients will want to associate themselves with. Good compliance is good business.
More than 30,000 organizations trust Paycor as their compliance partner, keeping them informed and in step with regulations that may affect their business and their clients. Contact us to set up and meeting to see how our solutions can support your organization, or take a guided tour of our products to find the best fit for you.
Sources: EEOC.gov, DOL.gov, IRS.gov