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5 HR Compliance Mistakes You May Not Know You’re Making

The amount of HR compliance required for businesses to be compliant at the local, state, and federal levels Is enough to make your head spin. At least, that’s what small to medium-sized business owners tell us. Here are the five kinds of mistakes we encounter most when we partner with a business ready to save time by outsourcing their HR.

For organizations in all industries across the US, complying with national, regional, and local laws is crucial to running a successful business. There’s one department that typically manages these all-important compliance measures? Human Resources.

For HR professionals, it’s imperative to stay on top of all the employment laws that your organization is subject to. Unfortunately, there are some tricky—and relatively unknown— areas where you might be falling short due to ignorance.  

Take a look at the five explanations below to ensure you’re not making these harmful mistakes.  

1. Improperly Completing Hiring Paperwork

New hire paperwork may feel like an unwelcome chore that affects your internal records, but there are countless legal ramifications for missing documents or incomplete forms. For example, I9 forms are one of the most common new hire forms to have errors. Check out our I9 checklist here to make sure both you and your employees are properly completing this form.

Moreover, some new hires may be unfamiliar with the standard forms and documentation requirements, so they’ll look to you to catch any errors or omissions. Take this onboarding step seriously, and don’t rely on your employees to get it right independently. And don’t forget—you only have three days after the hire date to complete this paperwork. 

2. Classifying Employees Incorrectly

Within your organization, workers can be classified as either exempt or non-exempt. Exempt employees are not entitled to receive overtime pay. Instead, they’re paid a salary that meets or exceeds the Department of Labor’s requirements. Non-exempt employees on the other hand earn must receive overtime pay if they work more than 40 hours in a week. Beyond a salary basis, exemption status is also dependent on job types, like sales, and job duties like managing a team.  

We also frequently see that employees are misclassified as independent contractors. It is critical that business owners correctly determine whether the individuals providing services are employees or independent contractors. The main difference between W2 and 1099 workers is that a W2 is a payroll employee, and a 1099 contractor is a non-payroll worker. When you hire a contractor, they work independently, often send invoices for payment, and don’t require additional expenses such as taxes and employee benefits. If that’s the case, your worker will need a 1099 form rather than a W2.

The US Department of Labor is strict on the difference between an exempt and non-exempt position. If you’ve never explored the definitions as they may apply to your employees, now is the time to make sure you’re classifying team members appropriately. 

You can learn about the difference between exempt and non-exempt employees here.

3. Disregarding Safety Regulations

OSHA, which stands for the Occupational Health and Safety Administration, sets both federal and state standards for employee safety while on the job. And since OSHA has many guidelines that only apply to businesses above a certain number of employees, some small companies and start-ups assume they’re off the hook. 

In reality, that’s not always the case! Some OSHA regulations apply to every business, so double-check before disregarding any safety requirements. Learn more about how OSHA regulations can impact your business here.

4. Not Keeping Up with Compliance Changes

One of the unfortunate truths of human resources is that national and local compliance measures are constantly changing for employment laws. 


Partnering with a Professional Employer Organization (PEO) allows businesses to share liability to ensure that they’re compliant with ever-changing laws. A PEO alleviates some of that burden while helping cut risks and costs. A PEO will have dedicated experts who will stay on top of the thousands of annual changes to employment regulations. Learn more about how we can help you avoid common benefits administration and HR management pitfalls here.

5. Inadequate Payroll Administration

Lastly, payroll administration can involve potential mistakes and compliance failures. Whether you have incorrect employee data to begin with, or introduce your human error into the process, you’re almost guaranteed to make a mistake with payroll. 

To cut back on the potential for mistakes, keep up with the latest requirements around payroll and try to eliminate as many of your manual steps as possible. Check out our blog 7 Costly Payroll Errors And How To Avoid Them to learn how you can stay compliant.

Final Thoughts

Most business owners are aware there are consequences when compliance falls short, but do you know all the details that go into meeting HR regulations? The five areas above, cover the five most common mistakes, but keeping up with the full list of compliance regulations is something best left to the experts.
If you need support or could use a second look, contact our team of HR pros to schedule a comprehensive HR audit. Allow us to identify gaps and find the solutions to keep your business compliant and fine-free!

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