Employment Regulations: Mistakes Small Businesses Make
One of the most exciting aspects of being a small-business owner is building your team of employees. As an employer, you create opportunities for others, but with that comes the responsibility of managing your team. There are many clear requirements that are commonly known, such as paying overtime or not discriminating against applicants and employees, but what about the lesser-known requirements? Several common mistakes can cost your company time and money if overlooked.
The first mistake we’ll look at is classifying employees as contractors. Hiring contractors can have many benefits for your small business including lower costs due to saving on taxes, unemployment insurance and workers compensation insurance. Other benefits are having more flexibility with hiring and firing plus a reduction in liability exposure related to employee claims and lawsuits.
Sounds great, right? Not so fast. While those benefits can sound tempting, not all hires can be classified as an independent contractor. A few determining factors are: Does the individual work for only one employer? Do they submit invoices or are they paid through payroll? Do they operate independently or are their duties dictated by others? These and other factors should be carefully considered before hiring takes place.
Another mistake would be requiring employees to perform work during unpaid times such as lunch breaks or after hours. Contrary to what many believe, the State of Georgia and the federal Fair Labor Standards Act do not require employers to offer meal breaks, although it is highly recommended. The problem comes in when an employer requires an employee to perform duties while not being compensated. Regardless of how small a task or even if the individual is on the premises during the off time, if they work they must be compensated.
Finally, let’s look at withholding an employee’s final paycheck. The transition of an employee can be a contentious event. Depending on why and how they depart, there may be hard feelings all around. If an employee departs on less-than-friendly terms, getting them to return company equipment can be a major challenge; however, some employers mistakenly believe this gives them the right to withhold the employee’s final paycheck. While you cannot withhold the employee’s entire paycheck, what you can do is deduct the value of the items not returned. Before doing so, it is strongly recommended that you create and distribute a policy informing employees that they will be responsible for the cost of items not returned and/or damaged. Include the value of items. It’s also a great idea to include space for the serial numbers and other information for all items issued to employees.