Full-Service HR

Regulatory Compliance: Is Your Business Prepared?

Regulatory Compliance
Reading time 13 Mins
Published on Jul 23

There are more regulations today than ever before. Business owners can eliminate or reduce the risk of noncompliance by protecting themselves and their companies with tools, training, and a force of experienced compliance professionals.

There is an ever-growing array of employee protection regulations, tax laws, and other legal requirements challenging today’s employers. Employer’s decisions, actions, and responsibilities are plagued by endless complexities and compliance challenges caused by this system of ubiquitous regulatory reach. Small and medium-sized companies need to protect themselves from increased exposure to risk with the same level of professional compliance management afforded to large companies. Here are some areas of business operations in which ensuring compliance requires the advanced tools, training, and experience of professional compliance management.

Human Resources

Human Resources regulations protect employees, helping to ensure their rights and opportunities are protected. The Fair Labor Standards Act, Equal Pay Act, sexual harassment laws, anti-discrimination laws, and more provide employers a framework within which they can shape a company culture of focus on regulatory compliance to ensure fairness and consistency in management. Compliance with the entire body of critical federal, state and local laws is the broad-ranging set of responsibilities managed by HR professionals.

Payroll Processing

Payroll processing in many small to medium-sized businesses is performed without the benefit of the range of resources necessary to do a thorough job of ensuring compliance. Many outside payroll companies will often process whatever is sent to them, without question and without proper compliance review. A compliance-focused payroll processing team leaves no detail unexamined, to ensure that what employers are paying employees is based on Department of Labor and Fair Labor Standards Act regulations.

Payroll compliance is a priority of the Sheakley PEO, guaranteeing that employers are meeting required salary and wage thresholds, including those stipulated in prevailing wage contracts, paying overtime correctly, executing all withholdings properly, reporting according to requirements and complying with all other payroll regulations.

Tax Reporting

The tax code pertaining to employers is a complex web of federal, state and local requirements. Prior to coming on board with the PEO, many companies have a CPA handling their tax compliance. Because there are a lot of deadlines that employers have to meet, over-burdened small businesses are at risk of missing those critical deadlines if they are focused on growing their business and aren’t paying enough attention to compliance.

There are significant penalties for employers failing to meet tax requirements, so it’s vital that every business has a well-qualified, knowledgeable professional handling their taxes and payroll. With the PEO’s expert team ensuring compliance, employers have peace of mind in knowing that all requirements are being consistently met.

Tax Withholding

For employers managing their own payroll, it can be difficult to properly educate their employees on the various requirements applicable to them. For example, employees are often poorly informed on the taxes they are required to pay, with many claiming erroneous exemptions from federal withholding. For client companies, the PEO manages the responsibility of explaining to employees the requirements for tax-exempt status and other legal restrictions regarding claims they may enter on their income tax withholding forms.

Sheakley also informs employees of other required taxes, such as municipality and school district taxes, the federal standard tax rate on bonuses and commissions, and other taxes applicable to their home and work addresses, to ensure their employers are not withholding any incorrect or unnecessary taxes. The PEO also educates employers on the differences between employees and 1099 independent contractors and emphasizes the serious risks of noncompliance with laws that clearly define and distinguish them from W2 employees.

Benefits Administration

The PEO’s Benefits team is focused on the compliance related to employee benefits programs, such as requirements for 5500 reporting, ACA reporting (including 1094C’s and 1095C’s for employers with 50 employees or more), Cafeteria 125 Plan Discrimination Testing, COBRA and more. The Administration of Health Insurance, HSA, Flexible Spending, Life Insurance, Vision, Dental, 401K, vacation pay, and other employee benefits present multitudinous compliance challenges for employers. The PEO’s administration of FMLA clarifies employee’s rights for employers and ensures compliance with the Act’s requirements, including those attached to employer group health insurance benefits.

Benefits management can require a great deal of time and energy. For small to medium-sized employers, devoting valuable resources to this task can be difficult. The PEO removes this burden so its clients can refocus on growing their businesses.

Recruiting and Hiring

The PEO provides participating employers with the same professional recruiting tools and personnel available to big businesses. Its experts can advise on recruiting and hiring compliance issues, such as the language used in job ads, legally-sound job applications, inappropriate interview questions, nondiscriminatory applicant testing, and permissible background check procedures. For clients preferring to handle their own recruiting, the PEO can review and offer guidance on policies and procedures that might not be up to acceptable standards of compliance.

Sheakley’s staff of experts also strives to keep employers informed on current, hot-button topics, such as the “Ban the Box” movement, which urges companies to remove any questions regarding prior felony convictions from their job applications. Another example, the ban on questions regarding prior salary information, is becoming more common across the country, even in Sheakley’s home city of Cincinnati. The PEO works to make sure that all of its participating employers are fully compliant with the rules and regulations applicable to their geographic location.

Employment Forms

The PEO provides its clients with a standard package of new hire documentation, which helps ensure a baseline standard of compliance across the board. Employers are instructed on how to fill out all forms and notified of any legally-mandated deadlines associated with each. For example, a company has three days from a new employee’s starting date to complete and review the compliance of the Employment Eligibility Verification form (I9).

Completed documents received from clients are preserved for the length of time mandated by law. By maintaining meticulous records, the PEO ensures that its clients have a first line of defense against any legal issues that may arise.

Health Insurance Benefits

Employers managing their own insurance benefits, without a PEO relationship, can find themselves in a minefield of compliance risks, especially after the passing of the Affordable Care Act (ACA). Under this law, qualifying employers must offer minimum essential coverage to their employees. Companies failing to do so, or lacking proof of such offers, can face stiff fines of up to $200,000 per occurrence.

Proper documentation is crucial to an employer’s defense in such cases. For clients choosing the PEO’s benefit management service, comprehensive recordkeeping is standard and every detail is tracked. Sheakley’s experts are equipped to respond to any legal challenges, proving compliance, so that fines are removed or reduced to minimums.

ADA Administration

The Americans with Disabilities Act (ADA) is a clearly articulated set of protective laws designed to shield handicapped individuals from discrimination in all employment practices. Businesses covered by the ADA must ensure people with disabilities have an equal opportunity to apply for and work in jobs for which they are qualified, have an equal opportunity for promotions, have equal access to the benefits and privileges provided to other employees, are provided with a reasonable accommodation, and are not discriminated against. When it comes to ADA compliance, the risks for uninformed employers abound. The PEO’s team of experts can ensure that clients are properly educated and protected.

Safety and Risk Management

The PEO provides employers with an abundance of safety and risk management resources to ensure compliance. Sheakley’s team of consultants spends time at each client’s workplace, reviewing policies and procedures, evaluating safety programs, providing appropriate training, and conducting walkthroughs, all to ensure that employees are safe and protected. Participating employers also have access to an extensive online library of safety trainings, allowing for education on-demand. Having the PEO by your side guarantees a safer, more productive workplace.

Workers’ Compensation Compliance

One of the biggest Workers’ Comp (WC) compliance failures comes when an employer does not report an injury within the mandated timeframe, or at all. Most businesses only report serious or traumatic injuries, not realizing that all incidents, not matter how minor, must be reported.

For clients on its self-insured Workers’ Comp policy, the PEO stresses that all injuries must be reported to its WC team within 24 hours of the incident occurring. This allows for proper documentation and investigation of the injury, which is crucial in the claims adjudication process that follows.

Drug Testing

The law requires that workplace drug testing is done in a fair, nondiscriminatory way. Employers cannot have pre-employment screenings for some applicants, but not others. They also cannot require random drug testing for certain employees, while excluding others. Drug testing policies must be fair and impartial. The PEO provides support to help employers maintain effective and compliant workplace drug policies.

Terminating Employment

Serious legal and compliance issues can arise for employers who fail to follow and document the steps in an appropriate progressive discipline plan prior to terminating an employee. Employees who are suddenly or unexpectedly fired may feel that they were discriminated against and file a lawsuit alleging wrongful termination. Employers who neglect to maintain disciplinary records, may face increased risk of exposure to these kinds of charges. Sheakley’s PEO provides its clients with consultative expertise in all aspects of the disciplinary process, to ensure compliance and prevent baseless litigation.

Sexual Harassment

When an employee experiences sexual harassment, it is the employer’s ethical and legal obligation to fully investigate the charges, even if the harassment is only rumored.

The PEO assists its clients with building comprehensive plans of action for dealing with sexual harassment, from creating company-wide policies to providing sexual harassment training. By communicating clearly-defined expectations and adhering to a zero-tolerance policy, participant employers can maintain a workplace free of sexual harassment.

Employee Supervision

Consistency in the application of disciplinary action is key for employers wishing to avoid compliance issues and complaints of unfair treatment. One employee cannot be written up for a rule violation, while another employee who violates that same rule is allowed a pass. Sheakley’s team of experts trains client management on the importance of fair, balanced, and consistent employee disciplinary practices.

Fairness and consistency must be the guiding principles employers adopt in all of their interactions with employees, from hiring and coaching to performance reviews and disciplinary action. Employers must maintain detailed documentation of all training, coaching, developmental and corrective actions for its employees.

Consistency and sound reasoning are especially key in the application of disciplinary action for employers wishing to avoid compliance issues and complaints of unfair treatment. One employee cannot be written up for a rule violation, while another employee who violates that same rule is allowed a pass. Sheakley’s team of experts trains client management on the importance of fair, balanced, and consistent employee disciplinary practices.

Laying Off Workers

The Worker Adjustment and Retraining Notification (WARN) Act imposes requirements on employers who are laying off employees. When considering layoffs, there are a number of rules and regulations that employers must keep in mind to ensure proper compliance with state and federal laws. One such law is the Worker Adjustment and Retraining Notification (WARN) Act. This labor law requires certain employers to provide advance notice to employees before conducting a mass layoff. This provides affected employees with the time needed to seek other employment or the retraining needed for a new occupation. Other laws, such as the Older Workers Benefit Protection Act (OWBPA), provide employees with the time needed to consider severance agreements (21 days) and the right to revoke the agreement after its signed (within 7 days). The PEO furnishes its clients with the tools and instruction needed to maintain compliance through any layoff.

Protecting Workers’ Rights

Under Title VII Protected Classes of the Civil Rights Act, employers cannot discriminate based on race, color, religion, gender identity, sexual orientation, or national origin. This means that hiring and employment decisions cannot be based on any individual’s inclusion in a protected class. The PEO provides its clients with the guidance and support necessary for preventing discriminatory practices and ensuring the legal protection of all employee classes.

Unemployment Administration

Unemployment is an area of human resource management fraught with compliance hurdles. Employers must provide the Unemployment Administration with notification when an employee is hired or fired, quarterly reports of the wages paid to their employees, and are liable to pay a certain percentage of their revenue towards unemployment tax. The PEO’s unemployment specialists, along with attorney partners, guide employers throughout the process to ensure compliance with all state and federal post-termination requirements.

Providing Employee References

References can often be the deciding factor on whether or not an applicant lands a new job, so understanding what can and cannot be said when providing information to a prospective employer is vital. Many states have different and varying regulations governing what a company may say about former employees. In Ohio, the law allows an employer to both confirm the fact of prior employment, including hire and termination dates, and to disclose a truthful job performance review, even if that review is negative. Most employers still either ignore reference requests or only provide confirmation of employment because of the threat defamation lawsuits. Sheakley’s PEO can help educate clients on the laws in their state and provide guidance when reference requests are received.

Arbitration, Non-Compete, and Non-Disclosure Agreements

Depending on the industries in which they operate, some employers may need to execute various types of employment contracts, such as non-compete, non-disclosure, non-solicitation, and arbitration. The PEO can provide examples and templates for these kinds of agreements, but since they are legally-binding contracts, it is recommended that all clients retain legal counsel to review and provide guidance to ensure compliance with all applicable laws.

Liability Insurance

In today’s litigious society, it’s imperative that employers have general liability insurance to protect them from claims of discrimination, wrongful termination, harassment, and other work-related issues. The PEO carries Employment Practices Liability Insurance (EPLI), which it makes available to all clients.

Achieving and Maintaining Compliance

One serious issue involving an employee complaint that was not handled properly can lead to litigation that can be devastating to a small or medium-sized business. It is critically important for employers to be fair and consistent in their practices and to understand and apply the myriad rules and regulations governing businesses.

That’s the true value in a relationship with Sheakley’s PEO, whose core functions include a dedication to ensuring and managing all aspects of HR compliance impacting every facet of business operations.

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