Taking risks is a common activity associated with business. Entrepreneurs great and small calculate odds and take chances on a regular basis.
While risk has an important and healthy role in business, though, there are times when running risks is the wrong choice. There are certain business actions that should be carefully aligned with government regulations in order to avoid running into trouble in the future.
Here are a few areas where compliance with certain requirements is necessary for any business.
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1. Don’t Drop the Ball on Payroll
Payroll is a regular part of any business. But the responsibility goes much further than forking over cash or writing a check every other week. Even if you have a solid direct deposit system in place, you still want to think about additional compliance concerns.
For instance, it’s important to withhold the right amount of money with each paycheck. You need this money to pay your corporate taxes and should never skip this step when you’re paying an employee. Employer contributions are also a must-address area.
Basic payroll aside, there are other payroll compliance considerations that have come into the spotlight in recent years. As remote work has become more common, hiring workers across international borders has increased.
This is a wonderful way for businesses to gain access to better talent. Even so, you must make sure that you handle international payroll correctly. When hiring abroad, you’ll be interacting with two government entities. It’s a situation that you must handle with care.
If you’re cashing in on the ability to hire international workers, more power to you. However, it’s recommended that you look for an official global payroll solution like Remote or a professional CPA to help you cross your t’s and dot your i’s as you go along.
2. Classify Your Workers
Another common compliance concern revolves around classifying your workers’ employment status. Full-time and part-time positions are common and can have a major impact on how your business runs. Contractors have also become common thanks to the freelance economy.
Make sure that you label each employee the right way. Don’t mark a full-time worker as a part-time employee. This illegally avoids the need to provide certain benefits (more on that further down) and can get you in a lot of trouble.
Exempt status is another consideration. If your employees are non-exempt, that means you must pay them minimum wage. It also means they’re eligible for overtime pay.
Freelancers are also tricky. You can classify someone as a 1099 worker (i.e. a contractor or someone receiving non-employee compensation.) However, if you outsource all of your work to freelancers whose primary income is from your business, it can once again run into compliance issues. In addition, if they live in certain regions, like California, it may be illegal to hire them as a contractor if they don’t meet certain criteria.
3. Be Aware of Statutory Entitlements
When you hire a freelancer, you don’t have to offer them any benefits. They operate as a separate entity, and you are technically outsourcing work to them.
However, when it comes to your official employees, it’s important to look for any statutory entitlements or benefits that you are required to offer them. A “statutory” entitlement or benefit is required by law and not optional.
For example, you must pay an employee minimum wage. And not just the minimum wage that you choose. There are federal, state, and local minimum wage laws. You must pay your employees whatever is the highest one of these by law. In contrast, offering 401(k) matching to your employees is a perk that is not legally required.
Another good example of a statutory benefit is the Family and Medical Leave Act (FMLA.) This act requires employers to give their qualifying employees up to 12 weeks of reasonable medical- or family-related leave per year. This is unpaid, but employers are not allowed to terminate employees because of a leave of absence within these bounds. In addition, you must maintain their health benefits during this time.
There are many different statutory requirements for an employer. Some of these are federal. Others are dictated by the local states or regions in which you live. Make sure you’re aware of them all. If you’re not sure, you may want to check with a lawyer to ensure that you’re compliant.
There are many compliance considerations that every business should be aware of. For instance, this list didn’t even touch on areas like environmental impact guidelines set by the EPA. And then there’s compliance with workplace health and safety — a fascinating item that is evolving along with the new hybrid workplace.
There are other compliance factors associated with things such as data management, workplace behavior, corruption, and even social responsibility. These can feel intimidating at first. But don’t let them scare you away from your business hopes and dreams.
Instead, make an effort to understand the compliance risks and regulations that you’re facing as a business in your industry. Again, it’s recommended to recruit reputable third-party services and find a lawyer and accountant that you can trust to help you navigate the issue.
If you can do that, you can ensure that your business remains compliant in every required area. This can help you operate with peace of mind and a sole focus on building your business in the future.