3 Common Employer Compliance Issues

Regulations on business reporting and human resources matters continuously change, making employer compliance troublesome. The need for businesses to stay current with changing laws and remain knowledgeable of reporting requirements is absolutely critical. This is especially true considering that failure to stay in compliance almost always results in financial penalties.

Here are some top employer compliance issues that can lead to steep consequences—and how to avoid them.

Insufficient New Hire Documents

Various federal, state and local laws require particular paperwork at the time of hire. When an employee is onboarded with your organization, it is of upmost importance that these documents are accurate and complete. Failure to obtain and maintain the right forms at hiring could cause litigation later for lack of employer compliance.

I-9: The I-9 establishes authorization to work in the U.S. Unfortunately, it’s the one most often left incomplete, incorrect or missing accompanying documentation. Always make sure you complete every section in its entirety. Ensure employees provide proper supporting documents for proof. (It helps to provide the list of appropriate documents and let the new hire choose what they would like to provide.)

Timing is also very important when it comes to the I-9. Employees must complete their portion by the end of the day on their start date. Employers, meanwhile, must complete their part within three days of the employees first day.

W-4: All employees must complete a federal tax withholding form designating the amount of tax they want withheld from their income. Some states also have withholding tax; a corresponding form from that state must be completed at hire as well.

It’s in your best interest to avoid advising employees on amounts they should withhold. Instead, direct them to seek a tax advisor for their questions.

State Specific Notices: Many states have various local law requirements, and new hires need to know about them. Check with the state in which your new hire is located to ensure they receive all employment-required notifications.

Marketplace Notice: The Affordable Care Act (ACA) requires you to distribute a notice of coverage options to each new hire within 14 days of hire. This is regardless of whether you offer medical insurance.

New Hire Reporting: Last but not least, employers are required by the federal government to report various new hire information to their state within 20 days of hire. Some states require shorter timelines for reporting. There are various options on what to submit and how, so check with your state to ensure employer compliance.

Reporting Requirements Under the Affordable Care Act (ACA)

Requirements for the ACA are complex, and the employer mandate can be difficult to navigate. Employers with 50 or more full-time equivalent (FTE) employees are required to offer minimum essential health coverage for full-time employee and their dependents.

Along with the offer of coverage, employers are required to complete information returns to the IRS each year. The information returns must be completed timely and accurately to avoid triggering an ESRP notice (also called a 226-J letter) from the IRS.

If you receive an ACA-related notice from the IRS, most employer compliance matters can be addressed with careful review from an expert. Some common errors that could result in receiving an ACA penalty notice from the IRS include:

• Miscounting employees: Errors in a company’s full-time employee count each month can directly and significantly impact the proposed penalties.
• Form errors: Forgetting to check a box, or not completing a section of the information return, can trigger a penalty letter.
• Coverage value threshold: Is coverage considered affordable and does it meet the criteria for minimum value for health coverage?
• Ignoring the annual reporting requirements: If you are an applicable large employer (ALE), you should be completing the annual information returns.

ACA noncompliance penalties could reach amounts in the hundreds or thousands of dollars. It’s in your best interest to work with an expert who can navigate the ACA requirements and help avoid the situation.

Overtime Pay and Minimum Salary for Exempt Status

The Fair Labor Standards Act (FLSA) requires employers to pay time-and-a-half to non-exempt employees working more than 40 hours in a work week. However, employees are considered exempt from this rule if they meet certain salary thresholds and responsibilities.

In 2020, the Department of Labor (DOL) raised the minimum salary level for exempt employees to $684/week (it was previously about $455/week), or $35,568 annually. Meeting the minimum salary threshold does not automatically make an employee exempt from overtime pay. The employee’s job duties also must primarily involve executive, administrative or professional duties as defined by the regulations.

State laws are not always identical to federal FLSA regulations. Some states, like California and New York, already have higher state salary threshold requirements. (For example, in California, the threshold for employers with 26+ employees is $1,040/week.) Employers need to make sure they meet the requirements for the states in which they operate.

Failure to observe overtime and employee classification rules could lead to a DOL audit or lengthy investigation. Not only is that disruptive to your business, the resulting penalties can reach thousands and even millions of dollars.

Leave the Complexities to Our Experts

While employer compliance takes time and effort, the financial and reputational impact on your business can be far worse. Staying current with these issues will save you significant work and money in the long run.

Because the rules change continuously on a state and federal level, it’s best to leave tracking them to the professionals. The HR Solutions Team at James Moore focuses exactly on what your business needs. We’ll do the work as your personal advocates. Learn more about our services and connect with us today.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.