Quick links

• 
  Introduction
  
• 
  Federal (USA) labor law basics​
  
• 
  Fair Labor Standards Act
  
• 
  Family and Medical Leave Act
  
• 
  Employee Retirement Income Security Act
  
• 
  Provide SPD (Summary Plan Documents) to your employees
  
• 
  Provide COBRA Insurance​
  
• 
  Provide Section 125 Plan Document​
  
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  Workplace Posters​
  
• 
  State labor law basics
  
• 
  10 simple steps to remain in compliance with labor laws​
  
• 
  Utilize technology to simplify the process​
  
• 
  Conclusion
  

As a small business owner, you’re probably wondering how you can stay in compliance with all the state and federal labor laws that apply to your company. You don’t want to hire a lawyer to advise you on every single one of these laws. You want to stay in compliance without spending too much time and money on attorney fees. In this article, we will document the steps you can take to remain compliant with Federal and State Labor laws.

Federal (USA) labor law basics

At the minimum, you should be aware of the following labor and workplace laws at the Federal level.

• FLSA (Fair Labor Standards Act)
• FMLA (Family and Medical Leave Act)
• ERISA (Employee Retirement Income Securities Act)

FLSA

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek.

Many states also have minimum wage laws. In cases where an employee is subject to both state and federal minimum wage laws, the employee is entitled to the higher minimum wage.

FMLA

The Family and Medical Leave Act (FMLA)  entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave. Eligible employees are entitled to:

• Twelve workweeks of leave in a 12-month period for:
  • the birth of a child and to care for the newborn child within one year of birth;
  • the placement with the employee of a child for adoption or foster care and to care for the newly placed child within one year of placement;
  • to care for the employee’s spouse, child, or parent who has a serious health condition;
  • a serious health condition that makes the employee unable to perform the essential functions of his or her job;
  • any qualifying exigency arising out of the fact that the employee’s spouse, son, daughter, or parent is a covered military member on “covered active duty;” or
• Twenty-six workweeks of leave during a single 12-month period to care for a covered servicemember with a serious injury or illness if the eligible employee is the service member’s spouse, son, daughter, parent, or next of kin (military caregiver leave).

Please note that the FMLA does not apply to very small businesses.  It only applies to employers with 50 or more employees in 20 or more workweeks in the current or preceding calendar year.

ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry to provide protection for individuals in these plans.

While ERISA is a very broad and complicated piece of legislation, here are the key provisions you need to be aware of to be in compliance.

Provide SPD (Summary Plan Documents) to your employees

If your employees participate in a ERISA covered retirement plan or health benefits plan, you must provide them free a SPD which is a detailed guide to the benefits the program provides and how the plan works. Typically your broker will provide you the SPD.

Provide COBRA Insurance

The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end.

For example, if you had 20 or more employees in the previous year and if you terminate an employee, you are obligated to provide the employee COBRA coverage. If you are using a benefit enrollment platform, the platform should provide COBRA support. If not, your health benefits broker should be able to help you with this. 

Provide Section 125 Plan Document

If you allow your employees to pay group health and other insurance premiums with pre-tax salary deductions, you should have what is called Section 125 Plan Document. The document is named after the IRS code that authorized this plan. The document provides details of the benefit plan you are offering to your employees. Your benefits broker should be able to provide you with Section 125 plan documents.

Workplace Posters

Many of the laws that create rules regarding employment include a requirement that notices about employees’ legal rights under those laws be posted at the workplace. 

Employers are federally required to display notices covering a broad range of topics, including the minimum wage, workplace safety, and family and medical leave. 

For employers with some remote workers, physical posters are required for onsite employees, and the DOL (Department of Labor) encourages electronic posting for the teleworking employees. Employers with an entirely remote workforce may satisfy continuous-posting obligations using electronic-only means if all employees exclusively work remotely, customarily receive information from the employer via electronic means and have readily available access to the electronic posting at all times.

State labor law basics

In addition to Federal laws, you also need to pay attention to the State labor laws. Depending on where you do business, there may be different state laws and regulations you need to follow. The Department of Labor offers a good starting point for understanding your obligations to state labor laws here. 

Some states have their own specific wage and hour statutes that require employers pay certain employees (e.g., non-exempt employees) overtime when they work more than 40 hours per week. 

To get up to speed on what’s required by your state, it’s best to check out each individual state department of labor website or consult an attorney who specializes in employment law. 

10 simple steps to remain in compliance with labor laws

As a small business owner, staying on top of all your HR obligations can be time consuming and complex. There are hundreds of federal, state and local employment laws governing every action you take related to your employees. The penalties for not staying compliant are severe and can include costly fines, legal fees and even closure of your business. However, there are some steps you can take to ensure that your company is following all applicable rules. 

Here’s a simple 10-step process to follow: 

1. Review your employee handbook or manual to make sure it reflects current law (e.g., minimum wage, leave requirements). If it doesn’t, update it immediately. 
2. Make sure you have an up-to-date personnel file for each employee containing basic information such as their date of hire, job title and salary. 
3. Update your payroll records to reflect any recent changes in employment status (i.e., start date, termination date) or compensation levels. 
4. Check to see if you need to register with your state’s unemployment insurance agency.
5. Confirm that you are paying into Social Security and Medicare based on your employee count. 
6. Ensure that your health plan meets Affordable Care Act standards, including providing adequate coverage for preventive care services without cost sharing or other financial barriers; no annual dollar limits; coverage for adult children until age 26; no discrimination based on pre-existing conditions; etc. 
7. Make sure you aren’t using discriminatory hiring practices (such as failing to interview qualified candidates who have disabilities or rejecting applicants because they use tobacco products). 
8. Conduct training on harassment prevention, equal employment opportunity and sexual harassment prevention—both annually and when new hires begin work. 
9. Keep track of hours worked by nonexempt employees so that you don’t run afoul of overtime laws; track hours worked by exempt employees so that they receive appropriate pay for hours worked over 40 per week. 
10. Remember that these are just general guidelines; you may have additional obligations depending on your industry, size of your workforce and other factors. It’s important to consult with a lawyer or human resources professional about specific issues affecting your business.

Utilize technology to simplify the process

Technology can simplify the complex process of ensuring employer compliance of labor laws. By investing in an HR software solution, you can reduce your risk and ensure your business is compliant with all applicable laws.

Recommended Reading: Biggest pain point with Payroll and HR software

At any point in time if you feel like connecting with us in this respect, our team is there to help. You can use the link below to book a call with us.

Contact UZIO

Conclusion

For SMBs who typically do not have the luxury of big HR teams, remaining in compliance with labor laws can be tough and expensive. By leveraging technology platforms for your HR needs and by following the steps outlined above, you have a much better chance of remaining compliant with Federal and State labor laws.

Quick links

• 
  Introduction
  
• 
  Considerations for a best-of-breed solution
  
• 
  Advantages of Best-of-breed HRMS Option​
  
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  Disadvantages of Best-of-breed HRMS Option​
  
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  What are the benefits of an integrated solution?​
  
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  Disadvantages of an integrated solution​
  
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  When to go for an integrated solution, and when to for best-of-breed solution
  
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  Other considerations before making the decision?​
  
• 
  Conclusion
  

The market for HR management software has exploded in recent years, with companies using these tools to find and recruit talent, onboard employees, track performance and benefits, and much more. But with such diverse options available, how do you know which one is right for your company? This article will examine the pros and cons of best-of-breed vs integrated HRMS so you can make an informed decision.

Considerations for a best-of-breed solution

When you choose the best-of-breed approach, you select individual solutions for individual functions, each from a different vendor. For example, you may have a payroll solution provided by one vendor, your benefits solution from another vendor, your hiring and onboarding module from another vendor and your performance management system from a different vendor.

Considering the obvious challenge that these different systems will not talk to each other out-of-the-box, why will you even consider the best-of-breed approach. Well, there could be various reasons for it. You may have some unique needs in your organization which can only be met by the best-of-breed solution in that vertical. For example, you may have employees in different countries and so you may need to work with a specialized payroll vendor who supports international payroll which is typically not supported by Integrated HRMS vendors targeting the SMBs.

In other cases, you end up with the best-of-breed approach not by design but simply as a result of decisions made in the earlier life cycle of the company when individual function owners chose the vendor they had used in the past for their individual function without thinking about the needs of the HR organization as a whole.

Advantages of Best-of-breed HRMS Option

Best-of-breed software allows companies to select and implement specific modules that perfectly fit their workforce. Companies can customize a package of best-of-breed HRMS software to ensure there are no gaps in functionality and to include only those features that they need. This makes it easier to adopt in small increments and adjust as needs change over time, which means it’s a more nimble option than an integrated solution.

The key advantages of best-of-breed software include:

• Flexibility: When you choose a best-of-breed system, you get the flexibility of implementing smaller chunks of functionality as per your needs instead of taking on a big implementation for all the HR functions at once.  
• Installation and implementation is often quicker and easier due to the narrower scope and impact of software seeking to fulfill a single function.
• More features: Often these come with more feature because of the tighter focus on just one HR function
• Simpler training: Training is simpler because of fewer users using each system
• Greater expertise: Since best-of-breed systems are niche specific focussed so these often bring best-of-breed expertise to the table
• Switching systems is easier because the disruption is only to one of your HR functions.
• There’s no reliance on a single vendor; lessening and spreading the risk and impact of a provider unexpectedly going out of business.

Disadvantages of Best-of-breed HRMS Option

The biggest disadvantage of this approach is that different modules don’t work seamlessly with each other. There is no single “source of truth”. It becomes the customer’s responsibility to keep the data in sync across multiple systems. For example if you are using two different systems for your payroll and benefits and an employee changes her benefit selection because of a LSC (Life Status Change like getting married etc), it is the responsibility of the HR team to ensure the premium tied to the new selection is updated in the payroll system otherwise employee will see incorrect amount deducted from her payroll. The HR team ends up copying data from one system to another manually which results in errors and is quite inefficient.

Although these pieces of software might not seem like much individually, when combined together they can make for a complicated array of data that requires lots of manual input from users.

Not only does using separate systems make it more difficult to share information across departments within your organization—it also limits how you can use data for reporting purposes. For example, let’s say you decide to purchase four separate software modules: payroll management, time tracking, recruitment management and employee performance reviews.

Even though these functions are critical to managing employees effectively, none of these modules will be able to talk directly to each other; you’ll still need to manually enter data into spreadsheets or databases before being able to pull reports together.

Another downside to the best-of-breed systems is cost. Typically the total cost of all the best-of-breed systems combined is significantly more than the cost of an integrated system.

What are the benefits of an integrated solution?

A fully-integrated HRMS offers a range of HR functions in one system. 

These functions often include at a minimum a workforce database which acts as a system of truth, time and attendance, leave management, payroll solution, recruitment, onboarding, benefits and in some cases even talent management. 

Many integrated HRMS packages aim to provide end-to-end management of the whole employee life cycle. All these functions work off a single database – a single system of record – making for easy sharing of information between functions. 

This cuts down on training time, ensures consistent functionality across all modules, and makes collaboration with multiple users easier.

The main advantages of an integrated HRMS include:

• It works out of the box. With multiple best-of-breed modules, work is often needed to ensure compatibility and seamless communication, requiring middleware and patches to transmit and ‘translate’ information between different software packages.
• A single vendor contact for all of your HR software support needs means that if you have a problem with an integrated HRMS there’s only one company you need to contact.
• Logically, an integrated HRMS solution means lower costs. A strategy of combining several best-of-breed packages to meet your HR needs can be more expensive than a single solution.
• The simpler implementation and maintenance reduces the burden on your IT team. The technical challenges are greatly reduced with an integrated HRMS.
• That said, the greater number of users usually associated with an HRMS means implementation and initial staff training costs may appear higher but… the single interface means your users are not starting from scratch when learning about each automated HR function – having mastered navigating the system, users have the basic foundation for using the full range of functions. When compared with the cost of multiple best-of-breed implementations, an HRMS suite can still be better value financially.
• An integrated solution has little likelihood of problems around exporting or integrating data. There are no compatibility or format issues between modules because an HRMS works as a streamlined whole (or should do!)
• Similarly, the single database means you eliminate the need for multiple data entry and therefore greatly reduce the possibility of human error and inaccurate or inconsistent data.
• A single point of access or single login for all your HR technology makes life simpler for users.
• The uniformity of software across your HR functions simplifies processes (and access to those processes) for employees. A single user interface gives a familiar and unified feel of  your HR platform.
• For employees, the same HR software (with the same interface and experience) handles everything from the initial job application and recruitment, through performance management and progression, to resignation or retirement. This uniformity means that the HRMS effectively becomes a part of your HR team’s brand.
• It’s far easier to generate reports using data in a single suite rather than drawing (potentially incompatible) data from multiple modules.

Disadvantages of an integrated solution

While an integrated system may seem to be a better option when deciding on your company’s HR needs, there are some things to consider before committing.

First and foremost, there’s the cost in case you don’t need all the modules to be implemented upfront. If you are only going to use a couple of modules of an integrated solution, make sure that the vendor is not charging you for the whole system.

It also makes sense to weigh how much customization you need in your HR software against how much time it would take to build out those features yourself with an add-on tool. Typically the integrated solution will be limited in the amount of customization it can support for the individual functions.

When should the SMB use an integrated solution, when should it use a best-of-breed solution, and when can it do both at once?

There’s no one-size-fits answer to these questions, but there are some general guidelines.

If you’re looking to implement a core suite of applications designed to work in harmony with each other, it’s best to pick an integrated solution that covers everything from performance management and talent acquisition to payroll and benefits.

That said, if your business processes are highly specialized—for example, if you have very specific needs around hiring employees—you might be better off choosing a best-of-breed product instead.

It’s also worth noting that many companies start out using best-of-breed products before eventually moving on to an integrated system down the road.

For example, if you run a small restaurant chain and decide to use an applicant tracking system (ATS) from one company while still using another company’s module for human resources management (HRM), then maybe later on you decide it makes sense to integrate those two systems together into one cohesive software package.

In short, don’t get too hung up on whether you should use an integrated or best-of-breed solution; instead, think about what works best for your company today and what will work best tomorrow.

Is there anything else the SMB should consider before making the decision?

If you’re not sure which route to take, here are a few more things to consider before making your decision. 

Ask yourself these questions, and you’ll find a clear answer.

• What is it like to work with [Integrated/Best of Breed] vendors on an ongoing basis? 
• How can I make my new system fit in with my existing technology stack? 
• Am I willing to commit long term to [Integrated/Best of Breed] provider or will I need flexibility down the road in case there’s something better that comes along?
• How do I get started? 
• What are some of your favorite features?

Once you have brainstormed these points, and weighed your options, you will be better placed to make an informed decision.

Recommended Reading: Biggest pain point with Payroll and HR software

At any point in time if you feel like connecting with us in this respect, our team is there to help. You can use the link below to book a call with us.

Contact UZIO

Conclusion

There is no right or wrong answer when it comes to choosing between best-of-breed and an integrated system. It really depends on your company’s unique needs. If you still need help making this decision, please reach out to Uzio. We offer an integrated HRMS solution that is designed for SMBs and is the most effective and easy to use solution in the market.

Quick links

• 
  Introduction
  
• 
  Register to Conduct Business
  
• 
  Get a Registered Agent
  
• 
  State Income Tax Withholding Account
  
• 
  State Unemployment Tax (SUTA) or State Unemployment Insurance (SUI)
  
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  Worker’s Compensation Insurance
  
• 
  Payroll
  
• 
  Summary
  

Your business is growing and to manage this growth you need highly qualified employees. Considering the very tight job market and the desire for employees to work remotely, you decided to expand your employee search beyond your home state and started looking for remote employees in other parts of the country.

It makes perfect sense and really what could go wrong? Well, a lot if you do not take the necessary steps to remain in compliance with state registration, taxation, unemployment insurance and workers compensation insurance laws and regulations of other states.

In this guide, we will give you step by step instructions so that you remain in compliance with different state laws and regulations and avoid paying big fines and penalties.

Let us get started.

Register to Conduct Business

If you are hiring employees outside of your home state, the first thing you need to do is to register to do business in that state. Each state has a slightly different process for this. SBA (Small Business Administration) has the information you need on how to register with federal and state agencies.

Get a Registered Agent

If your business is an LLC, corporation, partnership, or nonprofit corporation, you’ll need a registered agent in the state where you are hiring your employee.

A registered agent receives official papers and legal documents on behalf of your company. The registered agent must be located in the state where you register.

Many business owners prefer to use a registered agent service rather than take on this role themselves.

Now that you have taken care of registering with the state where you are hiring the new employee, the next step is to ensure that when you process payroll for this employee, you can withhold applicable taxes on behalf of the employee and also pay unemployment insurance tax in that state.

If your payroll system either does not support out of state tax withholding or is not sophisticated enough to prompt you to get applicable SIT (State Income Tax withholding account) and SUTA (State Unemployment Tax account) details, you may unknowingly be in violation of that state laws and may incur penalties and fines. We have seen this with a number of employers who came to Uzio because their previous payroll provider did not have comprehensive support for out of state hires and the employer ended up with big fines.

Here are some tips on For a Massage Franchise owner: How to correctly calculate wages for your massage therapist? – UZIO Inc, so that you can stay focused on running your business and still comply with the FLSA.

State Income Tax Withholding Account

Most but not all states have state income tax and they require employers to withhold state income tax from employees wages who are working in that state. You should get a state tax id number so that you can withhold taxes. You can find more information about how to procure a state tax id here.

State Unemployment Tax (SUTA) or State Unemployment Insurance (SUI)

In addition to withholding state income tax on behalf of employees, the employers are also required to pay state unemployment tax. You will see SUTA and SUI terms being used interchangeably. Every state has a slightly different process for registering for SUTA/SUI.

Once you register, you will receive an account number and a tax rate. You want to make sure that your payroll solution is updated with the account number and corresponding rate so that unemployment taxes are withheld and deposited with the right agency.

Worker’s Compensation Insurance

When you hire an out-of-state employee, you want to make sure you purchase Workers compensation Insurance for that employee in that state. ‘Workers comp’ as it is usually called provides coverage to employees when they are injured in an accident at work.

The coverage provides for medical care as well as compensation for a portion of the income employees lose when they can not return to work because of the injury. Many states require employers to submit proof of the coverage and if the proof is not provided in time, the employer can be fined hundreds or even thousands of dollars.

So it is critical that you have workers compensation insurance coverage for your employees in the state they are working. If you are working with a payroll provider like Uzio, we make sure that you have workers comp coverage for all your employees. If your payroll provider does not provide you this service, you can also work with a broker to purchase the required coverage.

Payroll

The federal government sets a minimum wage of $7.25 per hour, and many states have higher requirements. If you’re hiring out-of-state employees, keep in mind that overtime rates are typically time and a half of your normal pay rate for any hours worked over 40 hours in a single week.

Additionally, each state has its own rules regarding pay frequency and pay stub requirements; it is important to comply with these rules if you want to avoid expensive fines and penalties.

For example, California requires employers to provide pay stubs on or before payday—and pay stubs must include all information required by law (e.g., deductions). Failure to do so can result in a fine of up to $100 per employee for each violation.

Recommended Reading: Biggest pain point with Payroll and HR software

At any point in time if you feel like connecting with us in this respect, our team is there to help. You can use the link below to book a call with us.

Contact UZIO

Summary

Hiring remote workers in the very tight job market seems like a no-brainer however as an employer you want to make sure you follow the steps outlined above to remain compliant with the state laws and avoid costly fines. It may seem daunting at first however if you work with a payroll provider like Uzio, we take care of all the steps outlined above. If you are looking to hire out-of-state employees, you should first give Uzio a call.