When you first start a company, amid the excitement and many competing priorities, you may not be considering the vital role of human resources (HR) in growing a company.
While you can probably get away with a less-than-defined HR strategy as a startup, these policies, procedures and strategies can determine your fate as the business grows.
In a perfect world, all businesses would operate in strict accordance with the laws and best practices governing HR. Unfortunately, that”;s not always how things work.
For every size business, there are certain laws and regulations you must adhere to or risk financial or legal penalty. There are also policies and practices that should be written and formalized on day one. Others are nice-to-haves early on that, if time, money and bandwidth permits, should be implemented. As your employee count increases, many of these nice-to-haves become necessities.
Here”;s how to HR in a growing company, broken down for every size business:
Two to 19 employees
You company is small -; meaning your headcount is low. You”;re probably a new company, and you”;re just trying to get your bearings. Or, perhaps you”;ve been around for a while, but your goal is to grow into a much larger business.
First, it would probably be wise to have a part-time or full-time HR generalist. If you don”;t have the desire or the resources to hire an HR generalist, then you or one of your staff should be designated to handle these issues.
What are the essential HR functions, what laws must you abide and what are the nice-to-haves?
Essential HR functions
Process new employee paperwork, including I-9sMaintain employee filesPrepare employee payrollProcess employee termination paperworkEnsure requisite compliance posters are posted and OSHA logs maintained
For companies without a dedicated HR person, it”;s common for the Controller or Chief Financial Officer to maintain employee files and the onboarding/offboarding paperwork. Hiring and firing then often falls to the hiring manager. Compensation should be a discussion between the hiring manager and your management team.
Depending on the industry, you may be required to implement a safety program with regular safety training.
Consider hiring a company that specializes in payroll processing to ensure that requisite payroll taxes and deductions are withheld. If the company is interested in offering benefits, they may want to consider working with a benefits broker to identify the most cost-effective benefits plans.
Other insurance to consider include:
Workers”; compensation insuranceProfessional InsuranceDirectors and officers InsuranceEmployment practices liability insurance
Applicable employment laws
Employers must adhere to copious laws. Some of the major ones are:
Consumer Credit Protection ActEmployee Polygraph Protection ActEmployee Retirement Income Security ActEqual Pay ActFair Labor Standards Act (FLSA)Health Insurance Portability and Accountability ActImmigration Reform and Control ActNational Labor Relations ActOccupational Safety and Health Act (OSHA)Uniform Services Employment and Re-Employment Rights ActVETS 4212Age Discrimination in Employment Act (ADEA) -; applies to companies with 15 or more employeesAmericans with Disabilities Act (ADA) and its Amendment Act (ADAAA) -; applies to companies with 15 or more employeesGenetic Information Non-Discrimination Act (GINA) -; applies to companies with 15 or more employeesPregnancy Discrimination Act (PDA) -; applies to companies with 15 or more employeesTitle VII of the Civil Rights Act -; applies to companies with 15 or more employees
There may be more, depending on state and local regulations.
At this stage of your company”;s life, your hierarchy is likely flat and benefits are probably limited. Because of that, these areas are not required, but will become increasingly important as your company grows.
A defined organizational chartRetirement, medical and other benefitsEmployee handbookJob descriptionsDefined HR processes and proceduresEmployment applicationDrug-testing and pre-employment screening processLiability management training courses or resourcesPaid time off policies
20 to 49 employees
Once a company hits the 20 to 49 employee range, an experienced full-time HR generalist is typically needed.
Your HR generalist should be capable of handling payroll, tactical HR duties (leave requests, new employee paperwork and files, etc.) and most associated tasks. Companies, however, sometimes choose to outsource payroll processing and some of these duties.
Essential HR functions
As the company expands, the list of required duties accumulates. Essential HR functions are the same as company with fewer than 20 employees, plus:
Overseeing leave requests and workers compensation claimsAdministering drug testing and pre-employment screeningCoordinating recruiting and hiring processManaging employment-related and company-wide employee communications and announcementsDelivering employee training on discrimination and harassment prevention (and other employment-related liability topics)Assisting managers with employee relations to ensure proper communication of expectations and documentation of performance and behavior problems or safety violations, as needed
At this stage, your company should have:
A comprehensive employee handbookDefined company mission, vision and values that underly your cultureAn established employee onboarding, training and development programsAn organizational chartClearly defined job descriptions for each positionLeave policiesPaid time off policies
Applicable employment laws
When small companies reach at least 20 employees, they must also comply with:
Consolidated Omnibus Budget Reconciliation Act (COBRA)
If the company offers group insurance plans, then it must offer benefits continuation coverage to eligible employees and dependents. This begins when the existing coverage ends due to qualifying events such as separation, termination, divorce or death.
The notice of COBRA coverage must be provided to the employee within 90 days of health plan coverage. Once hired, an employer has 90 days to give the notice to the employee. Once the employee has a qualifying event, the employer has 14 days to notify them of their rights under COBRA.
The Older Workers Benefit Protection Act
If you employ someone age 40 or older and you”;re providing them a separation release agreement, then you must give them 21 to 45 days to consider it. Upon signing the agreement, there is a seven-day window to revoke their decision.
At this size range, a hierarchy is beginning to form within your company. However, your growth may still be organic and not highly planned and manicured. Therefore, your nice-to-haves are:
Retirement, medical and other benefitsEmployee wellness programsDefined career paths for each position within the company
50 to 99 employees
Once that fiftieth employee is hired, more regulations, particularly at the federal level, kick in.
At a minimum, a company at this size must have a seasoned, full-time HR generalist who can handle tactical and strategic work such as employee relations, recruiting and retention, and training and development.
Ideally it would be someone who has experience with the tracking and reporting requirements related to the Affordable Care Act (ACA), as well as requirements for complying with the Family and Medical Leave Act (FMLA).
This is also the point where it may make sense to add an HR specialist capable of handling things like recruiting or payroll.
Essential HR functions
At this stage in your company”;s life, it”;s vital to formalize and codify processes and procedures. There are too many moving parts and potential pitfalls that would otherwise put your company at undue risk. Your HR duties now include:
Ensuring your company is compliant with applicable federal, state and local employment laws, postings and reporting requirementsCollaborating with the management team on recruiting, performance management and employee relationsWorking with the leadership team to ensure HR initiatives are in alignment with company goalsUpdating and maintaining HR policies and procedures, as neededDeveloping and maintaining job descriptions for each position within the companyFacilitating liability management for compliance with employment laws and HR best practices; implementing soft skills training to address gaps
Your company should have:
Comprehensive training and development programsA compensation philosophyA medical and dental benefits planPrograms that support recruitment, retention and recognition, including:
An employee referral incentives, rewards and recognition program
An employee assistance program (EAP)
A health and wellness strategy
Performance management process
Applicable employment laws
In addition to the previously mentioned laws, three new laws come into play at this level:
Affordable Care Act (ACA)
Employers must offer coverage to at least 95 percent of their full-time employees and dependents. Failure to comply may subject the employer financial penalties.
Family and Medical Leave Act (FMLA)
Employers of this size are likely required to offer employees FMLA leave, if the employee and employer meet certain requirements. For more information on who”;s eligible and for how long, read this.
Affirmative Action Plans (AAP)
If your company has $50,000 in government contracts, then your HR representative must prepare and maintain Affirmative Action Plans (AAP) in accordance with the Office of Federal Contract Compliance Programs (OFCCP).
The AAP documents the steps related to ensuring that employment decisions such as recruiting, hiring, advancement, compensation and more are based on merit and experience regardless of race, color, religion, sex, national origin, age, disability, veteran”;s status or other protected factors. The plan tracks and analyzes the company”;s demographic makeup and pay of its workforce.
Worker Adjustment and Retraining Notification (WARN) Act
The WARN Act is applicable should you have a layoff or plant closure. This requires employers to provide notice of at least 60 days of plant closing or mass layoffs.
WARN defines a mass layoff as a reduction in force that is (1) the result of a plant closing, and (2) results in an employment loss at the employment site of 500 or more employees during a 30-day period; or employment loss for 50-499 employees if they make up at least 33% of the employer”;s active workforce at a single worksite. Employees with less than six months service or who work less than 20 hours per week are not included in the count.
At this stage, the more formalized your processes, the better. The following aspects reflect that desire for more structure:
A well-defined compensation structure with salary gradesDefined career paths for each position within the companySuccession plansProcesses for identifying high-potential and high-performing employees and development plans for eachFormal processes for eliciting feedback from employees, including
Automated HR processes, including:
Time and attendance
Employee onboarding and offboarding
100 or more employees
As your company grows more federal laws come into play in addition to the added duties of processing the paperwork and payroll for the additional employees.
At this employee count, you need a seasoned HR presence with a mastery of compensation and benefits and a company budget mindset.
Essential HR functions
With a higher headcount, your HR department can no longer merely be process oriented and tactical. While these functions are certainly important with less employees, it”;s crucial for HR departments of larger companies to be analytical and strategic. This includes:
Conducting analysis on turnover, recruiting and training to identify trends and assess the effectiveness and engagement of your strategiesReviewing benefits and health and wellness plans to ensure they are cost-effective and meet company and employee needsOverseeing your performance management program to ensure its consistently followed; Facilitate discussions to recalibrate and align performance ratings to employee performanceMaintain and review compensation structures to ensure alignment to the company”;s compensation philosophy and place in the market; Conduct salary surveys to assess market competitiveness
Applicable employment laws
A final layer of federal laws take effect with companies of this size:
At 100 employees, companies are required to file an EEO-1 report detailing employment data categorized by race, ethnicity, gender, job category, wages and hours.
You must submit this each year to the Equal Employment Opportunity Commission. Uniform Guidelines of Employee Selection Procedures
These are designed to provide a framework when conducting pre-employment testing or any kind of selection procedure to ensure they are fair.
Once your company reaches a certain size, the list of nice-to-haves dwindles. This is because you are now in a constant battle to attract and retain employees. One key to addressing this issue is to offer competitive and enticing benefits, which means nice-to-haves are now near-necessities.
Some nice-to-haves include:
Formal employee mentoring programPredictive analyticsDefined career pathsSuccession plans
The challenge of state, city and county laws
At all sizes, company requirements and regulations are changing. Employment law is constantly evolving, not just at the federal level, but at the state, city and county level.
For example, 20 states have some form or mandatory sick leave requirement as of 2019. Of these states, some also have county and city requirements.
For instance, Texas does not have mandatory sick leave requirements, but San Antonio and Dallas will as of August 1, 2019.
It can be confusing. But the right HR plan can keep your firm up to date and out of trouble.
Summing it all up
HR is complex and grows increasingly so as your company expands and headcounts rise. The ever-changing nature of employment laws suggest that this article may be out of date by the time it publishes. Under these circumstances, it takes a dedicated HR expert to help you grow your business in accordance with employment laws and HR best practices.
If all of this is too much for you to handle, then I have good news. A professional employer organization (PEO) can take on much of these responsibilities, help ensure you”;re compliant with applicable laws and build a people strategy that aligns with your business growth goals.
For more information on the important role of HR in a growing company and how outsourcing your HR needs might be able to help your business, please download and read our complimentary e-book: HR outsourcing: A step-by-step guide to professional employer organizations (PEOs).
Read more: insperity.com