What challenges rank high among today’s small businesses? A major concern has been staying compliant with the maze of federal, state and local regulations.
A recent survey conducted by
In an annual study, ComplyRight surveyed owners, CEOs and others who manage the HR responsibilities at 300 small businesses (five to 100 employees) across the U.S. And the results from
As employment laws constantly remain in a state of flux and evolution, the study aimed to identify the current trends, concerns and perceptions that small businesses have when managing and navigating their ways through what seems like a limitless muddle of compliance regulations.
State of Confusion
The study found that 58% of small businesses are concerned about complying with conflicting federal, state and local regulations. However, this is just one area that is perplexing employers.
Results showed that employers have moderate-to-high levels of concern in these areas:
- New limitations on questions they can — and can’t — ask job candidates (55%)
- Expanded requirements for paid medical leave (52%)
- New tax reporting requirements, such as the Affordable Care Act (51%)
Lesser, yet still significant, issues include the potential for employee lawsuits (30%), increasing risk of harassment complaints (27%) and enforcement of employment eligibility verification/Form I-9 (25%).
The Compliance Conundrum
It’s no surprise that small business employers readily admit they are not experts in HR legal matters. Less than 50% of the respondents said they are fully confident in their knowledge of employment law. However, 64% reported being very confident in their readiness for labor law investigations or legal actions.
Although lacking awareness of the laws, the survey found that employers believe they are prepared to defend their businesses in case of a legal dispute. This could be a troubling sign because small businesses often have no HR or legal professionals on staff.
More unsettling is that employers, when it comes to employment law, are overly trusting of unreliable or questionable sources for compliance information. Among the findings:
- 78% say they find written notifications from federal and state agencies useful — yet the vast majority of these agencies do not provide this kind of information
- 69% rely on friends and colleagues for advice on HR compliance
- 60% rely on accountants, lawyers or other business advisors who typically have limited knowledge about these ever-changing employment regulations
Additional Key Findings
Despite the clear risks legal actions and fines that can occur with inadequate recordkeeping, most of the participants from these small businesses use outdated methods for managing employee-related tasks and administration.
Nearly one-half (46%) stated they rely on “pen, paper and sticky notes” to manage their HR processes, and only 17% of respondents reported using current HR systems.
Encouraging news though is that 84% of small businesses have an employee handbook or formal policies in place. But, on the other hand, according to the survey, many of these handbooks do not include recommended policies.
- 47% don’t address the use of social media use in the workplace
- 35% don’t address the use of personal electronic devices
- 33% don’t address pregnancy accommodations
Most surprisingly, the survey revealed that the number of small businesses with weapons policies had declined over the past year. In ComplyRight’s survey in 2017, 67% of businesses surveyed had a weapons policy in place, and this year, this number decreased to 56%. This could indicate that employers may be uncomfortable addressing this controversial issue and that they are choosing to ignore it.
Overall, the study uncovers what appears to be substantial vulnerabilities for small businesses to legal actions and fines. And not having solid systems for compliance comes with certain hazards. In 2017, the Equal Employment Opportunity Commission reported that employers targeted by discrimination charges lost 90% of the lawsuits filed, resulting in almost $400 million paid to victims.
Practical, Easy-to-Reach Solutions for These Complexities
In its study, ComplyRight states that practical and easy-to-achieve actions are readily available that can alleviate the burdens and risks for small businesses when it comes to managing the multitude of regulations.
ComplyRight strongly recommends that a small business:
- Take time to evaluate potential risks and determine whether the business has the right tools in place to mitigate these risks
- Investigate current technology and processes — web-based HR solutions have become more affordable and practical for the small business, and this HR technology can eliminate or minimize compliance risk as well as streamline processes
- Increase its compliance confidence by choosing vendors and partners who fully understand the intricacies of labor law regulations
- Regularly update employee policies to cover and address new developments or cultural shifts that have a direct impact both on the business and its employees
It is a fair assumption that the complexities related to compliance regulations very likely will increase. However, with the right tools and practical measures, small businesses are in a better position than ever to handle the compliance maze so they can get back to focusing on key priorities like revenue and growth.
Jaime Lizotte is the HR Solutions Manager of