When it comes to ensuring compliance in the human capital industry, long gone are the days of simply tracking minimum wage. With data privacy regulations, ACA, co-employment, background checks, etc. to consider, it’s important to make sure that you’re keeping track of these items, while ensuring that your employees know about them to avoid legal fees.
With that being said, and given state and local complexities can be difficult to manage, back-office compliance can really cut into your bottom line if not managed properly and efficiently. As such, here are a few compliance measures you should evaluate to make sure you’re not being burned, cost-wise, by your back-office.
Regulated, Paid Sick-Leave Ordinances
While their impact is relatively recent and limited in scope, sick leave/paid time off (SPTO) ordinances are being consistently rolled out across the US—with current mandates in more than 10 states and several cities. Although your state might not currently be impacted, if you’re looking to start business in another state, you must take this into account when quoting and doing your billing/pricing for your clients. If your employee is working in a state with an SPTO mandate, you need to follow the guidelines of that state.
So, how does this impact gross margin? While an employee is not automatically guaranteed paid sick leave (each regulation has its own requirements), if they are approved for SPTO and have a pay out that wasn’t billed to the client, your weekly gross profit can drop significantly.
To mitigate these costs while still remaining compliant, implement these five best practices:
- Update client agreements to include statutory costs associated with sick ordinances. You might get some pushback on it from your clients, but it’s important to make your agreements at least have it.
- Consider adding a small fraction for potential costs of overall SPTO—especially in states that are fully mandated (when pricing new business/if using margin calculators). You can include it in overall bill rate, and take some pennies off to accommodate going forward.
- Make sure your payroll system accurately accrues the time off. While this can be tricky, given each regulation is different, you want to make sure it’s handled correctly to avoid fines or Department of Labor issues.
- Review gross profit by employee. Depending on volume, one employee can get lost in a small percentage point, and can sneak up on you if you have more high-volume roles.
- Ensure pay stubs accurately reflect the hours. It helps to specifically call out “statutory stick ordinance” on all paystubs to help avoid fines. However, there is currently no payout for SPTO.
State Pay Notices
Also known as “assignment start” or “new hire notices,” state pay notices require that you notify employees, in writing, what their pay rate is, how they will be paid, when they will be paid, etc.
With mandates currently in place in more than 13 states (and with California, New York, South Carolina, and Washington, DC requiring you use their designated forms), it’s important to evaluate how much time your office staff spends working on these.
Since their time equates to money spent and to ensure your maximizing your office staff’s time, processes can help save you money. As such, it’s important to first see if the state pay notices impact you and determine if you’re compliant. Sources like Google, SHRM, the Department of Labor, etc., can provide you with the necessary information for the state(s)/providence(s) you place talent in. From there, in order to make the most use of your workers’ time, look to automate the manual form completion process by requesting functionality or using a third party. If manual processing is required, consider fillable PDF options.
The industry has seen a large increase in tax levis and creditor garnishments in recent years (e.g. child support, student loans, etc.). Further, if you offer health insurance, national medical notices require you to enroll and deduct premiums from an employee’s check for their dependents, and comes with penalties if you do not properly comply.
If you are spending time on garnishments (including notifying employees), staffing members could be costing you a lot of money in areas that have nothing to do with growing your business. Here are a few different ways to cut down on costs, based on your garnishment situation:
- For child support (particularly if you are filling high volumes/working in multiple states), there is a free government program you can use to get rid of paper notices and have them electronically delivered. You simply determine if a worker is currently employed, and if so, process the garnishment. If not, just fill out a spreadsheet and upload it back to the government site.
- If processing multi-statement garnishment, a third-party like ExpertPay can be incredibly useful. With ExpertPay, you simply pay them a single amount, and they disperse the allocated money to different localities/states for actual payment of garnishments withheld.
- When determining manual notice volume, figure out if a worker is currently employed, and then notify the insurance company to automatically enroll them. While there’s not much you can do to eliminate manual processing, still make sure you work with your benefits team to confirm you’re compliant.
While your focus should be on customer service and finding the best talent, it’s important to evaluate where you can cut costs for your clients, and of course, yourself. Without assessing the status of these three items, not only are you likely to lose time and money, your higher back-office costs can put you at risk for losing your clients to your competition. Therefore, make sure you are consistently and systematically reviewing your back-office operations, or bring in a third-party to do so, to guarantee you’re operating at cost-effective and efficient level!
To find out how People 2.0 can help you cut your back-office costs and remain compliant, contact us!