Finding, Managing and Paying Employees
All businesses, big and small, have to comply with a myriad of regulations surrounding Human Resources. Business demands eventually push companies to hire employees and in turn, based on the number of employees, additional laws apply.
There are several sites in Iowa to assist businesses with compliance related to employee administration:
Independent Contractor vs Employee
It is critical to make certain you are properly classifying workers as independent contractor or employee. The fines from the IRS and Department of Labor can be large for misclassification. Remember, you can never go wrong classifying someone as an employee and paying the worker on an hourly basis. Review the information found on the Iowa Workforce Development Misclassification Unit website to determine proper classification of employees vs independent contractors.
You have determined that you need help and need to take the leap to hire employees. The first step is preparing the business, and the next step is to find the right employee! There are many different ways to find the right person:
- Recruit your employees yourself
- Networking with others – Word of Mouth
- Job boards, online postings
- Placing ads in newspapers or posting signs
- Referrals from employees
- Social Media
- Use a temp agency
- Use a staffing agency
There are a few essential steps you should take in order to fill your position regardless of how you decide to recruit your employees:
- Define your employment needs. What are the essential functions of the position to be filled (the primary reasons this position exists in your business, the top 5-10 job duties)? A job description, either formal or informal, will help to define the requirements of the position when recruiting and hiring the right person. Read this article from the SBA on writing effective job descriptions.
- Develop interview questions. Your questions should be relevant to the position, legal, and consistent for each candidate. Look for a good fit for your company's culture as well as the right skills. Take notes on a separate piece of paper (not the job application or resume).
- Check personal and professional references for each final candidate. According to the Fair Credit Reporting Act (FCRA), background checks may only be conducted after a conditional offer of employment has been made. Learn more about background checks from the FCRA.
Recruiting yourself requires you getting the word out to friends, colleagues, the public and anyone who might be interested in working for your company. Most startup companies find their employees through active networking and referrals from friends.
Temp, as in temporary employee, agencies can be used to fill a wide variety of positions from clerical to manufacturing, to professional and even executives. There are several reasons companies may use a temp agency to fulfill employment needs:
- Companies that have fluctuations in the workload due to peak production periods
- Seasonal operations
- Employees on vacation or leave of absence
- New business or growth that requires additional employees quickly
- The desire to do a "trial" run with a prospect prior to hiring
Staffing or recruiting agencies focus on finding the right candidate for the position based on criteria defined by the company looking to hire and typically charge a percentage of the first year salary for the service. The best recruiting agencies have knowledge of the market, are familiar with employment trends, current wages, who and where the candidates are and can offer other solutions if there are no candidates.
The staffing agency should be familiar with your company and send the top candidates. Read this article to learn more about how to select a staffing agency.
Iowa Employer's Disability Resource Network
EDRN partners are here to provide technical assistance, information, resources, and training to help you effectively recruit, hire and retain qualified employees. EDRN can provide consultation and resources to create a welcoming environment for applicants and employees with disabilities by assuring your facilities are accessible. In addition, EDRN can customize training to fit your needs.
Keep in mind that many of these resources will not only assist you to build a diverse workforce, but they can also enhance your business’ services to customers with disabilities.
You have hired employees! What are you going to do to keep them? Here are some important things that you should take into consideration for your employees:
- Develop consistent policies and follow them. The Small Business Administration has information on how to develop an employee handbook. Many small businesses do not have time to do this on their own. Contacting a qualified HR Consulting company or legal counsel for assistance can streamline this process.
- Change your mindset from being the "Doer" to being the "Leader".
- Research and learn how to manage all types of employees from high performers to the difficult.
- Many times small businesses and startup companies do not realize the value of time and how much time managing employee administration can take. Outsourcing employee administration, payroll and bookkeeping can save small businesses huge amounts of time so that more focus can be applied to operations.
- Leading by example and the Golden Rule still apply in all businesses today. Treating others like you want to be treated and not being afraid to know how to do the jobs within your business can help build credibility and respect.
Paying employees on time and accurately will increase employee retention significantly. You should determine how and when to pay your employees and stick to your schedule.
Outsourcing your payroll responsibilities to a third party such as an accountant, bookkeeping firm or payroll processor is a smart decision for those that are not accountants by trade. Outsourcing payroll allows you, as the business owner, more time to focus on your business operations, while leaving the important task of complying with the tax deposits or reporting and the liability associated with taxes, to a professional (keep in mind, that even with a third party processor, owners are ultimately responsible for their tax obligations).
The Department of Labor requires that hours worked be tracked for non-exempt employees (this would be for all hourly employees). There are several options for tracking employee hours worked:
- Manual (hand-written) time card
- Badge swiping
- Point of Sale Systems
- Time Clock
- Web-based time-keeping system
When is payday? Choices for payroll frequency are:
- Weekly - 52 times per year (paid every week)
- Semi-Monthly - 24 times per year (paid 2 times per month)
- Bi-weekly - 26 times per year (paid every 2 weeks with 1 week lag - Most common)
- Monthly - 12 times per year (paid 1 time per month)
In Iowa, employers may require new employees to participate in direct deposit, but may not require employees who are currently receiving paychecks to sign up for direct deposit. An alternative pay option is a pay card. This is a reloadable debit card, issued through a national or regional bank which would replace a paycheck. There are various laws and regulatory guidelines that may be different by state so research to determine if payroll cards are right for your company. Iowa regulators have approved legislation requiring employees to agree voluntarily in writing to receive payroll debit cards.
Exempt vs Non-Exempt
Classifying employees as exempt from overtime or non-exempt (those who must be paid time-and-a-half pay for hours worked over 40 in a work week) is another critical decision when paying employees. Misclassification can lead to fines, penalties and the payment of back wages to employees that may be owed overtime. The Department of Labor
provides direction on how to classify employees. The biggest thing to remember is that you must evaluate each position by the actual duties worked, not based on job title, in order to determine eligibility for exempt or non-exempt. Remember, when in doubt, you can't go wrong paying someone hourly.