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Local Limelight: Weeklyish Articles Of Interest

Risky Business: Avoid Fines, Lawsuits, and Turnover

Your business may be at risk and you may not even know it. If you have employees, here are three high risk areas you need to be aware of:

Oregon State Fines: Many businesses recently have been slapped with hefty fines and the owners had absolutely no idea they were doing anything wrong. The IRS is launching audits on over 6,000 employers and the U.S. Department of Labor estimates that 1 in 3 employers misclassifies workers …are you one of them? Avoid fines by understanding the laws around classification of independent contractors, interns/trainees, volunteers, and exempt employees.

Molly Kelley, an HR Business Partner at Xenium, works with many businesses and has found that “unfortunately, we’ve already seen quite a few businesses directly impacted by fines resulting from the confusion between whether the person performing work for them is actually an independent contractor or an employee. The line can feel fairly gray to a business owner and needs to be something they look at very closely in light of the additional audits and attention on this issue right now. The IRS is launching audits of over 6,000 employers over the next three years aimed at ferreting out misclassified workers that will result in very hefty fines.”

Did you know that, according to the Daily Journal of Commerce, Oregon revised its independent contractor statute with the intention of increasing enforcement across state agencies for unemployment, workers’ compensation and tax purposes. A recent IRS study concluded that misclassified workers caused an estimated tax loss of $2.7 billion. So you can see, there is a significant financial incentive for locating violators.

Now is a good time to examine worker classifications and make adjustments before it’s too late.

Lawsuits: Employment lawsuits have been on the rise. In fiscal 2010 alone, there was a 7% increase in lawsuits. You need to know how to protect your business, your employees, and yourself because according to the EEOC, the average lawsuit costs $235,000.

There are several ways to mitigate your chances of a lawsuit. Kelley suggests that, “all businesses, no matter the size, should have an Employee Handbook with current policies, updated every two years. Part of this process should include meeting with employees to discuss any changes, allowing them to ask for clarification on any of the new material. The protections offered to employees change all the time, such as the introduction of lactation breaks, credit check requirements and greater requirements for reasonable accommodations for employees on the basis of religion. All of these policies need to be added to or updated in your handbook, discussed with your employees and have a new Employee Handbook Receipt signed and on file for every employee.”

Another suggestion is to understand and apply correct termination procedures. “The old HR mantra of document, document, document can’t be stressed enough and should be easier than ever in our highly electronic age”, says Kelley. “Documentation should be paired with progressive discipline. Your employees are relying upon you to provide them with coaching and feedback that gives them every chance to succeed. To provide accurate coaching, you need to have clear documentation with the specifics of what happened and the date it occurred. Should things not work out and you have to part ways with a particular employee, your documentation may potentially be all that stands between you and a nasty lawsuit.”

Turnover: Employee turnover costs your business up to five times a person’s annual wage. The costs are tangible and intangible.

For example, time and money are spent recruiting, screening, interviewing, and training replacements; it all adds up quickly. As the economy rebounds, retaining your talent is a bottom-line necessity and targeted training is a cost effective remedy.

Many businesses are still recovering financially; however, they may be reinstating raises and bonuses as an incentive to keep employees. Often overlooked is the power of career growth and development in keeping those same employees. The lack of career growth and development opportunity is one of the leading reasons why employees leave a company.

Targeted training is a cost effective way to send a clear message that you value your employees, and feeling valued is key to employee retention. The benefits associated with training employees, whether they are hourly or salary, are numerous. 

Training leads to great returns for both the company and the employee. Targeted training on Customer Service, Performance Management, Leadership Essentials, Interviewing/Hiring Practices, etc. will improve retention, increase morale, and ultimately impact your bottom line.

In sum, a business owner needs to pay close attention to how vulnerable their business is to risk; when in doubt, reach out for assistance to alleviate any potential risk.  There are many resources available so you can sleep easy.


For More Information Contact:
Lauren Davis at XeniumHR
Phone: 971-404-9358

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