Most everyone in the staffing business knows the pain (yes, actual pain) of compliance failures and their penalties.
Some failures are the result of inexperience and are innocent yet costly. Consider the husband and wife in a new S Corp (they were Pres and Vice Pres).
They intended to file their taxes late, because they discovered that an S-Corp (Sub-Chapter S) was required to file both a state and a federal corporate tax return plus their joint personal return that could not be done until the corporate returns were complete and that no regular tax preparer would do the corporate returns and that only an accountant or corporate tax specialist would touch it and wanted $1,000 to do them. That second year they only grossed 60,000 and with a net loss.
So, they wanted time to learn how to do them themselves. They knew they had to file a “Request for an Extension to File” their 1120 corporate return. That form is an automatic extension for up to 6 months and costs nothing to get.
There was no actual tax due in that second year of their business operation and the VP (she) thought the Pres. (he) filed for the extension, and he thought she did.
Penalty? $195 per month for each officer, for each month the return was not filed. Total penalty $195 per Mo. X 2 officers =$390 per Mo. X 6 Months =$2,340, for the mistake.
I can hear experienced voices in the background saying that’s nothing! How about The Affordable Care Act (ACA) penalties of $100 a day for failure to provide one employee a Patient Protection Notice or one Cobra notice $110 a day, or an OSHA safety violation, or a HIPAA violation of up to $60,000 per violation! Or how about no FMLA information poster in the break room @ $180.
The focus in this article however is not on all the horror stories, nor is it about the civil lawsuits that have followed government penalty action. What I would like to focus on is how to avoid compliance issues entirely. Yet knowing that no company is perfect, if yours is ever subject to a compliance failure, the government or civil attorneys will be hard pressed to find any degree of intentional negligence. Indeed, the exact opposite should be the case. That is the quite achievable goal.
3 Key Issues for Compliance: Good Staffing Software, Good Training, Professional Commitment.
Good Staffing Software: Obtainable, comprehensive, secure, documented, and retrievable data deliverable in the form of various reporting documents is essential for many forms of governmental compliance agencies. Those documents are cross referenced with the government’s own records, so accuracy is essential. That is what computers and great software programs do so well.
Your Software’s Payroll module.
A national, regional, or multinational company may well employ thousands of people who work in and/or reside in many different taxing jurisdictions. Payroll deductions need to be made accurately from each and reported on each check stub (paper or electronic), deposit categories and total deposits summarized, checks printed, federal, state, and local reports printed etc. etc.
Your Software’s Tax tables need to be updated to your software regularly and automatically to keep you compliant with all the taxing jurisdictions.
ACA Health Insurance management
In October of 2020 we had written in this Blog about the ACA and our staffing Software that “The ACA formulas can be quite daunting but with all the government program data within the software itself, matching up with each employee is simple, fast and reliable”
Getting the data into the software is a very organized process where the applicant is guided through a series of questions and information and uses a self-generated electronic signature to sign-off on and which “signature” is known to that applicant alone.
He or she is given as much time as they need in the onboarding process with a program they can upload to their phone or computer. Each step of the ACA selection process is very well written in easy-to-understand language, but they can still ask questions as they move along in the process. All of the documented and signed off information is automatically uploaded to their applicant master file.
Other Ways Software Can Facilitate Avoiding Compliance Failures.
One simple but amazing tool to insure someone is eligible to work in the USA is the E-Verify software which is a direct integration accessing and the huge databases of the Federal Government (Homeland Security, FBI, Etc.). Within minutes it will search these files and return a verification of the applicant’s eligibility (or not) to work in the United States where it resides in the applicants master file.
Other Federal programs which have complicated eligibility rules like the FMLA have the rules for this legislation within the software which can accurately track eligibility and allow accurate decision making for granting or denying benefits.
This was particularly important when, during the first couple of years of Covid FMLA (“Unpaid” family leave) was changed to another program called FFCRA that provided for “Paid” leave time and required a significant software modification in a short period of time to insure compliance with the new legislation.
Good Training and Compliance
A staffing company is almost daily involved in training. It needs to train core staff in all sorts of compliance issues, office procedures, computer skills, software knowledge, public relations and sales.
It also needs to train their temporary workers on compliance issues, improving basic job skills, interview skills, and knowledge of different workspaces, potential hazards, safety precautions, use of safety equipment, job descriptions, contact persons. A whole lot of training!
Because training is so central we wrote an article almost 3 years ago (February 2020) on “Building a Professional, In-House Training Program”.
In that article, in addition to the main “how to build it” we tried to answer the obvious question of “Why”? And, although we thought the major reason was legal, we thought there were 9 other reasons to have a simple yet formalized and professional in-house training program.
Those nine reasons, and there may be others, were then and are today: Professionalism, Credibility, Sales, Reputation, Client Retention, Employee Retention, Loss Protection, Profitability and Staff Development. I think you can see, just by thinking about these topics, how each may be enhanced by having a simple yet formalized, professional in-house training program.
The article went on to talk about the actual building with topics like, Choosing a Space, Audio Visual Equipment, Regulatory Training Materials, and the all-important topic of a simple yet well-organized system of Documentation.
A training session is not over until it has been titled, described, and securely retained in each of your attendee’s master files.
Rule #1: If it is not documented, it did not happen.
As you can see from our list of reasons for a professional in-house training program and having the management support of good staffing software it is easy to think that these alone might be sufficient to avoid compliance failures and all that comes with it. Looking them over I might agree.
But key to everything we have been discussing is the “Professional Commitment” of the key executive. The commitment to do the job right, to do it well, to do it so your employees are proud of the company they work for, where they can advance in professionalism, to do it for your clients who will know you have their back when it comes to compliance (remember the joint-employer principle).
Do it for your contract workers who will learn more with their experience at your company and grow, do it for your own success and financial well being, peace of mind and self-esteem.
A professional commitment sometimes seems to have the reputation of a kind of enthusiasm that can be perceived as bordering on a congenial case of fanaticism. So what! Make that commitment and carry it off anyway. Your workers and clients will love you for it and your competitors will call you all sorts of names, but some will secretly admire you. Like NIKE says, “Just Do it!
As always, Stay Safe, pray for Ukraine and celebrate Christmas, Hannukah, Kwanza, and the New Year!