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HR questions business owners should be able to answer

Owning a business comes with many responsibilities. There are the day-to-day operations, the thought of keeping your employees engaged, the tedious balancing of your finances, compliance challenges, and much more. Establishing a foundation of knowledge is key to overcoming these obstacles. There are particular questions that all business owners face when operating a business. Knowing the answer to these questions, especially as they relate to payroll and HR, impacts the long-term success of the business. Below are the payroll and HR questions that business owners should be able to answer.

Question 1: What are payroll taxes?

Payroll tax liability is a key compliance challenge facing all businesses with at least one employee. Businesses are responsible for two things. First, employers must withholding certain taxes from employee wages. Second, business owners must pay employer paid taxes on each employee.

One portion of the tax withholdings are for federal and state income taxes. Next, The Federal Insurance Contributions Act, or FICA, requires businesses and their employees to contribute to the Social Security and Medicare programs. Finally, the remaining portion of the tax liability helps fund Federal Unemployment Tax, FUTA, and State Unemployment Tax, SUTA. Knowing and adhering with your payroll taxes responsibility is key for your business to maintain compliance and avoid penalties.

Question 2: What information do I need to collect about my employees?

When hiring employees, certain information must be obtained from those employees and stored in a secure manner. This information must be gathered during the employee onboarding process. Required employee information includes:

  • Employee’s full name
  • Employee’s social security number
  • Their full address
  • Their birthdate
  • Employee’s occupation
  • Their regular pay rate

After each payroll cycle, the following data must be collected and stored:

  • Hours worked each day and total hours worked each workweek
  • Total straight-time earnings
  • Total overtime earnings
  • All additions and deductions of the employee’s wages
  • Total wages paid each pay period and date of payment

As part of the onboarding process, a federal and state W4 form and the Form I-9 must be completed by the employee. The W4 forms are used to determine tax withholdings for federal and state income taxes. In order to verify an employee’s identity and eligibility to work in the United States, the IRS requires a completed Form I-9 for each employee.

Question 3: What laws apply to my business?

Once a business hires its’ first employee, it must begin to follow certain federal legislation. All businesses with a certain number of employees must adhere to the following federal laws:

Employers with 1+ Employee

Fair Labor Standards Act (FLSA)

Under FLSA, employers must pay their employees at least minimum wage. This law also set the rules around which employees are eligible for overtime and how it must paid out.

Immigration Reform and Control Act (IRCA)

The Immigration Reform and Control Act is the law that governs employee eligibility in the United States. Employees must submit proof of identification and a completed I-9 to their employer that proves their eligibility to work in the U.S.

Equal Pay Act

The Equal Pay Act requires that employers pay men and women equally for the same work performed within the same company.

Civil Rights Act and Title VI

The Civil Rights Act prohibits businesses from discrimination against employees or applicants because of race, color, gender, nationality, or religious beliefs.

National Labor Relations Act (NLRA)

Under this act, businesses are not allowed to prohibit or punish workers for organizing, or joining, a union. Additionally, the act describes how union and employer disputes should be handled.

Uniformed Services Employment & Reemployment Rights Act (USERRA)

Employees must be allowed reemployment for up to five years after getting called into actively military service. Also under USERRA, military veterans with disabilities must receive reasonable accommodations within the workplace.

Occupational Safety and Health Act (OSHA)

OSHA is the law that requires businesses to maintain a safe working environment for its’ employees. OSHA lays out the guidelines in which workplace injuries should be handled.

Health Insurance Portability and Accountability Act (HIPAA)

Under HIPPA, employers and managers cannot access employee health records without the employee’s consent.

Employee Polygraph Protection Act (EPPA)

According to the EPPA, with few exceptions, businesses cannot use lie detector tests on prospective or existing employees.

Employment Retirement Income Security Act (ERISA)

Employers’ private pension and health plans must give participants information around plan features, funding, and responsibilities.

Employers with 15+ Employees

Americans with Disabilities Act (ADA)

Following the Americans with Disabilities Act, employers cannot discriminate against people with disabilities in areas such as employment, transportation, public accommodation, communications, and governmental activities.

Genetic Information Nondiscrimination Act (GINA)

Under this act, employers cannot discriminate against employees or applicants because of genetic information such as genetic risk factors, family medical history, and disease susceptibility.

Employers with 20+ Employees

Consolidated Omnibus Budget Reconciliation Act (COBRA)

COBRA mandates that employers offer covered employees and their families the option to continue health insurance for 18-36 months after terminating employment.

Age Discrimination in Employment Act (ADEA)

ADEA protects employees and potential candidates against discrimination from employers if they are over 40 years of age.

Employers with 50+ Employees

Affordable Care Act (ACA)

Under the Affordable Care Act, companies must offer affordable health insurance to their employees. These companies are also subject to certain annual ACA reporting requirements.

Family and Medical Leave Act (FMLA)

FMLA states that employers must offer up to 12 weeks of unpaid and job-protected leave to eligible employees following the birth, adoption, or foster placement of a child or for a serious family illness.

Employers with 100+ Employees

Worker Adjustment Retraining Notification Act (WARN)

Under WARN, employers must provide at least 60 days advanced notification to employees if workplace closings and mass layoffs are going to occur.

EEO-1 Survey Filing (Title VII, Civil Rights Act)

The Equal Employment Opportunity Commission (EEOC) requires private businesses with 100 or more employees to report on employee demographics and compensation.


Additionally, there are state legislation requirements that businesses need to comply with. In regards to Maine based businesses, the following laws apply:

Employers with 5+ Employees

Maine Mandatory Retirement Program

Starting in April 2023, private employers with 25 or more employees will be required to either offer a retirement program or deduct 5% of employee wages to put towards a state sponsored Roth IRA. This limit will decrease and businesses with 5 employees or more must be in compliance by April 2024.

Employers with 10+ Employees

Maine Earned Paid Leave

This law establishes a minimum standard for paid time off in Maine. Covered employers must meet this minimum standard, but the law does not require an employer to limit or reduce existing paid time off benefits.

Employers with 15+ Employees

Maine Family and Medical Leave Act

Maine businesses must provide employees 10 weeks of unpaid FMLA leave over a two-year period.

Question 4: How do I know if I am classifying my employees correctly?

To avoid penalties and fines from the IRS, your employees must be classified correctly. There are a few different areas in which employees are classified. First, decide whether your worker is a W2 or 1099 employee. As an employer, you must withhold and pay taxes on all of your W2 employees. 1099 workers must pay taxes on their own. Next, decide if your employees will be classified as exempt or non-exempt. This classification will determine if your employees are eligible for overtime pay or not. Exempt employees must be paid a certain salary and are not eligible to receive overtime. Non-exempt employees must be paid a certain minimum wage and overtime for any hours worked over 40 in a given 7 day period.

Question 5: Should I process my own payroll or outsource to a vendor?

Processing payroll is complex. Payroll tasks include tracking employee time, reimbursing expenses, withholding proper taxes, making proper benefit contributions, and more. Managing your payroll manually using spreadsheets and calculators significantly increases your staff’s administrative burden. Outsourcing payroll to a trusted vendor is a great way to stay on top of the compliance challenges facing small businesses. Generally speaking, the cost of outsourcing is far lower than that of hiring an in-house payroll expert.

Question 6: How do I handle labor requirements for remote workers?

The amount of remote workers continues to grow. With that comes additional compliance for business owners. Once your business employs a remote employee, important things to consider include:

  • Setting up tax withholdings for the state that the remote employee physically works in. Consequently, you will be responsible for state income tax withholding, unemployment tax contribution, minimum wage laws, state workers compensation insurance, and any other specific state or local tax laws for that state.
  • Send copies of state specific labor law posters to the remote employee.
  • Update your company handbook to reflect policies and requirements of your remote employees.

Read more information regarding the handling of remote employees here.

While there are many other aspects of human resource management, the questions listed above are critical for business owners to know. If you need any assistance with your payroll or human resource compliance, or have other HR related questions you need answered, please do not hesitate to contact us today.