Legal Issues

Avoid These 3 Employment Compliance Mistakes or Risk Fines

Avoid These 3 Employment Compliance Mistakes or Risk Fines
Image credit: Neil | Flickr
Reader Resource

Position yourself for growth in 2017—join us live at the Entrepreneur 360 Conference in Long Beach, Calif. on Nov. 16. Secure Your Seat »

One of the biggest mistakes employers can make is underestimating the importance of employment law and compliance. Companies both small and large are subject to federal and state laws regarding employment, especially when it comes to paperwork.

Related: The Changes to Tax Laws You Need to Know

With the multitude of federal and state employment laws and regulations that exist, it is easy to make costly errors. Avoid non-compliance woes by avoiding these three common mistakes:

1. Missing or incomplete I-9 forms.

Failure to keep valid I-9 forms on file can result in a number of fines. Before filing, be sure all forms are completed and include the proper dates and signatures. The I-9 form has a strict deadline of three days after the new employee’s start date -- missing this deadline will result in fines.  

In an effort to avoid deadline-related fines, have employees complete the I-9 during their initial onboarding or consider implementing a paperless system to save time associated with the printing and scanning of documents.  

Additional fines come from missing the proper supporting documentation that is required with the completed I-9 form. Employers cannot specify which document(s) to accept, so allow new hires to review the list of acceptable documents that comes with the I-9 and make their own selection.

Following an employee’s termination, employers must destroy the I-9 form three years after the person began work or one year after the former employee’s termination, whichever comes later.   

2. Outdated W-4 forms.

An employee must complete a W-4 tax form immediately after being hired and before receiving their first paycheck.

Related: These 3 Legal Traps Can Stop a New Business in its Tracks

It is crucial to keep this form current with the employee’s situation. While employees can change the amounts on their W-4 at any time, it is a good idea to have all employees submit a new W-4 tax form each year to maintain compliance.

The W-4 tax form can seem intimidating to new hires, but employers should not give employees tax advice. Is an employee having difficulty with the W-4? This IRS article will help them easily calculate their withholding allowance.

3. Absent job-application form.

Each potential employee should complete a job application form that is compliant with country and state regulations. Certain states require particular questions and notices to be included on the application form, such as criminal-background check questions and notices of at-will employment. Make sure your team stays up to date on these regulations. Application forms that don’t meet legal requirements put employers at risk for liability claims and non-compliance penalties.

Finally, the job application form serves as the employer’s primary source of information about a prospective employee.

The process of bringing on a new employee is not a simple task and requires some time and effort on both the employer and employee’s part. Above all, understand the employment laws and regulations in the country and state in which the organization is located. Doing so will help avoid non-compliance issues later down the line.

What hiring compliance mistakes have you experienced? Share your experiences in the comment section below.

Related: 3 Legal Precautions in Hiring Freelancers