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Human Resources FAQs

Hiring, managing, legal issues and more--our quick-hitting FAQs cover all your most pressing HR questions.

Opinions expressed by Entrepreneur contributors are their own.


How do I find good employees?
Following a well-thought-out, structured process will help you best match the right people to the right jobs in your company. You'll want to develop accurate job descriptions that include the skill sets prospective employees will need, and draft an ad. Post the ad in the mediums most likely to reach your potential job candidates such as the internet, industry publications and local newspapers. Compile a list of suitable questions you can ask over the phone to help you quickly identify qualified candidates and eliminate everyone else. Review the resumes you receive and identify your best candidates. Once you've narrowed your stack of resumes to a handful of potential applicants, call the candidates and use your phone-screening questions to further narrow the field. Using a consistent set of questions in both this step and your face-to-face interviews will help ensure you're evaluating candidates equally.

Based on the responses to your phone interviews, select the candidates you feel are best qualified for the next step in the process. Assess your potential candidates for their skills and attributes using a proven assessment tool. These assessment tests can be administered in person or online. Online testing and submission of results can help you determine whether the applicant should be invited for a personal interview. Once you've selected candidates based on the previous steps, schedule and conduct the interviews. Use a consistent set of 10 or 12 questions to maintain a structured interview and offer a sound basis for comparing applicants. Make your selection by matching the best applicant to the profiled job description. Run a background check on the individual to uncover any potential problems not revealed by previous testing and interviews, and if everything is up to snuff, make a job offer. For more detailed information on hiring good employees, click here .

What are some resume red flags?
Although nothing can replace thorough background checks on prospective employees, there are ways to spot inaccurate resume information. The following clues should alert you to a potential problem:

  • Positions that aren't supported by qualifications elsewhere on the resume. In most cases, senior managers have education and experience forming the foundations for their positions.
  • A list of references from or positions at companies that have gone out of . Be suspicious of impressive information that can't be verified.
  • Job titles that don't make sense in the context of the organization. Question someone who was "director of personnel" for a five-employee company or "vice president of production" for a service organization that doesn't manufacture anything.

That one of these red flags is in a resume doesn't necessarily mean it's a lie, but you should investigate thoroughly.

How do I find out the minimum wage in my state? Do I have to pay it if I run a business where my employees receive tips?
There are many state and federal laws that regulate the paying of employees, including the calculation of overtime, minimum wage, frequency of payment, and rules for payment upon termination. Because your business may be subject to both state and federal laws (the primary federal law being the Fair Labor Standards Act, or FLSA), which are often quite different and conflicting, you should check with the applicable government agencies, your local chamber of commerce, and appropriate financial and legal experts to determine which laws apply and how to correctly apply them

States sometimes set minimum wage laws above or below the federal minimum wage standard. If your business is subject to both state and federal wage laws, you'll have to pay the higher of the two. Under federal law (the Small Business Job Protection Act of 1996), you may apply tips received by an employee against the employee's minimum hourly wage, provided that: 1) The employee makes at least $30 in tips, 2) the employer pays at least 50 percent of the federal minimum wage, 3) the employee has been informed of the applicable law governing minimum wage and tip credits, and 4) the employee retains all the tips received by him or her (no tip pooling with other employees). However, if the hourly wage paid by the employer when added to the tip credit is less than minimum wage, the employer must make up the difference. Once again, you will need to make sure there are no contrary state laws governing if and when you can use tip credits to meet your minimum wage.

What are the pros and cons of offering internships?
Hiring unpaid staff is an obvious solution for startups but one that's often overlooked. Colleges and universities are teeming with bright young workers willing to work part time or full time during vacations to gain experience. Just posting an internship announcement at your local college will draw applicants. It takes effort to set up a win-win situation for both intern and employer, however. It's important to remember that interns are not like part-time employees who are primarily interested in a paycheck: You can't expect to give them menial work for the duration of their internship. One way to motivate interns is to ask them to list their learning objectives for the internship. Have monthly meetings with them to track how well they're doing on reaching these objectives. Then, even doing menial work becomes tolerable if it's put in context.

How do I set salaries?
You should look at market salary reports, which are used to determine the going market pay rate in similar companies and industries. Keep in mind that the uniqueness of job roles within smaller companies can make it difficult to compare job responsibilities in the market and obtain suitable salary comparison data. But it should be considered in an effort to achieve and maintain external equity. Factors within a company must also be taken into consideration when you're addressing compensation issues. Jobs requiring greater skills or more responsibility are seen as more valuable than lower-skilled jobs. But remember, how your employees view their compensation is just as important as the compensation package itself. The potential exists for pay programs to be misunderstood or characterized as unfair, subjective or downright unlawful. In some cases, there may be merit to those perceptions.

In building your compensation program, remember that your objective is to create a compensation program that will attract and retain top talent, motivate your employees to achieve and maintain high performance, ensure competitive and consistent pay practices, comply with applicable federal and state laws and regulations, operate within the constraints of your budget and financial resources, ensure administrative efficiency, and allow you to offer competitive salaries relative to the labor market. For more information on setting salaries, click here .

What's a job description and do I need one for the employees in my company?
A business owner can use a good job description not only as a valuable aid in the job-recruiting process, but also as an outline for reporting relationships and working conditions. A well-crafted job description can also be used for setting measurable performance goals based on duties in the job description, which you can then use when coaching your employees to meet these goals. You can also use your employee job descriptions, along with descriptions of possible job promotions, as incentives for employees to pursue classes, seminars and other career development activities, as well as for creating standardized compensation packages. For more on the subject, click here .

Managing Employees

What's flex time?
Flex time is a way of offering your employees a flexible work schedule--for example, giving them the option to work 7 to 4, 8 to 5, or 9 to 6. You can also be flexible in terms of leaving early for childcare emergencies or doctor's appointments. If adhering to a rigid on-site schedule isn't essential to getting the job done, allowing some flexibility in working hours, temporary telecommuting and making up missed time goes a long way toward building loyalty, mutual respect and motivation.

What are some issues I'll have to consider if I offer telecommuting as an option to my employees?
Offering telecommuting as an option--either a few times per week, per month or permanently--can help you retain talent by making your employees happier with their jobs because they're close to their homes and families; productivity increases thanks to extended working hours; and they don't have to worry about their daily commute and required cubicle time. Permanent telecommuting can give you access to national talent since it doesn't matter where employees are located. You'll also save money on overhead, as you won't need as large an office.

Issues that may arise with telecommuting, however, include maintaining productivity. Telecommuting can also fail with employees who require constant supervision. It's imperative to ensure accountability by setting up processes to monitor performance, including daily contact and activity reports. Other key issues revolve around maintaining a cohesive corporate culture and sense of identity among people who may rarely or never set foot in the same room. Isolation can also be an issue, so it's good to keep in contact with your employees, even if it means picking up the phone to talk to them every once in a while. Read other entrepreneur's experiences with telecommuting here .

Compensation & Benefits

What are some inexpensive perks I can offer my employees?
Offering a relaxed work environment has become more common. Allowing employees to work from home is another. An office celebration, with the objective of showing appreciation for all that your employees have done, can be as simple as pizza for lunch or doughnuts for an afternoon break. Slightly more costly perks like childcare, gym memberships or flu shots, and providing meals are other creative ways to show your employees you appreciate their hard work and care about them both inside and outside of the office. For more ideas, click here .


What's the difference between an employee and an independent contractor?
Taking on an employee means withholding income taxes and Social Security taxes (FICA), paying unemployment taxes (FUTA) and other state and local taxes, plus offering benefits such as sick/vacation days, health insurance and retirement accounts, which you won't have to pay for an independent contractor, who typically works for more than one company. The IRS asks the following questions to determine whether someone is truly an independent contractor or an employee masking as one:

1. Does the worker set his or her own hours?
2. Who makes the rules for how and where the work will be done: employer or worker?
3. Does the worker furnish his or her own tools and equipment and hire his own assistants if needed?
4. Does the person have a workplace (home office, for example) that's separate from the employer's premises?
5. Can the individual work for other companies?
6. Is the worker paid on a per-job or a commission basis?
7. Does the person send you invoices for his services?
8. Is there a written "independent contractor" agreement between worker and employer?

If the answer to these questions is "yes," you've successfully hired the person as an independent contractor and avoided the employee issues. For more on this subject, click here .

What are the legal implications of firing someone?
Most employment is "at will." This means that if the employee isn't working out, the employer can ask the employee to leave. Of course, if the employee has a written employment contract for a specific term, this doesn't apply. An at-will employee may be terminated by an employer at any time with or without cause and with or without advance notice, as long as the reason for the termination is not prohibited by law. For example, federal laws prohibit discrimination in employment based on certain protected classifications, including race, color, sex (including pregnancy), religion, national origin, age (40 or older), and disability. Therefore, an employer is prohibited from terminating an employee if the basis of that termination is his or her membership in any of these protected classifications. For more information on firing an employee, click here .

What do I have to legally do if I want to fire one of my employees?
You should develop an employee warning system which should be implemented in a predictable and logical sequence, and should be easily adaptable to varying circumstances. For example, you might devise a system by which the employee is gently reminded of company policy on a certain issue the first time such a warning is warranted. The second time, a sterner warning is given, often in the form of a written reprimand outlining past performance and the prior warning(s) given; a probationary--and final--warning can be issued the third time, with a thorough accounting of employee performance and a clear understanding that violating the probation will result in dismissal. All such warnings must be done in private so as not to embarrass the employee, with counseling offered on improving performance. The warnings should also be recorded in the employee's personnel file, as mentioned in more detail below. You should get an agreement on in writing and have the employee sign the form, so you have complete documentation on file.

The most important reason for fully documenting performance reviews is to protect yourself in the event that the employee must be fired later. You will have clear and objective information on which to base your decision. The employee can't say he or she wasn't warned or given a chance, and you will have vital written evidence for use in supporting your case.

If your employee doesn't make a comeback in performance after being put on notice, you must replace that person. The best way to approach this situation is quickly, without procrastinating. Use compassion and sensitivity when dealing with this task, avoid lecturing and, above all, do not resort to a shouting match. Limit yourself to facts supported by written documentation. Some labor attorneys counsel that a witness should be present at a firing for better protection in the event controversy arises later. For more information on firing an employee, click here .

What should I do to discourage sexual harassment?
Be sure all your employees know that harassment is against the law and that they have a right to a harassment-free workplace. They also need to know how to lodge a complaint. You have to be vigilant and take prompt, corrective action. Once you know about something, don't write it off, thinking "I'm sure he or she didn't mean anything by it." When a complaint has been made and you've taken steps to resolve it, document your actions. You may also want to ask the victim to sign a statement acknowledging what you've done and stating that the problem has been corrected.

The Equal Employment Opportunity Commission () says that an employer may be responsible for harassment acts of nonemployees where the employer, through its agents or supervisory employees, knows or should know about the conduct and fails to take action. If a customer or vendor is harassing one of your employees, speak to them (or in the case of vendor's, their supervisors) immediately. Read more here .

What must I do to comply with the Family Medical Leave Act?
Once an employee has given notice of his or her need for leave, you must provide that employee with notice detailing the specific expectations and obligations of the employee, along with any consequences of an employee's failure to meet these obligations. This notice is required, regardless of your written policies. However, if your policies so provide, the notice must also indicate:

  • Whether the leave will be counted against the employee's annual FMLA leave entitlement
  • Whether you require the employee to provide medical certification and the consequences of failing to do so
  • Whether the employee can substitute paid leave and/or whether you, as the employer, require this substitution
  • Whether the employee is required to maintain health insurance premiums
  • Whether the employee is required to present a fitness-for-duty certificate upon return to work
  • The status of the employee as a "key employee" and the potential for not being restored to work after leave
  • The employee's right to restoration
  • The employee's potential liability for your share of the health premiums if the employee does not return to wor

This notice must be given to the employee at least once in each six-month period that the employee has given notice for FMLA leave. For more information, click here .

What must I do to comply with overtime laws?
Covered, nonexempt employees must be paid at least minimum wage for all hours that they are "suffered or permitted to work," and that they be paid a special overtime premium pay for hours worked over 40 hours during a workweek. A workweek is generally a fixed 168 hours, or seven consecutive 24-hour periods, as established by the employer. The FLSA generally does not require that employees be paid overtime for working more than eight hours per day.

However, if there is a collective bargaining agreement in place that provides otherwise, the terms of that agreement will govern. Similarly, there may be specific state or local laws that apply. For instance, some states require overtime pay for more than a set number of hours in a day or other types of premium pay, in which case employers must follow these requirements.

In addition, for certain types of employees, such as those that work for hospitals or medical establishments, there are other rules to consider as well. For example, overtime pay for certain hospital workers may be calculated on either a 14-day, 80-hour work period or the seven-day, 40-hour workweek. There are also special rules for public employees. For instance, public police and fire agencies with five or more employees are subject to specific exemptions from overtime provisions altogether. To summarize, aside from these specific exceptions, and notwithstanding individual state or local laws, employers are generally required only to pay employees at straight time for those hours worked up to 40 hours per week, and time-and-a-half for those hours worked over 40. This requirement only requires employers to compensate employees for those hours actually worked. More guidelines on overtime pay are here .

What paperwork must I file when I hire someone?
For each applicant you interviewed, create a file including your interview notes, the resume and the employment application. For the person you hire, that file will become the basis for his or her personnel file. Federal law requires that a job application be kept at least three years after a person is hired.

Even if you don't hire the applicant, keep the file. Under federal law, all materials, such as applications and resumes, must be kept for at least one year after the employment decision has been made.

The 1996 welfare reform law required all states to set up new-hire reporting programs. While federal law asks for basic information, states can require more. Some states just want the basic facts on your W-4 form. Others want to know such things as health-insurance coverage and the new employee's date of birth. The deadline for reporting new hires also differs state to state. A few states--among them Alabama and Maine--give employers just seven days to report new hires. More confusing still: Each state has its own agency to handle information, and the way you report it varies from state to state. So be sure to do your research before you hire.

How can I protect my business from claims of bias when hiring?
Equal Employment Opportunity Commission (EEOC) guidelines, as well as federal and state laws, prohibit asking certain questions of a job applicant, either on the application form or during the interview. What questions should you sidestep? Basically, you can't ask about anything not directly related to the job, including:

  • Age or date of birth (if interviewing a teenager, you can ask if he or she is 16 years old)
  • Sex, race, creed, color, religion or national origin
  • Disabilities of any kind
  • Date and type of military discharge
  • Marital status
  • Maiden name (for female applicants)
  • If a person is a citizen; however, you can ask if he or she has the legal right to work in the United States

Other questions you should avoid include:

  • How many children do you have? How old are they? Who will care for them while you are at work?
  • Have you ever been treated by a psychologist or psychiatrist?
  • Have you ever been treated for drug addiction or alcoholism?
  • Have you ever been arrested? (You may, however, ask if the person has been convicted if it is accompanied by a statement saying that a conviction will not necessarily disqualify an applicant for employment.)
  • How many days were you sick last year?
  • Have you ever filed for worker's compensation? Have you ever been injured on the job?

In doubt whether a question (or comment) is offensive or not? Play it safe and zip your lip. In today's lawsuit-happy environment, an offhand comment can cost you plenty.

I have an employee in the reserves. What do I need to do to work with his or her needs?
The Uniformed Services Employment and Re-Employment Rights Act (USERRA) protects reservists from discrimination of any kind that relates, even in part, to the employee's military service. If called to duty, reservists must provide their employers with advance notice of their orders, either verbally or in writing, unless precluded by military necessity. While employers can ask commanders to temporarily defer employees for later duty on a case-by-case basis, the final decision rests with military authorities. Employers must promptly reinstate reservists once their tour of duty is complete. Time limits for reservists to return to work depend on the duration of the orders and range from eight hours to 90 days after completion of military duty.

The National Committee for Employer Support of the Guard and Reserve (ESGR) was created to serve as a liaison between reserve members and their civilian employers. Employers can find answers to their specific questions by contacting the ESGR Ombudsmen Services at (800) 336-4590 or .

What is the Equal Opportunity Act and how do I comply?
Title VII of the Civil Rights Act of 1964, as amended ("Title VII"), prohibits discrimination in employment based on certain protected classifications, including race, color, sex, pregnancy, religion, national origin, age (40 or older), and disability. Many states have individual laws that prohibit discrimination in employment as well. Therefore, under Title VII and certain states' laws, employers are prohibited from discriminating on the basis of sex with respect to hiring. For more detailed information click here .

What is OSHA and how do I comply?
OSHA is the Occupational Safety and Health Administration, the federal agency charged with ensuring that businesses maintain safety standards. The first step in complying with OSHA is to learn the published safety standards. The standards you must adhere to depend on the industry you're in. Every business has to comply with general industry standards, which cover things like safety exits, ventilation, hazardous materials, personal protective equipment like goggles and gloves, sanitation, first aid and fire safety

Under OSHA, you also have a general duty to maintain a safe workplace, which covers all situations for which there are published standards. In other words, just because you complied with the standards that specifically apply to your industry doesn't mean you're off the hook.

What are the pros and cons of using temporary services to find employees?
The main pro of hiring employees through temp agencies is that you'll get to see how that employee works, without having to hire them first. If they're good employees, you can then pay the staffing agency's separation fee of 15 to 25 percent based on the temp's length of service and hourly rate. The cons are that it might be more expensive to hire a temporary worker than it would be to hire an employee, since you can probably hire an employee for less money per hour than you're paying the staffing agency.

But be careful how you navigate the transition process. Going temp-to-perm increases head count, which could affect compliance with employment laws. Also, if the employee has been classified as a temp for more than six months, a status referred to as "perma-temping"--he or she may have the right to retroactive benefits, including 401(k), bonuses and health coverage. However, companies can get around such issues by asking the temp to take a few weeks off before starting as a regular employee. This could, however, create morale problems that outweigh the financial savings. For more information, read "Here to Stay" .

Can I outsource my payroll functions?
Yes, and using a payroll service generally makes sense if your payroll changes with each pay period. If your company has employees working varying amounts of hours each week or has a significant turnover rate, a payroll service can be a time-saving and cost-effective alternative to internal processing. Using a payroll service can also be helpful if you have to pay payroll taxes for multiple states. Payroll companies' basic services include calculating payroll and tax obligations for each employee, printing and delivering checks, and providing management reports. Paychecks can be issued on a weekly, bi-weekly, monthly, semi-monthly or yearly payroll basis.

In addition, payroll firms can offer services such as automatic check signatures, envelope stuffing, and direct deposit of checks. Payroll firms can also issue W-2 forms for a fee; offer tie-ins with 401(k) and Section 125 mutual fund plans, allowing employees to designate automatic deductions from their paychecks; and offer integrated HR software systems that track employee benefits-related information in addition to regular payroll data.

What do I do if I suspect one of my employees is stealing from me?
Screening applicants, including doing background checks, is a starting point for controlling employee theft. You should also closely track valuables, including cash and inventory. For example, know what your average sales are by shift and watch for variances that could indicate theft. You can also use surveillance cameras and even undercover investigators if you suspect theft is occurring. You should also use common sense controls, including frequent cash deposits, dual signatures on big checks, and book balancing. You should also separate accounting and check writing functions between employees and owners, and have your businesses bank statements sent to your home. You may also want to consider adding theft insurance to your business insurance plan. If you suspect theft, contact your lawyer immediately

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