Compliance is a four-letter word to many business owners – especially small business owners, who have to handle compliance issues themselves, at least until they get big enough to hire a head of HR.
It’s not fun or sexy. It doesn’t drive growth or generate revenue.
But it serves several purposes. It keeps you safe. It keeps your business running smoothly. And it keeps you in business. Non-compliance can really cost you.
Non-compliance can ultimately cause a company’s doors to close.
With that in mind, I want to look at three questions you can ask as a business owner to help evaluate your small business compliance program and see where you may need work.
I get it. Founders don’t have the time, money or resources to manage small business compliance. There are more important things to address, right? The only problem is that if you only worry about compliance when emergencies arise, you’re choosing to do it the more expensive, time-consuming, headache-inducing way.
If you wait for OSHA or the DOT or whoever to come knocking, they will put the brakes on your business (and likely find a reason to fine you).
Regulators typically come knocking for one of two reasons:
With a proactive compliance plan, you can minimize incidents and give whistleblowers nothing to blow the whistle about.
Let’s look at a real-life example:
A few years back, a developer hired XYZ Contracting to construct a building. When they started working with XYZ, they built a project timeline with several deadlines to help keep the job on track, and they wrote into their contract that financial penalties would be assessed if deadlines were missed.
Before long, XYZ realized they were in danger of missing deadlines, so they started cutting corners in several ways, including foregoing safety requirements. Eventually, one of the subcontractors on the jobsite noticed the unsafe conditions and called OSHA.
A few days later, OSHA showed up and – after a brief inspection – shut down the entire job for five days. No one was allowed to work for a whole week! In addition, they dropped massive fines on XYZ that hurt even more than the penalties from their contract with the developer.
So now, XYZ was five days further behind, paying severe penalties to OSHA, and facing even further penalties from the company that hired them. And that’s to say nothing of the indirect cost in terms of time, reputational damage, and emotional toll, to name a few.
A proactive compliance plan could have prevented all of that from happening.
For starters, a proactive small business compliance plan involves understanding the requirements of the regulatory bodies that oversee your industry, whether that’s OSHA, DOT, ADA, ACA or someone else.
Once you understand them, the next step is to build the requirements into the way you do business from the top down. The responsibility of maintaining a good compliance program cannot be relegated solely to HR or upper management – everyone needs to understand it.
Hire advisors to come in and do mock inspections, quiz your people on the rules, explain why you do things the way you do – then do it yourself. No matter how much you talk about it, if you don’t follow the rules, your people probably won’t, either.
Compliance may seem like nothing more than a pain in the neck and a drain on your resources, but ultimately, the compliance requirements for small businesses exist for the sole purpose of keeping you and your people safe.
In the end, a compliant company is a safe company. And a safe company saves money – by not paying fines, lower Workers’ Compensation premiums and more. And companies that save money are able to be more competitive in the marketplace when bidding on jobs.
When a company hits 50 employees, the rules change. Suddenly, you are considered an Applicable Large Employer (ALE) and there’s a massive shift at that point, especially when it comes to health insurance. If you’re in that 35-45 employee space, you want to pay close attention as that 50-employee mark gets nearer.
In addition, if you have part-time employees, you need to be aware of what full-time equivalent (FTE) looks like. In order to calculate FTEs, add the total hours worked by part-time employees in a month and divide that number by 120. If the answer plus your number of full-time employees equals 50 or more, then you most likely qualify as ALE. Restaurants especially need to watch out here.
Keep a close eye on this, because the penalties for being out of compliance can be more than $4,000 per employee.
When you’re in founder mode, you often manage everything yourself. But I’m here to tell you that there is no better time to bring in outside help. If you’re focused on growth, nothing will frustrate you more than having to deal with an out-of-compliance scenario: it’s going to come at the worst time, take a long time to sort out, cost a lot of money and frustrate the hell out of you.
That’s why we always recommend bringing in outside experts on key compliance areas. You may want to hire:
When it comes to external advisors, make sure that whoever you work with has a thorough discovery process and asks the difficult questions. The truth is that a lot of insurance and risk management companies are either uncomfortable pushing into the topic of compliance or don’t know which questions to ask.
Compliance matters vary by industry, and advisors worry about looking like they don’t know what they’re talking about if they push into an area they’re not sure how to address. But with a little exploring and a few questions, most companies’ compliance concerns are typically pretty isolated to a single area.
Even the best owners often think of compliance as a box to be checked so they can do the real work of their business.
When you manage compliance for compliance’s sake, you will inevitably view it as nothing more than a drain on your time and money. But there is another way to think about it: How can compliance fit into your broader strategy of safety, Human Resources and growing your business?
Compliance is ultimately designed to keep people safe. When your people are safe, they’re less likely to leave. When they stay longer, your company gets better. When your company is better, you win more often. In that way, compliance has an impact on areas like retention and key personnel planning, just to name a couple.
One of the best ways to bring compliance into everything you do is to talk about it – during meetings, when new rules go into effect, when you’re starting a new job. You want to create a culture of compliance that views compliance less as “following the rules” and more like “part of the job.”
At Ellerbrock-Norris, we help businesses figure out how to comply with regulators in various industries. If you’re looking for an external advisor with experience helping small businesses, reach out today.