Small business owners work so hard to build a company. Being virtual doesn't exempt you from exposure to things that could get you in trouble simply because you don’t know to look for them. 

In HR, similar to accounting, what you don't know could cost you a lot of money. 

And so, if you're a growing business, and you're involving people in it – even if it's just you and five others in your team, or whether it's virtual or physical – you need to bulletproof yourself in the event of an audit. 

Therefore, you have the responsibility as a business owner with employees to be compliant.

Here are ways to help bulletproof yourself in the event of an audit:

1. Compliance posters must be in a place where all employees have access to them.

You must have compliance posters that are highly visible to your employees and they have to be up to date. This is so that if an auditor asks your employees where your company's compliance posters are, they're able to show it. Especially due to COVID, there is a mandatory poster that all employers are supposed to make sure their employees have access to.

2. Determine whether or not the people working for you meet the requirements to be considered 1099. 

This is something that trips up many small business owners because it’s a tough area to classify staff who are W2 – and getting it wrong can be very expensive. Just because somebody works one hour every month doesn't mean they are qualified to be a 1099. 

It doesn't matter how many hours they work, or that you pay them $5. The only things that matter would be what the Department of Labor says under the Fair Labor Standards Act. 

3. Understand how to classify exempt vs. non-exempt.

All positions can fall under non-exempt, meaning that a position is not exempt from overtime and this position is not exempt from minimum wage. 

Whether or not someone is exempt from overtime and minimum wage is not determined by their title or how a position is paid. Only certain types of jobs can be classified as exempt and it's based on the duties performed within that job. 

Now, to be exempt salaried, the job (not the person) has to meet certain standards. And only certain types of jobs can be classified as exempt. If you don't know what types of jobs can be classified as exempt, then you should go the nonexempt route. Otherwise, it can cost you.

4. Create an employee handbook.

A handbook is a reference guide for employees and managers. People want directions. They want to know what's going on and they want something that they can reference. They might just skim it or refer to it every once in a while, but people do look at that employee handbook. 

And so, once you put your employee handbook out to your staff, realize that it’s what you're expected to uphold. Also, it's important you have a handbook that's developed for the size of your organization.

If you want to learn more about HR basics and compliance, check out 048: HR Basics For Your Virtual Team with Tameaka Shelton