The HR Checklist Every Small Business Owner Should Complete Before Hiring Employee #10

At certain employee thresholds, federal and state employment laws that did not apply to your business suddenly do.  Ten employees is not a magic number for every law. Some thresholds are at 15, 20, or 50, but it is a meaningful inflection point where the informal, relationship-based approach to HR that works for very small teams starts creating real exposure.

If you are approaching 10 employees, or if you already passed it without updating your HR infrastructure, this checklist is where to start.

Legal Thresholds to Know

Employee count thresholds for major federal employment laws:

• 1+ employees: FLSA (wage and hour), FICA payroll taxes, workers' compensation (state-dependent), I-9 requirements, new hire reporting. Check out our hub for what to do before hiring your first employee.

• 15+ employees: Title VII (discrimination/harassment), ADA (disability), PDA (pregnancy), PWFA (pregnant workers)

• 20+ employees: ADEA (age discrimination), COBRA continuation coverage

• 50+ employees: FMLA (family and medical leave), ACA employer mandate

Many state laws have lower thresholds than federal law.  For example, California's FEHA applies to employers with 5 or more employees.  New York's Human Rights Law applies to 4 or more.  Check your state's specific thresholds. There can be many differences depending on your state.

The Checklist

Written policies

• Employee handbook: if you do not have one, now is the time.  At 10+ employees, 'we handle it case by case' creates discrimination exposure because cases will inevitably be handled differently. Check out our employee handbook hub for more resources. Or, if you don’t want to start writing a handbook from scratch, check ours out here.

• Anti-harassment and anti-discrimination policy: required in several states at various thresholds; best practice everywhere

• Progressive discipline policy: consistent disciplinary standards become critical as the team grows. Check out our progressive discipline hub for more resources.

• PTO and attendance policy: informal PTO arrangements create conflict at scale. Minimize the risk by checking out our PTO and time off hub, or jump straight to the finish line with our complete PTO and attendance policy.

• Social media policy: with NLRA-compliant language. Our social media policy template is ready to download and implement today.

Compliance infrastructure

• I-9 file audit: are all your I-9s complete, stored separately from personnel files, and within retention requirements?

• Employee classification review: are all your workers correctly classified as employees vs.  independent contractors? Misclassification exposure grows with headcount.

• Exempt vs.  non-exempt review: are all employees correctly classified under the FLSA? Misclassifying non-exempt employees as exempt is one of the most common wage and hour violations.

• Payroll tax compliance: are you depositing payroll taxes on the correct schedule? The schedule changes based on tax liability amount.

HR records

• Personnel files established for every employee: containing offer letter, I-9 (stored separately), W-4, policy acknowledgments, and any performance or disciplinary documentation

• I-9 files stored separately from personnel files as required

• Payroll records retained for at least three years

Manager training

• Do your managers know how to handle a harassment complaint? At 10+ employees, a manager who mishandles a complaint creates liability you are responsible for.

• Do your managers understand the basics of progressive discipline and documentation?

• Do your managers know which situations require HR or leadership involvement before action?
  

The Underlying Point

The informal HR approach (good judgment, relationship-based decisions, policies that live in the owner's head) works when the owner has direct relationships with every employee and can manage every situation personally.  At 10 employees, that is no longer realistic.  Situations will be handled by managers who need written standards to apply.  Employees will have conflicts with people the owner does not know well.  Decisions will need to be consistent across a team large enough that inconsistency is visible.

The time to build the HR foundation is before you need it.  At 10 employees, you need it. Get started with our Compliance Essentials bundle, which includes four foundational HR policies: Anti-Harassment, Progressive Discipline, Social Media, and PTO & Attendance, which is everything a growing small business needs to build consistent, compliant HR infrastructure. Soon after, you will need an established small business employee handbook. Ours is fully customizable in Word + PDF download.

Questions about this or other HR topics? Visit pragmatichrgroup.com for more resources.