Small Business HR Compliance Checklist: Essential Requirements

Compliance Is Not Optional for Small Employers

Many small business owners underestimate their employment law obligations, assuming that most regulations apply only to large companies. While some laws do have size thresholds, small employers are subject to more requirements than they typically realize. Non-compliance does not get a pass because the employer is small. This checklist covers the essential requirements.

Federal Requirements by Employer Size

All Employers (1+ Employees)

• FLSA: Pay at least federal minimum wage ($7.25/hour, but check state and local rates) and overtime to non-exempt employees.
• FICA: Withhold and remit Social Security and Medicare taxes.
• Federal income tax withholding: Withhold and remit federal income taxes from employee wages.
• I-9 verification: Complete Form I-9 for every new hire within three business days.
• OSHA: Maintain a safe workplace under the General Duty Clause. While all employers must adhere to this requirement, specific OSHA recordkeeping and reporting requirements may apply based on the number of employees and the nature of the business.
• EPPA: Comply with the Employee Polygraph Protection Act prohibiting most polygraph testing.
• NLRA: Respect employees' Section 7 rights to engage in concerted activity (applies to all private-sector employers, not just unionized ones).
• New hire reporting: Report new hires to your state within 20 days for child support enforcement.
• Workers' compensation: Carry workers' compensation insurance as required by your state (requirements and exemptions vary).

4+ Employees

• Immigration discrimination: Comply with anti-discrimination provisions of the Immigration and Nationality Act.

15+ Employees

• Title VII: Prohibits discrimination based on race, color, religion, sex, and national origin.
• ADA: Prohibits disability discrimination and requires reasonable accommodations.
• GINA: Prohibits discrimination based on genetic information.
• PWFA: Requires reasonable accommodations for pregnancy-related conditions.

20+ Employees

• ADEA: Prohibits age discrimination against employees 40 and older.
• COBRA: Offer continuation health coverage to separated employees and dependents.

50+ Employees

• FMLA: Provide up to 12 weeks of unpaid, job-protected leave for qualifying reasons.
• ACA employer mandate: Offer affordable, minimum-value health coverage to full-time employees or pay penalties.
• EEO-1 reporting: Required for all private employers with 100 or more employees, not just federal contractors.

100+ Employees

• WARN Act: Provide 60 days' notice before plant closings or mass layoffs (some states have lower thresholds).
• EEO-1 reporting: File annual workforce demographic reports with the EEOC.

State and Local Requirements

State requirements often exceed federal law. Common additional obligations include:

• Minimum wage: Most states have rates above the federal level.
• Paid sick leave: Required in many states and cities, often with no size exemption.
• Paid family leave: Required in a growing number of states.
• Anti-discrimination: Many states protect additional categories and apply to smaller employers.
• Workplace postings: State-required posters must be displayed in addition to federal ones.
• Wage theft prevention notices: Required at hire in several states.
• Pay transparency: May be required in job postings in some states; employers should consult legal counsel for specific obligations.
• Background check restrictions: Ban-the-box and fair chance hiring laws exist in various jurisdictions; employers should verify local requirements.

Required Workplace Postings

Ensure you display all required federal and state workplace posters. Federal postings include FLSA minimum wage, OSHA safety, EEOC equal employment opportunity, FMLA (if applicable), and USERRA military service rights. State postings vary but commonly include minimum wage, workers' compensation, unemployment insurance, and anti-discrimination notices.

Record Retention Requirements

Maintain employment records for the legally required periods. Key minimums:

• Payroll records: Employers should generally retain payroll records for at least 3 years, but requirements may vary.
• Tax records: The IRS generally recommends keeping tax records for at least 3 years, with certain situations requiring up to 7 years.
• I-9 forms: 3 years after hire date or 1 year after separation, whichever is later.
• Personnel records: Retention periods vary by state; employers should consult state-specific guidelines.
• Job applications: Employers should generally retain job applications for at least 1 year; federal contractors may have additional requirements.

Getting Help

Small employers should establish relationships with an employment attorney and a knowledgeable payroll/HR service provider. Membership in organizations like SHRM or your state employer association provides access to resources, templates, and compliance alerts. The cost of professional guidance is far less than the cost of non-compliance.

This checklist is a starting point, not a comprehensive list. Employment law is complex and varies by jurisdiction. Use it to identify areas where you may need to take action, and consult with qualified professionals for your specific situation.