16 Key HR Terms Defined That Every Business Owner Needs to Know

Posted by PRemployer on January 16, 2020

16 Key HR Terms Defined That Every Business Owner Needs to Know

Human Resources is a misleadingly complex field. Without constant vigilance and expertise in the relevant laws, small violations will pile up, leaving your company liable. This HR glossary provides a quick-and-dirty introduction to the most important terms to know.

1. Benefits Strategy

Your benefits strategy is more than just an offering of benefits; it's the strategy you develop to recruit and retain staff, keep costs low, and improve engagement through your benefits offerings. An effective benefits strategy takes into consideration competitor offerings, market trends, candidate priorities, workforce demographics, engagement, and more. The most effective benefits strategies are customized for each company.

2. Co- Employment

Co-employment is the term used to describe the relationships employees establish with both their employer and their professional employer organization, or PEO. In this model, the employees go directly to leadership for daily operations and directly to their contacts at the PEO for human resource issues, such as compensation and benefits questions. This allows a PEO to work as an extension of your local team and changes the perception from "third-party vendor" to "extended support" without taking away any control from the business owner.

3. Exempt Employees

Every organization must classify their employees as either exempt (not eligible for overtime pay) or non-exempt (eligible for overtime pay). Misclassification is costly and common, especially in organizations that do not partner with a PEO or have an established HR department. To qualify for an exemption, employees must meet clear requirements laid out by the Fair Labor Standards Act - and the rules are changing soon.

4. Fair Labor Standards Act

If you only familiarize yourself with one employment law, get comfortable with the Fair Labor Standards Act. It covers overtime, minimum wage, employee classification, deductions, travel pay, child labor laws, compensable work time, and much more. 

Most business owners, executives, managers, and supervisors do not have the time to study the extensive law in detail and become proficient in how to properly apply the regulations in every situation. Consequently, many violations of the law occur inadvertently and subject the business to costly fines, penalties, and defense costs.

5. Family and Medical Leave Act

The Family and Medical Leave Act grants  job-protected leave (not to be confused with paid leave) to workers who need time off for their own medical condition or the medical condition of a family member. Not all organizations are subject to FMLA, but most are, and there are serious consequences for failure to comply.

6. Independent Contractor

Unlike employees, independent contractors pay both the employee and the employer portion of social security and Medicare taxes. However, classification is governed by the FLSA to prevent employers from abusing true employees by misclassifying them as independent contractors.

A worker is only classified as an independent contractor if he or she meets the following three factors:

  1. The worker is free from the control and direction of the hiring entity in connection with the performance of the work.
  2. The worker performs work that is outside the usual course of the hiring entity's business.
  3. The worker is customarily engaged in an independently established trade of occupation.

The IRS considers all workers employees unless proven otherwise.

7. Non-Exempt Employees

Non-exempt employees are eligible for overtime pay when they exceed certain thresholds (usually 40 hours per workweek, but there are some exceptions). Most employees fall into this category, and it's the safest classification; while employers can be penalized for misclassifying an employee as exempt, they'll never be penalized for classifying an employee as non-exempt. Non-exempt employees can be paid hourly or on a salary just like exempt employees, but they are required to be paid at least 1.5 times their regular rate for overtime.

8. Occupational Safety and Health Administration (OSHA) Compliance

OSHA provides extensive safety and health requirements for employers with specialized standards for those in construction and healthcare. Employers must understand and comply with  OSHA regulations in order to promote employee safety and avoid penalties.

9. Payroll Management

Payroll can be incredibly complex and time-consuming, especially when you take into consideration the complexities of varying pay rules, state versus federal guidelines, and the myriad of differences that exist between states. Regardless of size, many businesses choose a PEO for accurate, compliant, and confidential payroll management.

10. Professional Employment Organization (PEO)

PEOs answer a common issue in business: HR legal compliance requires quick, affordable access to HR professionals with expertise in the area. PEOs provide outsourced human resource services for businesses including payroll, worker's compensation, employee benefits, and more.

For the purpose of taxes and compliance, your employees will appear to be on the payroll of your PEO partner. However, you retain full oversight of these staff members, giving you all the productivity and cost benefits of the relationship without the overhead or paperwork that is generally required for full-time or part-time employees.

Working with a PEO can significantly lower costs for employee health benefits because they represent a large number of people, which helps them negotiate better rates for employee benefits. 

11. Retention Strategy

When organizational leadership - generally HR - strategizes for keeping their top talent long term, they develop a retention strategy. Retention strategies provide what employees need in order to stay in an organization even if they are actively recruited by competitors.

12. Risk Management

Risk management refers to the limiting liability by complying with rules and regulations relevant to employment. The most common infractions are related to family and medical leave, discrimination, retaliation, and wage and hour laws.

13. Timekeeping System

Many organizations rely on a myriad of HR software (or web-based platform) solutions, including a timekeeping system. The most basic timekeeping systems allow employees to record their time by clocking in and out which provides employers with a record for payroll processing. More advanced timekeeping systems allow employees to review and approve their timecards, request time off, manage schedules, and run reports.

14. Toxic Workplace

Toxicity in the workplace is more than a buzzword; it can lead to disengagement among staff, high turnover rates, plummeting customer satisfaction, and a hit to your bottom line. Thankfully, correcting a toxic workplace isn't as hard as it seems when you have help from seasoned HR folks.

15. Turnover

Turnover is the rate at which employees leave your organization. It is calculated by taking the total number of employees who left in the last 12 months by the average number of employees in the same period. 

Employers often set goals around turnover because of the disruption and costs associated with it.

16. Workers Compensation

Workers' compensation is a type of insurance that helps cover wages and medical benefits for employees who have been injured at work or injured while conducting business for their employer. Employers who have at least one employee are required by law to carry workers' compensation coverage in every state (except Texas). If your business does not have it, you could be at risk of stiff fines, a heavy lawsuit, or even face criminal charges.

These 16 HR terms, including the relevant laws, provide a base of knowledge for business owners and HR employees to build off of. However, it may require a full-time compliance expert just to keep your company compliant with the FLSA, FMLA, and OSHA. Paperwork errors can cost thousands of dollars.

Instead of hiring a full-time compliance expert, consider PRemployer. We're a PEO who works as an extension of your team to help your organization stay compliant and effective. To learn more, download PEO 101 today.


PEO 101: Everything You Need to Know When Considering if a PEO is Right for Your Business


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