Mission to Grow: A Small Business Guide to Cash, Compliance, and the War for Talent

MTG EP 133 - Growing at 50-149 Employees
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Mike Vannoy: [00:00:00] But pretty certain when you're in, when you're north of 50 employees and certainly up to 150 employees, this isn't about you anymore. I think Mary, one of the things we talked about in the, in, episode number one of this series is establishing culture, right?

You know, it's getting payroll, right. But establishing culture, what is it you're going to build this business around? And when you're the. As the founder, the owner, the senior leader, you're the kind of the epicenter of culture. You get to have a big impact just on, I don't know, cult of personality, right?

But now you're relying on managers who manage other people whom you might not know all that well, maybe at all, to help carry that culture. [00:01:00]

HR roadmap for growing your business at every stage. Uh, we are, uh, in part three of a three part series unpacking the ebook of that same title. And, uh, two weeks ago we covered growing from one to 15 employees. Last week, 16 to 49 employees. Today we're unpacking 50 to 149 employees. So call it 50 to 150 employees.

As you grow your business from one stage to another, Um, you know, it, it comes with different requirements and there's different areas that you should be focusing on as an entrepreneur, as a business owner, as a manager. [00:02:00] And so we just want to unpack what are the specific HR things you should be thinking about as you either plan to enter.

Or are in this stage of 50 to 150 employees. Uh, uh, if you're a regular watch of the show, you know, Brian Shenker and Mary Simmons, uh, uh, Simmons, excuse me, our, uh, our esteemed guests, uh, to help me unpack this topic. So, uh, let's, if I, if I invite everybody to follow along, hop on asuresoftware. com, uh, uh, resources follow along in the, in the, in the ebook.

Um, Mary, maybe we'll start with you. What are the big H. R. And let's maybe you think strategic, not just there's a whole bunch of laws we're gonna unpack that when you cross the employee threshold. But just strategically, what should businesses be thinking about from an H. R. Perspective as you enter this more than 50 employees face?

Mary Simmons: Yeah, thanks, Mike. It's a great question. And I, I think, uh, one of the basic, and it's going to [00:03:00] sound overly basic, but you have to now have an HR function. So, maybe below 50 employees, you could do HR light. We talked about in the other sections. That you should have a handbook. I think that's pretty basic, but now that you have 50 plus employees and as Brian unpacked some of the laws, you need a real HR function.

So what do I mean by that? You need somebody who is either certified or experienced in the HR world to set up. An HR function that helps you number one, be compliant, but number two, now we have 50 employees. We need them to be productive. Right? So what are we setting up as far as expectations? What are we setting up as far as disciplinary performance management, et cetera?

All of that comes together to to mean that you have a real HR function.

Mike Vannoy: right. Brian, how about you? What are [00:04:00] the some of the big cons more strategic? considerations businesses need to be thinking about as they go for enter this 50 employees and then on up to 150.

Brian Shenker: Sure. Well, I mean, of course, for me, from the defense litigation standpoint, I'm thinking more employees, more potential issues. And that speaks to what Mary said, that we really need to have our HR processes in place, potentially, you know, more streamlined because, you know, HR, you know, whether it's one person or multiple as you grow.

It's, you know, harder and harder to, uh, you know, maintain with, you know, each each HR event that's occurring. Uh, so I, I think it's important to have this framework set up as you're getting to this area so that you're not scrambling, uh, you know, once you have so many employees and, you know, having HR issues.

Um, you know, certainly you're going to start, uh, hitting some of the, uh, federal statutes that [00:05:00] have, uh, you know, higher thresholds. Um, you know, and even other, uh, statutes that might not be based on employees, like maybe the Fair Labor Standards Act, you're going to have more potential exposure because you likely have, you know, multiple employees in, in certain positions.

And so if you're making a mistake in HR now, it might not just be affecting one person. It might be a whole group of employees, which, you know, exponentially increases that exposure. No,

Mike Vannoy: you know, you can You can go it alone as a leader, like when you start, you know, hanging on a shingle for yourself, you might not have, you might have zero employees. You're the individual contributor, you're the boss, you're the strategist, you're the janitor, you're everything.

And you still wear a lot of hats as you go from, you know, 1 to 5, to 15, to 25 and grow. But pretty certain when you're in, when you're north of 50 employees and certainly up to 150 employees, this isn't about you anymore. I think Mary, one of the things we [00:06:00] talked about in the, in, episode number one of this series is establishing culture, right?

You know, it's getting payroll, right. But establishing culture, what is it you're going to build this business around? And when you're the. As the founder, the owner, the senior leader, you're the kind of the epicenter of culture. You get to have a big impact just on, I don't know, cult of personality, right?

But now you're relying on managers who manage other people whom you might not know all that well, maybe at all, to help carry that culture. What do you guys have to say about that, about this, dare I say, introduction of managers and all of a sudden there's a layer between you and the front line?

Mary Simmons: I'll, I'll, I'll jump in here. Um, I'm sure Brian has a, has a point of view too, but for me, um, as an HR professional, this is where you need more training, right? Um, we always say [00:07:00] that we want to train managers to manage people, not just to manage process. So, if I hire a foreman, let's say, in a manufacturing setting, He probably knows or she knows how to, uh, make that manufacturing line go, go quickly.

But do they need, do they know how to motivate, coach, counsel, train those employees and then, um, manage that within a compliant. framework. They probably could use some reminders and some assistance. So as you get bigger, as you said, Mike, the leadership team is further from, um, a lot of the workers, right?

They may be interacting with the higher level managers or the mid managers, but maybe not as many employees. So we really need to make sure that we are training those managers to manage people compliantly within the culture that we've set. Um, and to be productive, of [00:08:00] course.

Mike Vannoy: Now, both of you talked about, you know, Mary, you said setting up a formal real deal, uh, say Sherm certified HR function and they use the word function. Uh, Brian, I think you used the word processes. Um, paint a picture for what that might look like. And it's not an overt advertisement for us. Mary, this is what your team does for clients every single day, but their resources are very different for our 51 employee company versus 149 employee company.

Um, when you think, when you say the function, what is that? What is, what are the buckets of that function?

Mary Simmons: Um, absolutely. Another, another great question. And, and I'm glad that Brian said process because the processes are, um, part of the function, right? So the HR function is the overreaching department that is going to drive the compliance and the productivity of your [00:09:00] department. But if we don't have process, Then anything that we do there is going to take too much time, be disorganized.

It might fight our culture. It might fight the goal, which is to make a productive team. So when you set up that HR function, you're first going to look at what is the compliance that we have to adhere to state, federal, and municipal, right? How are we going to set forth that? That compliance. So that's your overreaching umbrella.

But then you want to dig in and you want to say, you know, what are the other things that that fall under that HR function that's going to help protect our organization and help drive that the, you know, ROI to growth, right? So that's your performance management. That's your, um, comp, right? So how are we attracting?

Engaging and retaining staff. Um, and [00:10:00] then at, at the, at the end of the employment, um, relationship, how are we handling terminations? Right? Are we doing that? Compliantly culturally sound right? Because everybody sees when you terminate somebody. So you want to make sure, you know, number 1, that you do it compliantly, but the other pieces are you doing it in a manner that is.

You know, in line with your culture.

Mike Vannoy: Brian, anything you'd add there?

Brian Shenker: I think that's absolutely right. And, you know, you have these processes and I go back to what Mary said earlier about the manager training, because I think that's one big issue when you start getting to the size is that, you know, when you're under 50, you know, HR can always be involved and, you know, many requests for leave and things like that might go directly to HR.

Whereas now you have, you know, supervisors, mid level managers. Who might need training on, you know, for [00:11:00] instance, we'll get to it later, you know, FMLA and what, what triggers an FMLA request. Uh, and so, you know, they really need to understand these, uh, these managers more than the job and the performance.

They need to understand the compliance obligations the company has to because now they're part of that, um, you know, HR without managers that To have an idea what they're doing, uh, is gonna be really hamstrung to, uh, to comply.

Mike Vannoy: What, what are some of the challenges that you see companies face at this size? I mean, two, two things pop out for me is, okay, we, we acknowledge, you know, we are at a certain stage. We need some real deal HR. So maybe I have an FT, a full time equivalent employee that this is what they do. They're SHRM certified.

Maybe it's fractional, but I outsource part of this and I outsource part of that. There's different ways that you could stitch this together, but simply having processes documented doesn't mean I follow those [00:12:00] processes. And while the three of us certainly would be advocating from day one, first employee that you're documenting everything. I think realistically, we know that especially smaller firms where the owner is wearing many, many hats, that's not always the case. So I think maybe it framed it in the start in documentation and actually walking your talk and following these processes that you've documented. What are some of the challenges that you see firms face in those areas?

Mary Simmons: Um, I, I would say that I think a lot of times when you get into this 50 to 150 or 51 to 149 space, uh, the organization sometimes have grown fast. And although they recognize they need HR. They still operate like they're a smaller business. So one of the things that I think [00:13:00] can assist these organizations when they grow is to utilize data and collect data and act on that data.

For example, we talk all the time about it being a very tough environment right now to attract, um, the best talent, right? Um, we might get a lot of applications, but we're not finding the best talent. Um, can be difficult. So what we try to, you know, preach and teach is to utilize data. You have to keep data of where you're posting your ads, which ads you're posting, what verbiage you're using, what platforms and then what is the outcome from each.

That's just one example, right? And then you want to follow that employee through their life cycle, right? You want to keep. Data by doing stay interviews, for example, um, or employee engagement surveys and use that data [00:14:00] to inform, oh, that was the best place to hire. That's where these high potential candidates came from.

Um, and then. Uh, you know, double down on, on those and, and maybe stop using another. And recruitment is just one area where I want organizations to collect data. Another on the other end of the employment, um, relationship is termination. So are you doing exit interviews? We utilize a tool so that we can collate that data, go back to the employer and say, Look, everybody's leaving because they don't like XYZ manager.

Uh, we need to do management training or executive coaching with that manager or the salary. Everybody's leaving for salary. Let's do benchmarking. You cannot guess in your HR function anymore. You have to gate, gather data and [00:15:00] utilize that data. Use that to inform your decisions that you make to make that HR function better.

Mike Vannoy: Yeah, makes perfect sense. Brent, how about you? What, what, what are the challenges firms entering this phase face?

Brian Shenker: Yeah, I think, you know, similar to what Mary said, I mean certainly another data point is wages. I think that as they grow bigger, I mean, a, a couple issues. One, obviously compliance, uh, you know, with, you know, federal and state wage laws. But I think too, as you grow and have more employees and start developing departments.

It's really good to do, you know, a wage audit. Number one, make sure classifications are good, but also, you're, you're gonna have to start understanding compensation levels and really do, you know, compensation studies. Are you paying market rate? You know, these things, you know, start becoming bigger issues, you know, as you're growing, uh, you know, more is often expected from employees and applicants of, you know, larger, uh, companies.

So you want to make [00:16:00] sure, uh, you're keeping up with that as well. Um, you know, another area that I see is, uh, especially, you know, when FMLA becomes involved at this level, um, there are a lot of leave laws to manage, uh, both federal, uh, state and now, you know, many local ones. So I think, you know, more employees means many more, uh, you know, requests for leave and issues that will come up and you really need, uh, designated.

Uh, likely a designated person, you know, to handle those when, you know, he's getting up to 100 or more.

Mike Vannoy: I want to probably spend most of the rest of the time, uh, on compliance because when there's something about this 50 employee mark that all of a sudden triggers a whole bunch of laws. Uh, I mean, you have to comply with Fair Labor Standards Act from day one OSHA day one. There's a lot of them that. You know, big federal regulations.

That doesn't matter how big or small you must comply. You gotta, you can't discriminate. You can't, uh, [00:17:00] have an unsafe work environment. So those things, but there's a, you triple wire that there's all kinds of new ones. So we're gonna spend probably the majority of our time on that. The last thing, maybe I just want your guys thoughts about how do you guide an entrepreneur or a manager running a company?

Like, like you said, Mary, it's a fast growth firm. Things just change. You know, I used to be say, uh, the, uh, office manager. Well, now there's a payroll clerk. There's an HR person. There's an accounts receivable person. There's a billing person. I mean, the jobs by definition become more specialized and fractionalized.

It's my sense that as that happens, it'd be really easy to skip over salary benchmarking, job descriptions, performance management expectations as these jobs change over time. And you end up with people misclassified, uh, out of bed on comp, don't even have the right [00:18:00] expectations set. What, what, I mean. I see a nodding, give me some validation agreement, but, um, what's your guidance here?

Mary Simmons: yeah. I mean, I think, look, it's definitely challenging and we talked about it when you're a smaller organization. And let's say, you know, the 3 of us, plus 10 more people are running a company. We're all wearing a lot of hats that has its own unique challenges. Now, when we get bigger, and like you said.

It probably is the time to review job descriptions, which, you know, I preach they should be looked at every single year. Um, and, you know, who who's doing what? Um, so now you have other challenges, which is now we're getting bigger. So, you know, what? How can we be the most efficient? What are the, um, Steps in a succession plan right now.

We're big enough to actually have succession planning because we're going to have some key [00:19:00] positions that if that individual leaves for whatever reason, we've got a problem. So I always caution organizations of this size to make sure that they have some succession planning. And again, that's going to double back to the training, but it's going to probably include instead of just management training, some skills.

skills training. Um, and there's a lot of different ways that, that we can do that. And I, and I also encourage organizations like this to, um, when we talk about attracting the best talent, now you really have to be aware of your total compensation. It's not just. Salary. It never was just salary. It's, you know, what are the, what are the benefits of working at the organization for the individual training is something that the Gen X's and Gen Z's want.

So, um, there's another reason to do training, [00:20:00] but, you know, what's in it for the employee. And then how does that tie to where we want to go and how we want to grow? Um, so I think that the succession planning just becomes all that more Important and you can't really do succession planning without performance management Because I don't know if mike and and brian are high potential unless I have an evaluation And a and a good solid appraisal of their work then I know Where can they go in my organizational chart as people move on or move up?

Mike Vannoy: That's a great one, Mary. It's a, as you're saying it, it's, I don't think it's necessarily intuitive of all the things you think about. Okay. You cross this 50 employee threshold. What are the things you should be planning for succession planning? I just, I can see how that can feel like a big company thing to do, but man, if you're a 75 100 person company and you lose.

a really [00:21:00] key employee. Massive impact, right? Not that it's not when it's a smaller company, but it's just, it's a different dynamic. So you need it for productivity to protect against a potential loss. But how do you also, how do you retain that institutional knowledge and move people into roles? And maybe, for this job, It's not just a climbing of the ladder.

Maybe we need a tour of duty here and a tour of duty here to give them the experience that they need to go there. Right. So thinking that stuff through makes a whole lot of sense, Brian, what would you add Yeah, no, to the succession planning?

Brian Shenker: I think as a general concept, you know, kind of not just giving lip service to HR and really embracing, uh, the HR, you know, function here, right? I know, you know, Mary and I have each seen, you know, companies as they grow, you know, they might have an HR department, but. You know, the HR department doesn't have much power and they're, they're somewhat ignored and [00:22:00] it's more like a checking of the box, so to speak.

And I think that, uh, you know, here, you know, as you get bigger, there's a lot more delegation that has to occur, right? So the owners who wanted their hands in. You know, every, uh, you know, uh, you know, employment decision, you know, you're going to have to back away a little bit on those things. And, you know, trust the people who are going through these processes, right?

That, you know, trust that. You have a process for investigating a complaint and someone's going to do that. And that, you know, when you're lining up to terminate someone, right, there should be a process and, you know, making sure it's going to be a lawful, you know, compliant termination. And so I think oftentimes those things can't occur unless, you know, the, the owners and those running the company get, you know, give HR the opportunity to do that.

And I've seen a number of times. You know, uh, somewhat, uh, interfering with that and, [00:23:00] you know, not only does that, you know, result in cultural issues within the organization, but a lot of compliance challenges.

Mike Vannoy: Yeah. Great guys. Let's, let's move on. Uh, and I'll guide everybody else following along online. It's a page 13. In the ebook, we get a whole page of just, these are major, uh, federal laws. Uh, and yes, they're all federal. We do take a nod to state laws. Cause man, that list is just exploding, but there are some new federal laws.

When you cross this 50 employee threshold that I think are really important to unpack, uh, each of these could be its own one hour episode. So we'll, we'll try to get through them here in our remaining time. So. Uh, FMLA, Family Medical Leave Act, Affordable Care Act, ACA, ACA reporting, uh, uh, a nuance on the ACA, Form 5500, Affirmative Action Plans, uh, News Alert, a new president just sent an executive order that's going to blow that one up on us since this thing went live.

Uh, we'll talk about that, EEO reporting, and then just how [00:24:00] should we be thinking about state laws. So. But Brian, let's, let's let you start as our legal expert, uh, with maybe family medical leave act for the, for the employer who has just crossed the threshold for the first time. What do they need to know?

Brian Shenker: Right. So let's first talk about eligibility, right? And if you're going to be covered, uh, so to be a covered employer, you need to have, uh, 50 or more employees within a 75 mile radius. Uh, so that means, you know, if you have 25 employees in California and 25 in New York, you're not going to be subject to it.

Uh, but if you have them within that 75 mile radius. Now you have the FMLA to deal with. Uh, employee eligibility on the other side, uh, requires employees to be employed for 12, uh, 12 months of service, working 1, 250 total hours in the last 12 months. And if they meet that, then they're entitled to [00:25:00] 12 weeks of unpaid leave.

Um, and so, uh, You know, getting to, you know, the type of leave, right, uh, eligible employees get 12 weeks, uh, of unpaid leave in, you know, that 12 month period, uh, I believe that's increases to, I believe it's 26 weeks to care for an injured service member, uh, you know, and these, uh, this leave can be taken for a specific family and medical reasons, right?

Of either, you know, the employee, uh, or their family. Things like, you know, birth or adoption of a foster care child within the first 12 months, uh, the employee or the employee's family member's serious health condition. Uh, and so, uh, there is a whole process that the company needs to set up in place for requesting leave, uh, for, you know, determining and certifying if leave comes under the, uh, the FMLA, [00:26:00] and then notifying the employee.

So there are a lot of steps, right? So typically. The FMLA will be triggered by an employee request, right? And there are no magic words, and this is what we were talking about earlier, when you need your, uh, you know, managers to be on the lookout for these types of things, right? Uh, because this could be the employee's own health condition.

It could be, you know, an absence due to, you know, uh, Uh, you know, a child placement or it could be, um, you know, frequent absences or tardiness due to a family member's health issues. Uh, so some, you know, the employee does not have to mention FMLA. So it's important that, uh, managers understand, you know, what serious health conditions are, uh, and what things can be that come up under this. So, you know, and then there's certainly complications in terms of, uh, compliance where, uh, you know, employees don't have to take their, a [00:27:00] 12 week block of leave. Uh, it can be intermittent leave, um, which means, you know, you have situations where, you know, an employee can be there, um, you know, four days a week and out one day a week.

Uh, and so there are lots of things that need to be managed, uh, as part of this. Um, you know, not to mention, uh, the potential for the leave to become paid. So as I mentioned before, FMLA leave all alone, it's unpaid, but, uh, an employer can require that employees use paid leave, uh, during that FMLA leave. So if, you know, the employee has available PTO, they can be, um, you know, uh, they can, you know, like to use that,

Mike Vannoy: So, so I think all three of us have done entire one hour episodes on this topic would encourage, uh, I'll ask my team to include in the show notes, uh, for whichever YouTube or our website or otherwise. [00:28:00] Uh, that you can drill into and double click on that on FMLA. If you, if you want, I think the big thing here, if you're new over the 50 employee line, uh, it's to know a couple of things as an, if you, if you must comply, then go down the rabbit hole and figure out which employees are eligible, what they're eligible for.

The biggest thing you need to understand is if you have more than 50 employees within a 70 mile radius. Then you must comply. Um, uh, tell me if I got this right. If the federal government and it's and it's thinking here is maybe, maybe you're a, maybe you're a 150 employee or employee. Maybe you have 200 employees, but you have 10 locations spread all over the place.

And so just a few employees each, if you were to lose any one employee, it could be devastating. You would have a need to backfill them. But if you have that many employees geographically together, [00:29:00] it's reasonable to assume you can backfill folks, right? And so it's not quite as punitive. And that's kind of the rationale of the law.

Mary, do you agree with that?

Mary Simmons: Yeah, I I would say so i'm not sure they were Thinking, you know, how easy it is for the employer. But, but yes, I think, I think that that's it. And, you know, listen, we talk, we're talking a lot about productivity because it's important when you're a company that big paying that many employees, you know, productivity is important, right?

We need the profits to stay afloat and. The leaves, you know, can, you know, uh, be difficult for organizations because although you could bring a temp person on to replace the person, you shouldn't be replacing the person because they come back to the same or a very similar job. So, you know, if, if you have.

If you're a 50 employer and you have five people out on FMLA, [00:30:00] that can be very difficult to keep your productivity where you had it. So, you know, as you, you know, that's something that every, every employer of this size has to think about. How do I keep productivity where it needs to be? Um, given that now there's more leaves.

Um, that, that the employees can take and, and we've talked about other leaves, um, on shows and, and Brian has with you, uh, sick leaves are increasing, um, you have the pregnancy act that we talked about. So there's a, there's a lot of leaves that employees can take, thank goodness. But the flip side of it is how do the employers stay productive.

Mike Vannoy: Is there anything else? So if I'm an employer, I'm listening here, Hey, I'm about to cross over this 50 mark or I just crossed over the 50 mark. Uh, you know, we encourage you go down this rabbit hole and learn what you must know because you've got to [00:31:00] comply. But anything else about the employer? Uh requirement so more than 50 employees within a 50 mile radius Anything around industry or full time equivalency doesn't matter if they're part timers.

Brian Shenker: Nope. So, so not here. We'll, we'll get to that when we, when we get to, uh, the ACA. Um, but here, you know, the other, you know, main, uh, employer obligation is to restore the employee to the same or an equivalent position, uh, upon leave, uh, upon return from the leave rather. Um, and so that's, uh, certainly a big one.

And, you know, again, that goes to kind of what Mary was, uh, speaking to that, you know, these people are going to be out for some period of time and to maintain Um, production, you need someone to step in. So, uh, you know, when you get to this size, you know, cross training employees, having them shadow other workers to understand, you know, other related roles, you know, could be very useful, you know, when, you know, a [00:32:00] key employee takes leave.

Mike Vannoy: Yeah. All right punchline here. If you've got more than 50 employees part time or full time doesn't matter within 70 miles of a single place of business You're gonna have to comply with uh The family medical leave act fmla, uh, do a deep dive here. Uh, because there's a lot to note There's a lot of nuance here of uh of how you administer this leave And how this may or may not play nicely with your local and state laws and what leave types Uh, uh your other leave types you must comply with paid or otherwise brian.

Mary Simmons: would add, Mike, don't forget it. Now you need a handbook policy for FMLA and it should, it should be included. I would post it in an employee area.

Mike Vannoy: Yeah, we just need to get a big neon hat for you that says Employee handbook flashing all the time because it's true, right? Cause every one of these, every policy, every procedure, every best [00:33:00] practice, uh, uh, certainly every law that you've got to comply with needs to be in a handbook. So good, good, good catch, man.

Uh, Brian, you mentioned, uh, the ACA, the Affordable Care Act. Uh, just take, so a lot of people know, but just give us a brief definition of what it is and. A little bit different in our definition here of, it's still a 50 employee trip wire, but there's something different about these 50 employees.

Brian Shenker: Exactly. So before we get to the employee issue, we'll start with, you know, what, uh, the basics are of the ACA, and really the main part of it's the employer mandate. so if your company is an applicable large employer, an ALE, again, we'll get to how you determine that. Then you must provide health benefits to workers, that, you know, are both, that meet, you know, minimum value and affordability standards, or else you will face, tax [00:34:00] penalties, if such coverage is not offered.

so obviously it's very important to understand these requirements and to understand if your business qualifies as an ALE. and you need to get ahead of this, right? This isn't one where you want to find out after the fact, Oh, we, had 50, you know, full time equivalents. You need to be measuring this, understand when you're coming up against it so you can plan.

Um, so that brings us to who has to comply. So the majority of the ACA's requirements apply to businesses with 50 or more full time equivalents. Um, so again, right, as we mentioned in the FMLA, that just counts employees. Doesn't matter if they're part time or full time. Uh, but here, we need to look into that, uh, and there is a calculation, uh, that, that follows.

So, uh, essentially, the steps to determine if you are, uh, subject to ACA, [00:35:00] You need to count up your full time and part time employees in the following way. So first, count up all your full time employees who are working an average of 30 or more hours a week in a given month. Right? So, for each month, you determine which of these employees are working those 30 or more hours a week, and that's going to be your full time figure.

Second, you need to count your full time equivalents. So, for each month of the last calendar year, you'll add up all the non full time employees up to a max and add their hours of service up to a maximum of 120 hours per employee per month. And then we divide that by 120 and we get our full time equivalents per month.

Uh, then we add those full time equivalents and the full time employees together, uh, for the last 12 months and we divide by 12 and we have our average number [00:36:00] of full time equivalents per month. And if that is 50 or greater, um, you know, for the prior year on average, then you're going to be subject to the employer mandate.

I know that's a lot, but, you know, employers should really look into, you know, understanding how to count this because, you know, there are significant penalties for, you know, failing to offer coverage to employees, uh, that should have been, you know, offered affordable and minimum

Mike Vannoy: the entrepreneur who's driving their car, listening to this podcast, they thought, man, that's super mathy, um, netted out. So unlike FMLA, if I have more than 50 employees within a 70 mile radius, it doesn't matter if they're full time or part time, I've got to comply with FMLA. Uh, g gimme the give, gimme the grossly oversimplified definition, the non-lawyer version.

Mary, I'm gonna have to pivot to you 'cause Brian won't be able to help himself here. , what's, [00:37:00] what's the Yeah, I, I like,

Brian Shenker: Right. So, I mean, the basic premises, right? So you could have, you know, 50, you know, 40 part time employees and 10 full times. Um, and depending on the hours that these people work, you, you may or may not hit, uh, ALE status. So I think it's, um, you know, it's where you don't want to assume you don't meet it, but I think you can certainly have more than 50 employees and still not be in ALE.

So that's the other side of this, right? You hit 50 employees under the FMLA within a 75 mile radius, you're subject to that. Here, even though you might have 50 or 60 or 70 employees, you really have to run through this calculation because don't assume that you have to offer coverage. There may be reasons an employer wants to offer, you know, health coverage, but it may be, hey, based on, you know, the prior year's averages, we're not subject to it [00:38:00] this year.

You know, we don't see tremendous value in offering health insurance, so, you know, it could be a big savings. Um, yeah, so that's why it's really important, you know, forgetting about the math, just understand that even if you have, you know, over 50 employees, you may not be required, uh, to comply with, you know, the employer mandate.

Mike Vannoy: punchline FMLA more than 50 employees within 70 miles. You got to comply ACA It the answer is it depends and there's a but there is a black and white formula It might not be super simple if you're not used to it for those of you who are used to it. It's not that hard It's pretty straightforward if you have Any if you have 50 employees, you should find out the formula And do the calculations to see if you have to comply because it's possible to have more than 50 employees And not have to comply It's not really possible to have fewer than 50 root employees that have to comply.

Is [00:39:00] that fair to say?

Brian Shenker: That's fair to say, yeah.

Mike Vannoy: Yeah, so so I think the punch line here is is know the rule know the formula do the calculation Mary, what's your guidance here on? Um, dare we say newcomers to, uh, the ACA

Mary Simmons: You know, I, I'm going to add that I think offering medical benefits is probably one of the most compelling reasons to attract employees and the best employees, right? Um, to your organization. Everybody needs medical coverage. Not everybody can get it from their partner. So offering the medical benefits is, um, I think an investment in the best talent that you can get in your organization.

Mike Vannoy: and I know it's a divestiture, but, uh, um, in today's war for talent, I mean, uh, employers, I don't, I don't think the employees were ever like [00:40:00] so cold blooded. They're like, screw their employees. I don't have to, I'm not going to. Uh, but there is realities of supply and demand of labor. And businesses operate generally operate on as thin a margin as they can to survive and compete against their competitors and still have some profit left over.

So in the past, I think this wasn't necessarily even an option for so many people. Um, but I feel like that, that dynamic has just changed so much where even small employers kind of expected if you, if you can offer benefits, then. You know, you're not going to be able to get staff and therefore they're baking the cost of those benefits Into their goods and services, right?

Mary Simmons: Correct.

Mike Vannoy: Yeah Okay, um brand anything else on ACA before we talk about its follow up its partner ACA reporting

Brian Shenker: Uh, no, I think we can move on to that,

Mike Vannoy: All right, let's talk. Let's so so there's the Affordable Care Act. We talked basically what that is [00:41:00] What is what is ACA reporting?

Brian Shenker: Right. So under the ACA and reporting, we're mainly, uh, looking at, uh, form, uh, IRS form, uh, 1095. Um, and so basically any ALE that, you know, that's offering, you know, full time employees, you know, health coverage as they should, uh, you know, they need to re, uh, report to the IRS. information about, you know, coverage to employees so that the IRS can determine if the employer may or may not owe a penalty, uh, for, you know, not offering coverage.

Um, so there's. Uh, you know, there's also, you know, 1094 C, which, uh, is, you know, one form per tax ID and it requires information, uh, you know, such as the number of people employed and, you know, how many, um, You know, people are receiving [00:42:00] coverage. So you know, there's, you know, there's a lot of information that needs to be filed with the IRS.

There are also some states that will require, uh, you know, uh, tax filings with respect to ACA reporting. Um, Yeah. Some of those states include Washington, D. C., California, New Jersey, and I believe Massachusetts as well. So be careful that your state may have additional reporting requirements. And really going hand in hand with these reporting requirements are notice requirements to employees.

You know, there's the notice of marketplace coverage options that's provided to all new employees. Um, you know, summary of benefits coverage and, you know, a lot of this stuff is, you know, may come from the health insurer, uh, but as the employer, you should. [00:43:00] Um, and of course, you know, these IRS filings come with, you know, significant penalties, you know, if, you know, there are filings late or not at all.

Um, so that's why you certainly want to know your whether you're a ALE subject to these requirements, because it's one issue not to provide the coverage and another issue not to file in any of these. Required forms and you're going to get hit with penalties on both ends. So, uh,

Mike Vannoy: Mary, it's my sense that this is the place where maybe employers get in more trouble than just the law itself, which does either mandates mandates that I do or don't, uh, provide health benefits to my employees. I mean, some people maybe get that determination wrong, but I think for the most part, people get the determination, right?

And then they, and they, they're, they're not, they're not putting together their own health plans or using brokers who are going to help them provide. Uh, compliant, uh, [00:44:00] health plan packages. Um, but they really screw up sometimes when it comes to the re ongoing reporting requirements. And this is where people get fined and get in trouble.

Am I thinking about that? Right.

Mary Simmons: Yeah, absolutely. I mean, I, listen, I've been doing this for a really long time and when I listen to Brian, um, I get the feeling that I would assume some of our listeners do, which is, yeah, I really do need a real HR person, right? It's, it's, you know, I, I don't. It's not meant to be difficult. It's meant to have a process.

Um, so that, you know, employers follow the law, right? And the only way to ensure that is, is to have this process where they file these forms, but it's, it's not easy, especially when, uh, An employer, no matter how many employees they have and and at this at this juncture, we're [00:45:00] talking about 51 to 149. they have a lot to do.

Everybody's busy and they have their own specialty. So, to me. If what they listen to with Brian didn't convince everybody that what I said at the beginning that we really, we really need a, a, a strong HR foundation and an expert in that seat, you know. I don't know what else could, could help you come to that conclusion.

Mike Vannoy: Yeah. I'm going to move us to the next one. It's another reporting requirement. Um, it's the form 5, 500. Uh, I won't try to explain it, Brian, tell us what the hell form 5500, and why should people care?

Brian Shenker: sure. So this form is typically, uh, is filed by, you know, businesses that sponsor retirement plans. Uh, and, you know, hold plan assets and they need to file these, but [00:46:00] it's also a form that may be required for certain employer sponsored, you know, health and welfare plans, including medical, you know, dental, life insurance, and, uh, you know, and other fringe benefits.

Uh, and so. You know, this is an annual reporting requirement to the IRS, and it basically provides the government with details, uh, about, well, in the case of a, you know, retirement plan, you know, the plan's financial condition, you know, investments, and operations. Um, but again, you know, if, uh, you have, for instance, you know, a medical plan, and you have more than a hundred participants, Then, now it goes outside of the retirement plan area and now, you know, as the employer, I will have to file a 5, you know, 5500 form with respect to the, uh, you know, the, the medical plan we're providing.

Um, and so again, this applies to, you know, most public and private businesses again, [00:47:00] uh, especially, you know, providing plans to a hundred or more employees. Um, you know, there's a condensed version, a shortened version that applies to plans with fewer than 100. Um, and then there's also a, a, a form, it's called the 5500 EASY, uh, form, which I suppose, uh, is more straightforward because that applies if you only have, you know, the owner.

But at this point, you know, we're way beyond that. We're at the point where you're going to be filing either the short form or the full form, depending on the number of employees and, you know, what type of plans you may have,

Mike Vannoy: Well, so just to be clear for everybody, form 5500, if you live in say a state that has, which is almost half the states in the country, and now the list is growing, that mandate retirement plans. Uh, you know, it varies a little bit on size of company, but increasingly it's going to smaller and smaller companies that states are mandating you need to provide retirement plans, uh, [00:48:00] for your employees.

I think everybody kind of gets the punchline here, uh, that, uh, social security might not be everything it's cracked up to be is younger generations out of the workforce. So the states are trying to provide a safeguard for the employees of the businesses. In, in their state. So, so that said, if you have a state mandated plan, could even be an IRA, right?

Uh, if they're, if you're deducting money outta your employee's accounts for, and you're the plan sponsor or you're part of a state plan, you gotta file a 5,500. I know in the case of Lake Sure 401k, we file that, uh, uh, we, we, we provide that 5,500 on behalf of the client. I think most employee most. Retirement plans, the Fidelities, the JP Morgans, they provide this service, but it is something that the business owner still needs to be aware of, right?

Brian Shenker: Certainly, because, you know, there are penalties for, you know, uh, filing, you know, late or not at [00:49:00] all. And you also, you want to make sure it's accurate. There are penalties for, you know, inaccurate information, especially, you know, willful or omitted information. Uh, and, you know, just to note to employers, right, this will typically be due.

The last day of the seventh month after the plan ends. So, if you're on a calendar year plan, then it would be due, you know, every July 31st.

Mike Vannoy: Okay. Um, I'm going to, I would talk EO reporting. I'm just looking at the clock here. Let's just spend a minute on EO. Then let's, let's talk about our last point, uh, on affirmative action, because I think we're going to need a whole new episode on this based on just the president's actions last week. So Mary, but what is it that. Okay. I'm over 50 employees. What do I need? Why do I care? Why do I, why, why do I need to be concerned about EEO reporting now versus when I was a smaller organization?

Mary Simmons: Well, mostly because there's a federal mandate that at a [00:50:00] hundred employees, you have to fill out the EEO1 report. Um, and they just changed it recently, which is a good thing. Um, and now there's a portal to go into, and this is something we do all day, every day, um, for clients. In the correct time frame. Of course, it's not every day.

Um, but, you know, it can be confusing. It's gathering a lot of data. Um, and, and, you know, handing it over to the government. So, um, you know, is your organization. Uh, you know, keeping that data. Where is that data? How do you collect it? When do you collect it? How do you put it in the portal? There's there's quite a few nuances To it that if if an employer never did it it would be confusing I also feel like I think a lot of people have heard of fmla family medical leave act But the eeo1 reporting when I get on calls with clients Uh that are north [00:51:00] of 100 employees I'd say 50 No, about it.

So I don't, I, I'm not quite sure why that is, but that happens with a lot of employment laws that, you know, business owners or the C suite are focusing on growing the organization. They don't have the expertise or the wherewithal to handle the HR function. And this is just. Another one of those those items that has to be done.

It's mandated by the federal government, right? So all employers of a hundred plus need to do it.

Mike Vannoy: I never thought about it, but that makes sense. You know, the, we know small businesses get in trouble. They don't know what they don't know. The, the, the entrepreneur, the founder, the owner of the business is hands on in the business, wearing many hats, and they just don't know the HR laws. I think it's. Fairly well socialized this 50 employee mark that, okay, now there's a bunch of new stuff. And I think you just hit a natural point in your organization. It's like, man, I got, I just gotta have somebody who can help me with [00:52:00] my people stuff, whether it's the, whether it's the job posting, the job descriptions, the interview, the performance management, the, I mean, I think there's this natural inertia that happens and probably now we forget about crossing that a hundred employee threshold, right?

That the new requirement, Brian, anything else you'd want to add on EO before we close on affirmative action?

Brian Shenker: Well, I think, uh, you know, Mary, Mary covered it. I mean, I agree. There's the demographic, uh, data sometimes seems simple, but yeah, you, you, you've got to really understand how to do this the right way and how to report it. Um, it's not, you know, just, you know. You have data here. It is, you know, it's a little bit more, uh,

Mike Vannoy: All right, let's let's so let's take this last one and I think we really do need to schedule sometime in the near term as we learn a little bit more so we can give good at least as concrete as possible guidance to businesses around affirmative action. Um, let's start with. Uh, you know, let's go backwards 10 days here, [00:53:00] uh, and you know, two weeks in, in, in, before, before the, uh, executive order was signed, what was the law for affirmative action?

Um, and then we'll start unpacking a little bit. What's changed and maybe how we should be thinking about this right now.

Brian Shenker: sure. So, uh, you know, affirmative action plans. So, you know, the, we speak of the office of federal contract, uh, compliance programs, the OFCCP, uh, is the big agency here, uh, which again, going back 10 days, right? They require, you know, certain government, uh, contractors and subcontractors to develop and maintain affirmative action plans.

Um, typically, these are developed within the first, uh, I think three or four months of, uh, the commencement of a contract. Uh, they're, they're updated periodically, um, and there are three main laws that we look at, you know, [00:54:00] federally that require, um, you know, certain, uh, affirmative action plans. So again, stepping back in time, uh, You know, to last year, we'll say there's executive order 11246, which is probably, um, the main one here, which is, uh, affirmative action plans for, you know, uh, where there are 50 or more employees and a government contract of, you know, 50, 000.

Um, then you have Section 503 of the Rehabilitation Act, which deals only with, uh, individuals with disabilities and similar, 50 or more employees and at least 50, 000 in government contract. Uh, then lastly, you have the Vietnam Era Veterans Readjustment, uh, Assistant Act. And again, that supplies, uh, it requires the Firm of Action Plans if there are 50 or more employees and a government contract of 150 or more.

150, 000. [00:55:00] Um, so that's how things were. Um, and just to be clear, you know, the, the, uh, executive order 11246, right, that applied, um, to, uh, you know, to a lot of employees here and, you know, it resolved around, uh, race and gender, right, right, Mary? Um, and so. Uh, enter, you know, this, uh, this past week, President Trump, signed an executive order, entitled, Ending Illegal Discrimination and Restoring Merit Based Opportunities.

and basically the EO the, executive order's stated purpose was to, you know, end illegal diversity, equity, and inclusion, essentially together called, you know, DEI, as we know it, and so, you know, [00:56:00] the, executive order does not change existing law regarding, you know, discrimination in contracting, employment, or otherwise.

So I think it's real important. to, mention that, right? I think instead, you know, the administration, based on this executive order, is looking to target organizations that, you know, may violate existing anti discrimination laws in their employment practices. Um, and so, I think the key issue here based on, you know, this, uh, recent executive order is, uh, you know, there's issues certainly with DEI practices for private employers, uh, based on what the executive order says.

And the executive order also revoked executive order 11246, which was the primary, uh, executive [00:57:00] order on contractor affirmative action, uh, plan obligations. Um, so, you know, I, I think as you mentioned, Mike, we certainly will need to follow this up, you know, as, uh, as there's more guidance and we understand, you know, the executive order and, you know, what's coming next a bit more, um, uh, but, you know, basically, um, you know, the executive order bars federal contractors from considering race, sex, Uh, preference, you know, sex, sexual preference, religion, or national origin in their employment, uh, procurement, and contracting services.

In quote, ways that violate the nation's civil right law. Um, so, you know, we'll have to monitor this. I, I think, uh, employers should stay tuned, understand there, you know, there is some changes [00:58:00] with respect to some affirmative action plans. Um, but again, be able to be very clear. This does not eliminate the OFCCP as an agency or take away any, you know, contractor non discrimination obligations.

Um, you know, so I, I think, you know, that's certainly important. Um, you know, there, there is part of the executive order that states, you know, certain new provisions will be put into future contracts by the government. You know, we will wait to see exactly what those look like. Uh, so certainly, you know, guidance would be to review new contracts, um, for, you know, relevant EEO and DEI terms.

Um, you know, and private employers should also look at their own DEI programs, uh, and review their employment practices to ensure, you know, they comply with, you know, non discrimination statutes.

Mike Vannoy: that's really what, and Mary, I want your input here. Cause I think, so I [00:59:00] think, whether you're a really large employer or a small one, if you are, if you do a significant amount of work with the federal government, it's a, the procurement process is fairly legalistic and, and you have to understand that process just to, you know, to play.

Right. So I think. I think those large employers, well, over 50 employees doing government contracts, they probably are pretty well versed here and don't need our help. It's probably those that are now over 50 employees, um, that implemented their own DEI, what they consider to be best practices. And we're not taking any sides here.

We just want to give the best practical advice. So whether you love or you hate this executive order from, from president Trump. We just want to give the best legal advice we possibly can. And sometimes not even legal, just the best practice, Mary, what, what would be your guidance [01:00:00] for an employer who had their own, just DEI policy that they, you know, they're trying to do right in the world here in, in how should they be interpreting this executive order?

Mary Simmons: I Mean, I think on its on its face DEI Speaks to just staying it, you know adhering to EEO see practices and best practices, I think Where organizations may go awry, um, is when they don't hire, promote or give equal, um, conditions of employment to individuals based on business reasons. So, so if we always stick to, you know, the best performers.

Get the biggest raises. It's merit based, it's performance based and or it's business based. And that's how we're making our employment decisions all the way from ads [01:01:00] through termination. I think that's the best case scenario for employers. Laws are going to change and and go both ways. And this law can change.

I think what employers just need to stick to is making fair, consistent decisions, uh, based on business reasons in, in their employment practices and everything will be great. You do want to be equitable. You do want diversity in your organization and you certainly want inclusion. You don't want to leave people out because that's a bad culture.

Even if, even if we're not talking, um, Harassment, et cetera. It's, it's utilizing those practices in an inconsistent manner that, that I, I believe, uh, some of these new, some of this new legislation is trying to

Mike Vannoy: This one's going to get a lot of attention real soon here. I think there were so many executive orders signed in such a short period of time that a lot of stuff has gotten buried. Um, [01:02:00] we're going to have to unpack this one, but I think your advice is spot on, Mary. It's like, first of all, just don't discriminate, which is consistent with Title VII Civil Rights Act, and just follow the law.

Don't discriminate, uh, and, uh, make sure that your job posting, your job descriptions are clear. Your job postings are compliant. Your interview process is consistent for all applicants, no matter where they come from and what they look like. And that you just have good, consistent process, good documentation, really just HR best practices, uh, and you're probably fine here.

Um, if you do have some specific DEI policies, programs for whatever your reason, uh, it's probably wise to take a hard look at that given this executive order, we'll, we'll have an episode on this topic, uh, very soon. So, uh, Brian, Mary, always love talking to you guys. Get smarter every time I do anything you want to add in closing.

Mary Simmons: you know, I, I'll just go back to [01:03:00] what I said at the very beginning, which is at this point, employers need a real HR function with process with procedures, uh, and, and a lot of compliance. And we only unpacked some of it, you know, Brian and I could probably talk for eight hours on this.

So there's a lot there. I encourage employers to get that real HR function in place.

Mike Vannoy: Brian, anything you want to add?

Brian Shenker: Yeah. Look, I echo that and, uh, look, we, we don't operate based on fear, but, you know, we, we put these things out there. I mean, there's obviously a lot and, you know, an employer who wants to comply with everything, um, you know, Look, you know, there, there is a lot there. And unfortunately, in the world of employment law, you know, substantial compliance can still leave you, you know, with a big check to pay at the end of the day.

So, uh, it's, you know, It's building up, you know, an HR, [01:04:00] uh, framework here and, you know, not going at it alone. You can't be flying by the seat of your pants when you're at 50 to 149 employees. You really need to have, um, processes in place from, you know, onboarding through termination, you know, and everything between.

Mike Vannoy: Yeah. And for me, it's just, there's something about going for, you know, crossing this 50 employee threshold. There's like two big, big, big things happen. Number one is there are new laws you just must comply with. And certainly that was intentionally a big focus of today's conversation. It's just also true that now you are, you have employees that work for you that probably aren't family members or friends of friends.

Uh, you're, you're interacting with, dare I say, strangers who become part of your, your work family. And that's a new dynamic. You're having supervisors and managers who manage these things. And now. The, you're not the cult, the personality for controlling everything that is the culture of the business. And so how's the, what is the culture like?

What are the processes [01:05:00] like, are these managers actually following processes, uh, in best practices? So, uh, I think it's, it's this it's. Inserting a layer of management and supervisors that changes the dynamic so much in an organization. And at the exact same time, when boom, there's a whole bunch more laws you got to comply with.

This is not an easy threshold for businesses to cross, to get over this 50 employee mark. So, uh, invite everybody. Sure software. com go to the resources section, download the ebook next episode. We are covering our last, uh, uh, episode on this topic, uh, growing 150 to 500 plus employees. What are the challenges?

What are the systems needed? What are the laws that you've got to be complying with when you're in this phase of growth? Brian Barry. Thanks again,

Mary Simmons: Thank you,

Mike.

Brian Shenker: Thanks, Mike.

Mike Vannoy: everyone else for joining today. Thank you for letting us be part of your mission to grow. [01:06:00]