The Ultimate HR Compliance Checklist for Small Businesses

“Are we going to get in trouble for that?” It’s the thought on everyone’s mind as you scale your business, especially when it comes to HR. 

It’s easy to assume you're covered just because you’re treating people fairly. But in the world of human resources compliance, good intentions don’t protect you from legal trouble. Documentation does. Policies do. Compliance does.

HR compliance isn’t just about being nice—it’s about being right. And in the eyes of the IRS, DOL, and state agencies, almost right can still get you fined.

Whether you’re a founder managing HR solo or a team lead trying to stay ahead of employee paperwork, this HR compliance checklist is here to help. It covers all the HR legal requirements you need to stay compliant, from hiring and onboarding to payroll, employee data classification, workplace policies, and recordkeeping.

In a nutshell

• Employers and HR teams must account for major federal and state regulations and adjust policies if those regulations change.
• Employees have the right to be aware of their rights and relevant company polices.
• Effective HR record-keeping means fewer fines, employee complaints, safety + legal issues.

What goes into HR compliance?

HR compliance ensures that your workplace follows all of the necessary laws and regulations that govern it. That includes at the local, state, and federal levels. 

This protects both you and your business from potential liabilities and infractions. It also ensures that your people are treated fairly across the board. 

Employment laws to follow

Employee labor laws are designed to ensure that those who work for your business are treated with respect and receive basic protections against harm in the workplace.

Some of the most common employment laws that fall under HR compliance include:

• Title VII — Part of the Civil Rights Act of 1964, this prevents hiring and workplace discrimination based on race, color, religion, sex, and national origin.
• Fair Labor Standards Act (FLSA) — This provides standards for minimum wage, overtime pay, record-keeping, and child labor standards in the private and public sector.
• Americans with Disabilities Act (ADA) — This prevents discrimination against those with physical or mental disabilities and allows employees to receive accommodations in the workplace.
• Equal Pay Act (EPA)  — This requires you to pay employees the same amount for the same work, regardless of gender.
• Family Medical Leave Act (FMLA) — This entitles eligible U.S. employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons.
• Occupational Safety and Health Administration (OSHA) — This ensures workers have safe and healthful working conditions free from unlawful retaliation.

Now, what happens if you don’t comply with these laws? 

Why you need to care about HR compliance

HR compliance is non-negotiable. Things can’t slip through the cracks. Whether you have an entire HR department or you’re tackling issues on your own, your company has to be 100% HR compliant.

If you’re not, you may face:

• Fines — If an HR audit uncovers your non-compliance, you can face hefty fines from regulatory bodies.
• Legal issues — Employees can sue your company if their rights are violated and problems go unaddressed.
• Disgruntled employees — Without strong HR compliance and policies that support them, team members can become frustrated with your business, and those feelings can show in their work.
• Reputational harm — If word gets out that you don't have a compliant workplace, you'll have a tough time getting new people to come on board.

Let’s make sure none of that happens, yeah?

Your HR Compliance Checklist

Use the following checklist to make sure that you're accounting for important HR compliance components. 

FYI! Depending on your industry, you may also be subject to super-niche compliance rules. Make sure you check with your HR team to make sure you're not missing anything.

1. Hiring and onboarding

Get started on the right foot from the moment a person first interacts with your company with:

• Compliant job postings — Stick to federal and state-mandated hiring requirements.
• Hiring policies — Follow anti-discrimination policies to ensure fair and equitable hiring.
• ID forms — Collect I-9s and W-4s.
• Offer letters and employment agreements — Distribute them with the proper details and employment terms. 
• Background checks — Follow proper protocols when requiring these of applicants.

2. Employee classification

Different employees require different personnel records, pay, and attendance policies. You need to properly classify them within your HR management system based on:

• Employee compensation status — Are they W-2 workers or 1099? Are they nonexempt or exempt from certain protections?
• Minimum wage + overtime policies — Adhere to minimum wage standards for each state. Ensure overtime-eligible employees are aware of and follow company policies.
• Pay rates and compensation updates — Determine compensation scales for different level employees.
• Attendance policies —  Certain employees may follow different attendance policies based on their classification.
• Timesheets — For employees punching in and out, ensure timesheet policies adhere to compliance rules.

3. Record-keeping documentation

A lot goes into HR record-keeping, but you’ll need maintain documentation on: 

• Policies for hiring — Have detailed, compliant processes and policies surrounding hiring.
• Payroll/tax filing/benefit enrollment/COBRA notices — Clearly inform employees of how they can access this information.
• Disciplinary actions — Keep detailed records of all disciplinary issues and what was done to resolve issues.
• Documentation retention policies — Securely maintain these records until the retention periods pass.

4. Workplace Rights

Labor laws ensure that your employees are entitled to certain protections and rights on the job. You need to account for:

• Anti-harassment/discrimination policies — Make employees aware of behavior that is not acceptable in the workplace.
• Safety standards — Educate employees on the expectations they can have around workplace safety.
• PTO + ADA/extended leave policies — Provide detailed policies about vacation, sick, and prolonged leave time.
• Workplace posters — Place required compliance posters and notifications where employees can easily see them.
• Complaint procedures — Have specific processes that allow workers to file complaints without pushback. 

5. Employee offboarding

Detailed HR policies allow for smooth offboardings, so maintain documentation for:

• Records for final paychecks —  Keep documentation that shows employees received final paychecks and were compensated for unused PTO.
• Procedures for collecting company property — Established specific processes for getting back company laptops, cell phones, and other property.
• Exit interviews — Maintain notes and transcripts from exit interviews.
• COBRA/benefits information — Provide eligible employees with mandatory healthcare notices.

HR compliance FAQ

Q: What are the most common HR compliance mistakes?

• Misclassifying your employees
• Not hanging labor law posters
• Storing incomplete or missing I-9s
• Not updating handbooks annually

Q: How long do I need to keep HR records?

The length of time you're required to keep employee personnel records and other HR documents depends on the specific document. Lucky for you, we have a whole chart that lays out the retention period for major documents.

Q: Do small businesses have to follow the same rules as larger companies?

For the most part yes. Some federal HR compliance laws don't apply until your small business reaches 15-50 employees, but wage, tax, and classification laws apply to all businesses, no matter the size. 

Q: Do I need to hold trainings for harassment or discrimination policies?

It depends on your state. Some states, like California, require businesses to conduct sexual harassment training for employees every other year. Others, like New York, require specific training for those in leadership positions.

Q: How should remote employees access mandatory labor posters?

Since they can't exactly see the posters on the office wall, you should house all mandatory labor posters in a centralized HR management system so remote employees can see them whenever they want. 

Lacking a proper HR department? We got you.

When you’re building a business from the ground up, setting up an HR department probably wasn’t your first priority. And that’s totally understandable. Most small businesses and startups start scrappy, handling HR tasks on the fly.

But once you realize how much is riding on HR compliance—from hiring paperwork and payroll to employee classification and legal documentation, it becomes clear why HR isn’t just a “nice to have.” 

Hiline provides outsourced HR services for your small business, from payroll processing and employee onboarding to compliance audits and full employee lifecycle management. You’ll get access to seasoned professionals who handle the details so you can stay focused on growing your company, not getting buried in paperwork.

We help you stay compliant, reduce risk, and support your people—all for a fraction of the cost of hiring in-house. Let’s partner to build a compliant, scalable HR foundation.