5 Most Important HR Terms

5 Most Important HR Terms for Small Business Owners to Know, Understand, and Use in Their Business

You don’t have to have an HR department to understand and implement HR concepts. By no means are these terms inclusive of everything you need to know and take care of as an employer. However, if you master these three, your business reaps excellent benefits.

  1. Employee vs. Contractor

An employee is an individual who performs services for a company, following guidelines for when, where, and how to do the work. The company is responsible for withholding income taxes, report, and make deposits for Social Security and Medicare taxes, as well as pay unemployment taxes on the wages paid to an employee. There are strict reporting and deposit requirements.

A contractor is a person or organization that provides services or goods to a business under a contractual agreement. None of the withholding, reporting, or deposit requirements apply to a contractor.

  1. Exempt and Non-exempt Employees

The difference between the two types of employees is critical for small business owners.

Exempt employees are excluded from minimum wage, overtime regulations, and other protections under the Fair Labor Standards Act.

A non-exempt employee is required to be paid minimum wage and overtime pay for any time worked more than 40 hours per week. There are other guidelines in accordance with the Fair Labor Standards Act, as well.

  1. Background Check

Some, especially beginning small business owners, might think a background check is a silly thing to undertake when hiring people. But consider that you are putting your business – your livelihood – at risk each time you include someone new into your organization. And you don’t have to have an HR department to make it a practice of running a background check.