Owners rarely ask which HR function a rule belongs to. They ask which rules apply at their size. So this small business HR compliance checklist is organized by headcount, then covers records, policies, Texas rules and a month-by-month audit calendar. Every legal fact links to its agency page or statute.
What HR Compliance Means for a Small Business (and How Employees Are Counted)
HR compliance for small business means following federal, state and local employment law from the job ad to the final paycheck. Three inputs decide your obligations: headcount, where employees work, and what you offer (a group health plan, contractors, hazardous work). Federal law is the floor; when a state or city rule is stricter, follow it. Headcount sounds simple, but each law counts differently, and several look back at last year:
| Law | How employees are counted | Source |
|---|---|---|
| EEOC laws (Title VII, ADA, GINA, PWFA, ADEA) | Employees on the payroll for every workday in at least 20 calendar weeks of the current or preceding calendar year. Part-time, seasonal and temporary employees count; owners and independent contractors do not. | EEOC |
| COBRA | At least 20 employees on more than 50% of typical business days in the previous calendar year. Part-timers count as a fraction: 20 hours where 40 is full time counts as 0.5. | DOL |
| ACA employer rules | An average of at least 50 full-time employees (30+ hours a week or 130 hours a month) plus full-time equivalents during the prior calendar year. | IRS |
| FMLA | 50 or more employees in 20 or more workweeks in the current or previous calendar year. | DOL |
| OSHA injury and illness logs | Peak company-wide headcount last calendar year. More than 10 employees at any time means you keep logs unless your industry is partially exempt. | 29 CFR 1904.1 |
Illustrative example
HR Compliance Checklist at a Glance: Federal Labor Laws by Number of Employees
If you are asking what HR laws apply to small businesses, start here: this table is the core of any HR compliance checklist for small business. The rows are cumulative, so a 50-person company owes everything in the rows above it too.
| Employees | Law | What you must do | Source |
|---|---|---|---|
| 1+ | Fair Labor Standards Act (FLSA) | Pay at least $7.25 an hour, pay non-exempt staff 1.5 times their regular rate after 40 hours in a workweek, follow child labor rules and keep pay and time records. It covers businesses with $500,000+ in annual sales and any employee engaged in interstate commerce. | DOL, Fact Sheet 14 |
| 1+ | Equal Pay Act | Pay men and women equally for equal work. | EEOC |
| 1+ | Form I-9 | Verify identity and work authorization for every hire. | USCIS |
| 1+ | Federal payroll taxes | Get an EIN; withhold income tax and FICA, pay FUTA, deposit on schedule and file Forms 941 and 940. | IRS |
| 1+ | New-hire reporting | Report every new or rehired employee to your state. | Texas OAG |
| 1+ | OSH Act | Keep the workplace free of recognized serious hazards. Report a work-related death within 8 hours and an in-patient hospitalization, amputation or eye loss within 24 hours. | OSHA, 29 CFR 1904.39 |
| 1+ | EPPA and USERRA | Display the polygraph protection poster and give employees notice of service members' job rights. | DOL |
| 11+ | OSHA recordkeeping | Keep Forms 300, 300A and 301 unless your industry is partially exempt, and post the 300A summary from February 1 to April 30. | 29 CFR 1904.1, 1904.2 |
| 15+ | Title VII, ADA, GINA, Pregnant Workers Fairness Act | No discrimination based on race, color, religion, sex, national origin, disability or genetic information. Accommodate disabilities and pregnancy-related limitations unless that causes undue hardship. Display the "Know Your Rights" poster. | EEOC, PWFA |
| 20+ | ADEA; COBRA | No age discrimination against workers 40 and older. Offer COBRA continuation coverage if you sponsor a group health plan. | EEOC, DOL |
| 50+ | FMLA; ACA employer rules | Give eligible employees up to 12 workweeks of job-protected leave. If you are an applicable large employer, the employer shared responsibility rules and Forms 1094-C/1095-C apply. | DOL, IRS |
| 100+ | EEO-1; WARN Act | File the EEO-1 Component 1 report (federal contractors with 50+ employees and $50,000+ in contracts also file). Give 60 days' notice of covered plant closings and mass layoffs. | EEOC, 20 CFR 639.2 |
State laws often start at lower headcounts. Texas, for example, applies its sexual harassment rules from the first employee (see the Texas section below).
Checklist 1: Before and at Your First Hire (1+ Employees)
Registrations and payroll setup
- Get a free EIN from the IRS; you need one once you have employees.
- Register for state unemployment tax (in Texas, with TWC; thresholds are in the Texas section).
- Set up federal income tax withholding, FICA and FUTA. Texas has no personal income tax to withhold (Texas Comptroller).
Hiring paperwork
- Form I-9: the employee completes Section 1 no later than the first day of employment, and you complete Section 2 within 3 business days of the first day of work for pay. Start on Monday, finish by Thursday.
- Form W-4 on file for each employee (IRS).
- New-hire report to your state. Texas: to the Attorney General within 20 calendar days of the date the employee starts earning wages.
- Offer letter and a job description that records the role as exempt or non-exempt.
Pay and classification
- Employee or contractor? The IRS looks at behavioral control, financial control and the type of relationship. The DOL applies its own FLSA test and proposed replacing it in February 2026, so check which rule is in force when you classify.
- Exempt or non-exempt? Most exempt executive, administrative and professional employees must earn at least $684 a week ($35,568 a year) and pass a duties test. A federal court in Texas vacated the 2024 increase on November 15, 2024, and a DOL technical amendment effective May 15, 2026, restored the 2019 rule.
- Minimum wage: the federal rate is $7.25 an hour, and Texas uses the same rate.
- Track all hours for non-exempt staff and pay overtime at 1.5 times the regular rate after 40 hours in a workweek (DOL).
Posters and notices
- Federal posters per the DOL: FLSA minimum wage, OSHA job safety and health, EPPA and USERRA. Add the EEOC "Know Your Rights" poster at 15 employees, FMLA at 50, and your state's posters (Texas list below).
For who to hire first and how to run the process, see our startup hiring strategy guide.
Checklist 2: Payroll and Wage-and-Hour Compliance
Wage and hour errors repeat every pay period until someone catches them.
- Record every hour non-exempt employees work and do not allow off-the-clock work.
- Breaks: federal law does not require them, but short breaks of 5 to 20 minutes count as paid work time, and meal periods of typically 30 minutes or more do not (DOL).
- Calculate overtime on the regular rate, which includes non-discretionary bonuses (DOL Fact Sheet 56A).
- Keep payroll and time records for the periods in the recordkeeping table below.
Federal payroll filing dates
| Form | What it is | Due |
|---|---|---|
| Form 941 | Quarterly federal employment tax return | April 30, July 31, October 31 and January 31 |
| Form 940 | Annual federal unemployment (FUTA) tax return | January 31 |
| Form W-2 | Wage statement to each employee and a copy to the SSA | January 31 |
| Form 1099-NEC | Contractor payments to each contractor and the IRS | January 31 |
Dates per the IRS. A due date that falls on a weekend or legal holiday moves to the next business day, and if you deposited all taxes on time you get 10 extra calendar days to file Forms 941 and 940.
Penalty check
What Changes at 15, 20, 50 and 100 Employees
The "start preparing" points below are planning suggestions, not legal deadlines.
At 15 employees: Title VII, ADA, GINA and PWFA
- Written anti-discrimination and anti-harassment policy with a clear complaint path.
- A reasonable accommodation process for disabilities and for known limitations related to pregnancy, childbirth or related medical conditions (the PWFA took effect June 27, 2023).
- Consistent, job-related hiring criteria, with hiring records kept for at least 1 year.
- Start preparing at about 10 to 12 employees, since EEOC coverage can rest on the prior year's count.
At 20 employees: ADEA and COBRA
- Review job ads, promotions and layoffs for age bias against workers 40 and older.
- Severance releases from workers 40 and older must give at least 21 days to consider (45 in a group layoff) and 7 days to revoke (EEOC).
- With a group health plan: give the COBRA general notice within the first 90 days of coverage, and the election notice within 14 days after the plan receives notice of a qualifying event (DOL).
At 50 employees: FMLA and ACA
- FMLA policy, poster and notice process. Employees are eligible after 12 months of service and 1,250 hours in the prior 12 months, at a site with 50 or more employees within 75 miles (DOL Fact Sheet 28).
- Run the IRS large employer test: for each month of last year, add full-time employees to full-time equivalents (part-time hours, capped at 120 per person, divided by 120), then divide the year's total by 12. At 50 or more you are an applicable large employer.
- Start tracking part-time hours at about 40 employees.
Illustrative example
At 100 employees: EEO-1 and WARN
- File the EEO-1 Component 1 report when the EEOC opens each year's collection. When we checked in September 2026, the EEOC had not yet posted dates for the 2025 collection.
- WARN covers employers with 100 or more employees excluding part-timers, or 100 or more who together work at least 4,000 hours a week (20 CFR 639.3). Plan layoffs with the 60-day notice in mind.
Our guide to HR outsourcing for small business uses these same milestones to decide when outside help pays off.
Recordkeeping Checklist: What to Keep and for How Long
How long to keep employee records depends on the record. These are federal minimums; when a state requires longer, keep the longer period.
| Record | Minimum federal retention | Source |
|---|---|---|
| Form I-9 | 3 years after the hire date or 1 year after employment ends, whichever is later | USCIS |
| FLSA payroll records | 3 years | DOL Fact Sheet 21 |
| Time cards, wage-rate tables, work schedules, pay additions and deductions | 2 years | DOL Fact Sheet 21 |
| Employment tax records | At least 4 years after filing the fourth-quarter return for the year | IRS |
| Applications and other personnel records | 1 year; for an involuntarily terminated employee, 1 year from the termination date | EEOC |
| Records tied to a discrimination charge | Until final disposition of the charge or any lawsuit based on it | EEOC |
| OSHA 300 log, 300A summary and 301 reports | 5 years after the end of the calendar year they cover | 29 CFR 1904.33 |
| Medical information | Separate, confidential medical file, never the personnel file | EEOC |
Use a three-file setup for each employee: a personnel file, a confidential medical file, and an I-9 binder kept apart from both. USCIS recommends keeping Forms I-9 separate from personnel records to make an inspection easier.
Policies, Handbook and Training Checklist
Written policies tell employees the rules and show that you took compliance seriously. Most small businesses should document these at any size:
- Anti-harassment and anti-discrimination policy with at least two ways to report a problem
- Timekeeping, overtime approval and a ban on off-the-clock work
- Pay schedule with designated paydays
- Leave, including FMLA once you reach 50 employees
- Safety, injury reporting and workplace violence reporting
- Confidentiality and technology use
- Discipline and separation steps
- A signed acknowledgment for each policy
As a best practice, train managers once a year on handling harassment complaints and on timekeeping basics. Texas employers can check what each written policy should say in our guide to Texas employee handbook requirements.
Texas HR Compliance Checklist: State Rules on Top of Federal Law
Texas employers follow the federal rows above plus these state rules, checked against Texas agency pages in September 2026:
| Texas rule | What to do | Source |
|---|---|---|
| Pay frequency | Pay non-exempt employees at least twice a month and exempt employees at least once a month. Designate paydays and post them; if you don't, paydays default to the 1st and 15th. | TWC, Labor Code Sec. 61.012 |
| Final pay | Discharged or laid off: within 6 calendar days. Quit or resigned: by the next regularly scheduled payday. | TWC |
| Wage claims | Employees can file a Payday Law claim with TWC up to 180 days after the wages were due. | TWC, Sec. 61.051 |
| Unemployment tax | You are liable once you pay $1,500 or more in gross wages in a calendar quarter or have at least one employee in 20 different weeks of a calendar year. Register with TWC within 10 days of becoming liable. | TWC |
| New-hire reporting | Report new and rehired employees to the Attorney General within 20 calendar days of the date they start earning wages; the OAG takes reports through its employer website. | Texas OAG |
| Workers' compensation | Optional for most private employers. Covered employers post Notice 6. Non-subscribers post Notice 5 (no coverage) and file DWC Form-005 within 30 days of hiring their first employee and every year between February 1 and April 30. Tell each new hire in writing whether you have coverage. | TDI, DWC Form-005, TDI notices |
| Sexual harassment | Since September 1, 2021, Sec. 21.141 covers employers with one or more employees. Under Sec. 21.142, you are liable if you or your supervisors knew or should have known about harassment and failed to take immediate and appropriate corrective action. | Texas Labor Code ch. 21, SHRM |
| Other discrimination | The rest of Chapter 21 applies at 15 or more employees for each working day in 20 or more calendar weeks in the current or preceding year. | Texas Labor Code ch. 21 |
| Minimum wage and income tax | Texas adopts the federal $7.25 minimum wage. Texas has no personal income tax, so there is no state income tax to withhold. | TWC, Texas Comptroller |
| State posters | TWC's combined Unemployment Compensation Act and Payday Law poster (or the Payday Law poster alone if you are not liable for state unemployment tax); the workplace violence reporting notice in English and Spanish (1+ employees); your workers' comp notice; the EEO poster at 15+ employees. Also tell employees about the federal Earned Income Tax Credit by March 1 each year. | TWC |
Weigh the workers' comp choice carefully. Per TDI's workers' compensation guide, an injured employee can sue a non-subscriber, and the employer cannot argue that the employee's own negligence, a co-worker's negligence or the employee's acceptance of a known danger caused the injury. Employees working in another state bring that state's registrations and rules with them. For choosing a structure, registering the business and getting an EIN, see our plan for how to start a business in 30 days; for Texas state and county filings, see how to start a business in Houston.
Annual HR Compliance Audit Calendar (Month by Month)
Use this as your HR audit checklist for small business. Put the dates in a shared calendar with an owner for each.
| When | Task | Applies to |
|---|---|---|
| January | By January 31: W-2s to employees and the SSA, 1099-NECs to contractors and the IRS, Form 940 and the fourth-quarter Form 941. Replace outdated posters and recheck exempt salaries. | All employers |
| February 1 to April 30 | Post the certified OSHA 300A summary for the prior year. | 11+ employees, unless partially exempt |
| February 1 to April 30 | File DWC Form-005. | Texas non-subscribers |
| February to March | File Forms 1094-C and 1095-C by February 28 on paper or March 31 electronically, and furnish 1095-C to employees (the IRS set March 2, 2026, for 2025 forms). | Applicable large employers |
| By March 1 | Tell employees about the federal Earned Income Tax Credit. | Texas employers |
| April 30, July 31, October 31 | File Form 941 for the quarter just ended. | All employers |
| When the EEOC opens the collection | File the EEO-1 Component 1 report. | 100+ employees; some federal contractors |
| June | Run an I-9 self-audit, review contractor classifications and recheck each exempt role's duties. | All employers |
| September | Review policies and the handbook; refresh manager training on harassment complaints and timekeeping. | All employers |
| December | Recount headcount the way each law does for next year's COBRA, ACA and FMLA status; set next year's paydays; purge expired records unless a charge or lawsuit is open. | All employers |
Sources: IRS due dates, IRS Form 1094-C/1095-C instructions, 29 CFR 1904.32, TDI, TWC and USCIS self-audit guidance. Weekend and holiday due dates move to the next business day.
When to run a full HR audit
- You cross 11, 15, 20, 50 or 100 employees
- You hire your first employee in a new state
- You buy another business or its staff
- You receive a complaint, an agency charge or an agency inquiry
- You change payroll providers or move to a PEO
7 HR Compliance Mistakes Small Businesses Make
- 1.Calling workers contractors without a reasonable basis. The IRS says you may then be held liable for employment taxes for that worker. Fix: test each contractor against the IRS factors and keep your reasoning on file.
- 2.Treating "salaried" as "exempt." A salary alone does not make a job exempt; the duties test applies too. Fix: document the exemption for each salaried role.
- 3.Off-the-clock work and unpaid overtime. Back wages add up every pay period, and repeated or willful violations also carry the civil penalty above. Fix: record every hour and require approval for overtime, but pay for all hours worked either way.
- 4.Late I-9s, or I-9s kept in personnel files. Section 2 is due within 3 business days. Fix: make the I-9 part of day one and keep the forms in their own binder.
- 5.No written harassment complaint path. Texas harassment liability reaches employers with a single employee. Fix: publish two reporting channels and document every investigation and corrective action.
- 6.Late final pay in Texas. Discharged employees must be paid within 6 calendar days. Fix: make final pay a dated offboarding step.
- 7.Missing a threshold because you counted the wrong way. Part-timers count fully for EEOC laws but as fractions for COBRA. Fix: use the counting table above and recount every December.
Who Should Own HR Compliance: DIY, Software, Outsourced HR or an Employment Lawyer
| Option | Best for | What it covers | Limits |
|---|---|---|---|
| DIY with agency checklists | Very small teams in one state with simple payroll | Registrations, posters and filings using free agency tools | Your time; easy to miss a threshold or state change |
| Payroll or HR software | Teams that want filings and deposits automated | Pay runs, tax deposits and filings; some add new-hire reporting | No judgment calls on classification, discipline or terminations |
| Outsourced HR (HR provider, PEO or ASO) | Growing teams without an in-house HR person | Ongoing admin, policies, onboarding, files and compliance tracking | Not a law firm; anything outside the contract stays with you |
| Employment attorney | Risky terminations, agency charges, lawsuits and contracts | Legal advice and representation | Not built for day-to-day HR admin |
For a one-off project such as a handbook or an audit, compare HR consulting services; for per-employee price ranges, see our guide to HR outsourcing cost. If you use AI automation for small business for reminders, applicant intake or HR messages, keep a person in charge of every hiring, pay and discipline decision.
Where BizTech fits
BizTech's HR outsourcing services cover recruitment, payroll, onboarding, HR policy development and compliance documentation for startups and small businesses. See HR outsourcing plans from $300/month: HR Starter ($300/month) includes HR compliance fundamentals, HR Growth is $550/month, and HR Complete ($800/month) includes compliance auditing. Final scope is confirmed at kickoff. We are not a law firm; when a situation needs legal counsel, we say so and connect you with the right professionals. If HR is one of several functions you want to hand off, read our guide to outsourcing for small business.
HR Compliance FAQs
What HR laws apply to a small business with fewer than 15 employees?
From the first employee, federal law requires FLSA minimum wage, overtime and recordkeeping, equal pay, a Form I-9 for every hire, payroll tax withholding and filings, new-hire reporting, OSHA safety duties and required posters. OSHA injury logs start above 10 employees in non-exempt industries. State law adds more; Texas sexual harassment rules apply from the first employee.
How long does a small business have to keep employee records?
It depends on the record. Keep Form I-9 for 3 years after hire or 1 year after employment ends, whichever is later; FLSA payroll records for 3 years and time cards for 2; employment tax records for at least 4 years; personnel records for 1 year; and OSHA logs for 5 years. If state law requires longer, keep the longer period.
How often should a small business do an HR compliance audit?
As a best practice, run a full review once a year and check filing deadlines monthly or quarterly. Add an extra audit when you cross 11, 15, 20, 50 or 100 employees, hire in a new state, buy a business, or receive a complaint or agency inquiry, because each can change which rules apply.
What labor law posters does a small business in Texas need?
Most Texas employers need the federal FLSA minimum wage, OSHA, EPPA and USERRA notices, plus TWC's Unemployment Compensation Act and Payday Law poster, the workplace violence reporting notice in English and Spanish, and a workers' comp notice: Notice 6 if you have coverage, Notice 5 if you do not. Add the EEO poster at 15 employees and FMLA at 50.
Is workers' comp required for a small business in Texas?
For most private employers, no. Texas lets private employers choose. Employers that opt out, called non-subscribers, must post a notice of no coverage, tell new hires in writing, and file DWC Form-005 with TDI within 30 days of hiring their first employee and every year between February 1 and April 30. Injured employees can sue non-subscribers, who lose defenses such as employee negligence.
Can a small business outsource HR compliance?
Much of the work, yes. Payroll providers can handle tax deposits and filings, and HR providers can maintain policies, files, onboarding and compliance tracking. The contract sets what they take on, so anything outside it stays with you, and legal questions belong with an employment attorney. Keep final hiring, pay and discipline decisions with your managers.
The Bottom Line
An HR compliance checklist for small business is a moving target. It changes with your headcount, with the states you hire in and with rule updates, so tie your reviews to the calendar and to each threshold. Three next steps:
- Work through the first-hire checklist this week.
- Put the audit calendar dates in your calendar, each with an owner.
- Start preparing for your next threshold about 3 to 5 hires ahead (a planning suggestion, not a legal rule).
Want a second pair of eyes? Book a free HR consultation or compare HR outsourcing plans. This guide is general information, not legal advice; for a specific situation, talk to an employment attorney.
Ruhan Rafiq Bhaleshah
Chief Technology Officer
Ruhan Rafiq Bhaleshah leads the technical vision at BizTech, overseeing full-stack development, AI-powered workflows, and ensuring engineering teams collaborate with design and SEO specialists.