Building your Missouri cannabis business is an exciting, yet challenging endeavor. From laying the foundation for your cultivation to designing your retail space, your to-do list is likely quite long. An important area of your operation that deserves early attention to avoid costly fines and unnecessary stress, is your workforce and Human Resources processes.
These best practices will help you build an HR department that is efficient, compliant, and people-focused. Don't feel like reading? Check out this free Missouri cannabis HR webinar recording!
A successful HR department looks like:
People + Technology
In an ideal situation, the image below would be your organization chart with a full-time HR Manager handling the entire HR function, guiding your HR strategies and building your companies culture; however, we realize this is not always feasible in start-up mode. Instead we often see HR responsibilities fall waist-side or they might be delegated to another department head who may not have the knowledge or time to dedicate to HR. An alternative solution is to hire an HR consultant who has the knowledge, skills and ability to build a strong HR foundation. Many of our clients rely on Wurk for our HR professional services for this reason.
Standard Organization Chart
Having an HCM (Human Capital Management) software in place is going to help with Federal and State compliance and will help alleviate the administrative burden and cost of HR.
Here are the top 5 most common issues cannabis companies experience with their HR & payroll software:
1. Disparate systems
2. HR solutions that don't understand cannabis regulations
3. Payroll solutions that don't comply with cannabis money movement best-practices
4. Systems that can't support multiple EINs and multi-state operations (MSOs)
5. Solutions that aren't dedicated to the cannabis industry long-term
The most common issue cannabis businesses face is that they have several disparate systems that are not integrated with one another thus defeating their time and money saving purpose. Our recommendation when selecting an HR software is to ensure you select a fully integrated, all-in-one solution that will be scalable as your business grows. In addition, look for partners that are integrated with other solutions and partners in the cannabis industry, so you can build an ecosystem of expert support for your business. Lastly, make sure the provider that you chose is cannabis-friendly as many of our clients were previously dropped from their software providers without prior notice.
Common HR Technology Stack
Click here to learn more about Wurk's all-in-one cannabis HR & Payroll solution, and how it can help your small business today and your scaling business tomorrow.
Avoid Common Cannabis HR Missteps
W2 misclassified as 1099
Often times, we see employers misuse the 1099 (independent contractor) classification. For example, a client wanted to change an employee to 1099 because the employee wanted to avoid paying taxes on a bonus. Making this kind of change to avoid tax liability, would be in violation of IRS rules around using this classification. When you think of an independent contractor, think of a worker who runs their own business, but performs work for another business. They are usually paid a flat fee for the job they were hired to complete, and the company does not have control over how the worker performs the work.The consequences for treating an employee as an independent contractor without meeting the specific criteria could result in back taxes, fines and penalties.
Non-exempt misclassified as exempt
The next misclassification we see is when an employee is incorrectly classified as salaried, exempt instead of hourly, non-exempt. For example, an operator wanted to pay budtenders a salary as they did not want to deal with calculating and paying over-time. They did not understand that there are federal regulations when it comes to classifying a worker as exempt from over-time. Always refer to the duties test provided by the Department of Labor to help ensure you properly classify your workforce. It is also important to ensure that you are paying your salaried, exempt workers at least the minimum salary threshold which is currently $35,568 annually under Federal law. Some states have begone enacting their own minimum salary thresholds as well.
Wage and Hour Compliance
Fair Labor Standards Act
Each state has specific laws as it relates to exempt vs non-exempt when it comes to wage and hour compliance. The Fair Labor Standards Act states that hourly, non-exempt employees must receive at least time and a half for any hour worked that exceed the 40 hour work week. This sounds easy enough; however, often times we work with clients that are tracking time on a spreadsheet or utilizing another payroll method that is not scalable and leaves room for error.
Final Paycheck Laws
It’s important to understand final paycheck laws in your state. We often see this rule missed when it comes to terminating an employee. Missouri requires a final paycheck the same day if the employee is terminated or laid off. Best practice is to hand the employee a manual check at the termination meeting that has all of their final wages on it to include time worked, PTO payouts and any additional wages due. Missouri also requires that employers inform employees at least 30 days before decreasing their rate of pay. If this is a mass decrease, you can post a notice in a public place for all employees to see.
The most important take-away when is comes to wage and hour compliance is to ensure you understand and adhere federal and state laws to avoid costly fines and penalties.
Employee Handbooks & Job Descriptions
Handbooks & Policies
Cannabis Employee Handbooks are important for employees to understand the rules and policies in place and they also serve as protection for the employer to uphold these policies. Recently, an employee of a client was using alcohol on the job and we found that the employer did not have a handbook or policy in place to support their just cause for termination. For this reason, your Employee Handbook should be in place when you hire your first employee, and all employees should sign-off on handbook acknowledgment at their time of hire.
Lastly, make sure that your Employee Handbook stays up-to-date with quickly changing state and federal laws – at Wurk, we recommend a thorough review every six months or as federal and state laws change.
Cannabis Job Descriptions
Job Descriptions should follow the same suit as the employee handbooks. They should be created for every position and signed off on at the time of hire so that the employee understands the expectations and requirements of their job.
We understand that building Employee Handbooks and Job Descriptions is a time-consuming and sometimes daunting task. Because of this, our clients often utilize our HR services to assist with this process.
The next critical component to cannabis HR best-practice is proper I-9 implementation and management. The most common mistake we see is that I-9s are not completed in a timely manner. This often begins when companies are still small, but quickly evolves into bad habits that can cause significant risk to a scaling operation in cannabis.
The 3 Day Rule
So how do you prepare new hires to complete this required document on day one? Send your employee a list of acceptable documents that they can bring in on their first day to satisfy I-9 requirements. Next, how do you ensure your company's compliance with the employer portion of the I-9? Train your managers on how to properly complete the employer portion of the I-9, and stress the importance of the 3 day rule.
What is E-verify? E-verify is a web-based system that confirms employment eligibility based on information recorded on the I-9. It has a become a best practice for employers to verify eligibility to work in the United States. It’s important to note that Missouri does not require E-verify except for public employers and contractors. If you choose to utilize E-verify at your place of business, always ensure it is utilized consistently with every single new hire.
We understand your busy running your business so we recommend you carve out time for the completion of the I-9 and other on-boarding documents on the employee’s first day of work - Ensuring that I-9's are completed timely and accurately will help you avoid costly fines and penalties for non-compliance.
We discussed how important HR compliance is at your cannabis business, the best practices to help you avoid HR landmines and the policies and documentation you need in place to protect your business. It’s important to remember that not only is HR compliance the right thing to do, it’s your legal obligation as an employer and will be a factor in maintaining your cannabis license.
Wurk was founded in 2015 to empower the people of cannabis by providing robust and intuitive HR and payroll solutions designed and built specifically for the cannabis industry. Since, we have grown to serve clients in 33 states and have facilitated rapid scaling of many cannabis companies. Our solutions are easily customized to fit the needs of any-sized cannabis company.