No matter how intimate the work environment or how small the staff, it's vital for business owners to remain in compliance with the Fair Labor Standards Act (FLSA). Doing so will avoid an investigation by the Department of Labor's Wage and Hour Division, advises SCORE counselors. If a small business is investigated by the division and violations are found, owners may be asked to bring payroll practices into compliance, furnish back wages to employees and pay penalties.

The FLSA guarantees non-exempt workers (usually those who are paid on an hourly basis) receive at least minimum wage for all of their hours worked in addition to time-and-a-half rates if they work overtime. Unless employees fall under an exemption as a white collar worker, performing professional, executive or administrative work, they must be paid overtime rates, the source explains. This is not a benefit that can be waived even if it's been agreed upon by both the employer and employee.

If small business owners lack the financial resources to bring on human resources staff to navigate state and federal requirements, they might consider investing in payroll processing software or outsourcing HR duties to a third party. 

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