Episode 104: The Hidden Challenge of Success: Navigating HR and Compliance in a Growing Med Spa

Paul: But for us, we want you, at CEDR we’re like, you need to get an employee handbook in place as soon as possible.

CeCe: Absolutely. Yeah, whether you’ve got one employee or you’ve already got ten, it’s really important to have that structure.

Paul: Yeah, very, very important and, I got to tell you this not a employee handbook or any employee book, but you need one that has been, like, created for you.

CeCe: Absolutely.

Voice Over: You’re about to listen to an episode of What the Hell Just happened. Join Paul Edwards and his guests as they discuss interesting HR topics and solve some of our listeners’ submitted questions.

Paul: And occasionally I’ll go off topic to talk about whatever I want. Think barbecue, space exploration, growing your business, the things that interest all of us.

Paul: Hey, in today’s podcast we are talking about the structure that you would build for a business, preferably before you open it. But realistically this is something that happens, you know, should happen directly as your opening or it should be an ongoing process. And I’m talking about this because, you know, this podcast is, you know, it’s own thing. You know, What the Hell Just Happened? is its own thing, but it’s born out of my work and ownership of CEDR HR Solutions, whereby the question comes in and the doctor or the client says, ‘Paul, you won’t believe what the hell just happened’. And in this case, what could have just happened is that they get a demand letter from an attorney that they are going to have to pay out a lot of money on because they didn’t know what they didn’t know and they didn’t have an employee handbook in place. And most importantly, they didn’t have the training that comes with it. And that’s what CEDR does. It’s so, so unique. We don’t give you a template. They don’t give you a handbook builder. They don’t do any of that because unfortunately, you are not competent as a new business owner to have and you don’t have all the expertise to know what to include, why you’re including it. You need more than just a do-it-yourself template because you need that training. Because that training brings expertise in other areas of compliance and obligation for you as an employer. And so if you’re in this case, we’re going to be talking about med spas. It’s a group of businesses out there who are starting to grow. We see them look a lot, kind of like some of the dental practices that we work with. The teams look the same, the values look a lot the same, and they’re beginning to grow and they’re also beginning to acquire one another. And so that brings a new set of challenges to a small business owner. So I hope you enjoy today’s podcast. We’re going to talk about what the hell just happened. An owner is a victim of her own successes. Hey, CeCe.

CeCe: Good morning, Paul.

Paul: Morning. Hey, on this episode of What the Hell Just Happened, we’re going to tell the story of Mara. Mara owns a medi spa, for lack of putting it any other way, CeCe, Mara has become a victim of her own success. So she did such a good job at setting up her business that she’s found herself very busy and consistently growing a little bit and she’s having to add employees.

CeCe: Good problem to have.

Paul: It’s a great problem to have by the way, everybody, if you’ve listened to the podcast, I need to add this. We have a second listener. His name is Pete. Pete lives out in in the Silver City area of New Mexico. So I just want everybody to know we have a second listener. Kenny’s the first one and then you, whoever’s listening now. So now we have three listeners to the podcast every, every week. CeCe Wilson is, I bring her in often she’s head of HR and she’s moving up in the world. We’re going to make a really big announcement in one of these podcasts is moving up in the world here inside of CEDR, but CeCe has run our HR and so she really understands business and HR. And CeCe you have you just, you just got your master’s, too. You’re just getting smarter and smarter while I’m just sitting over here plodding away. So anyway CeCe, can you share a little bit of insight? Like, how do- now you know it doesn’t take much to open a business.

CeCe: Right.

Paul: You just, you go get a maybe a city permit if you’re, if, you know it, you go get your EIN number. I didn’t know what that was when I opened my first business. I may or may not have. We don’t. Okay. We don’t even talk about that. No, statute limitations are up. I had no idea. And I was just paying my people cash and under the table, as they say for the first business. What is, how does it look when you first open a business? Like you open the doors and you get your best friend or your wife or someone to work for you, someone to work the front desk and off you go.

CeCe: Not a lot of structure, right? Because you’re just, you’re not sure what’s going to happen, so you’re winging it to an extent, most people have got a plan, but.

Paul: Let me add this. A lot of us, when we opened our first business, we were employees of someone else before we did it. And probably, at least I wasn’t, I wasn’t privy to any of this stuff that wasn’t, you know, I just wasn’t in that position. So a lot of us just kind of are guessing at it, we don’t really know what to do. We just see everybody else opening a business. So we should be able to do that too.

CeCe: Sure. And maybe you model what you think you know from the perspective that you had as an employee. Which is a very small little window into what it actually takes to run a business.

Paul: And set one up, and then kind of follow the rules and stuff.

CeCe: But I think for the most part, people are thinking about the now. So they’ve got, you know, a couple of people helping them. Maybe it’s a more informal than is ideal with a real employee, quote unquote, that you found, you know, through a typical hiring process. And you’re not thinking about how to scale those processes or make them scalable as your business grows. So you’re sort of lacking that structure.

Paul: In my second business, well, it’s like my third business. I struck a deal with someone who owned a restaurant bar to be a co-owner and reopen it and run it and kind of change it and everything. I literally in my tie-dye shorts t shirt after strike of the deal with him, sitting in my living room, walked out on the front porch of my little apartment complex and just pointed at my four best friends and said, ‘Hey, have you ever thought about bartending?’ I mean, that’s how we set it up. And, and then off we were going and I didn’t know anything about worker’s comp. I didn’t know anything about matching taxes for Social Security. I didn’t understand that I was supposed to sequester some of their income, withholding taxes and remitting that to both the state and the federal government. I didn’t, I didn’t know any of that stuff, but we were up and running for about, I don’t know, eight months before I found out. There’s another thing you put in front of that I’m not using the podcast but I FO’d I found out that I was supposed to be doing those things. And then, and then, you know, for the purpose of today’s podcast and we’re and we’re going to talk about Mara. That’s the person that I spoke to who actually owns a medi spa. She’s a victim of her success. Well, I mean, the short version of her story, CeCe, this should sound very familiar to you. She opened the business with one other person. She’s sitting there now watching 12 people walk through the door every morning. So she’s gone from just Mara and one friend to she has 12 people working for her. And in the background no one knows it, but Mara has been offered to purchase another medi spa in town, and she’s going to do it. So she’s about to grow to 18 employees with two locations. She did what we just described. When I’m sitting with Mara a little bit and talking to her, what I discover is and you pointed this out, you use your experience of what you, you know, your limited experience and understanding in and what had happened in Mara’s previous life as an employee. And she was misclassified for a long period of time in one of the jobs that she did, which means she wasn’t they weren’t withholding taxes, they were improperly paying her directly under the table, which felt fine for everybody. They’re paying her as an independent contractor and she couldn’t do that, or they weren’t supposed to do that. So she took that, that game of telephone and she just she took that bad habit, that wrong thing she learned. And she just spread it throughout her whole team. Very common. And then part of her story was she was, she did eventually like I did find out that I need to run payroll a different way. And she went to an accountant, not a CPA, but she went to a local accountant who was someone who did this. And we don’t have any issue with that as long as they know what they’re doing. And the accountant didn’t understand classifications and gave her another wrong set of instructions about paying people by salary and not tracking their hours and doing those things that you’re required to do to pay someone. So, you know, even though we’re talking about medi spas today, I mean, this could be your restaurant, this could be your dental practice, this could be your your primary care, your first primary care practice. This could be your cleaning service. It doesn’t matter. All these same rules still, still apply there. And Mara’s case, we have quite a mess that we need to clean up. But we can do it. We can help her get back on track. We can help her reclassify, you know, over at CEDR. She may, she may once we get into this, actually have to hire an attorney, though, because there may be some IRS issues here.

CeCe: Yeah.

Paul: And you know, that’s not something that CEDR gets into. But we can tell you there’s a problem. Explain to you what, what you have to do and who you have to kind of go to to get that cleaned up. But I mean, just overall, I just kind of want to come on the podcast and say, what the hell just happened is I’m, I’m a year into my business and I’m finding out from consultants and from kind of, you know, I finally got my head above water and I can think for a minute, I’m reading up on it and I’m not complying with a bunch of rules and stuff that I’m supposed to be complying with. So there’s the legal side of this, you know, the human side of this kind of breakdown. Because this means that an employee, probably an ex employee who’s upset with you now can get on the Internet and Google their way into figuring out that you’re doing something that you’re not supposed to or you’re not doing something that you are supposed to do.

CeCe: Yeah, yeah. They’ve got some leverage now.

Paul: They have some leverage, or it could even be leverage within your business. And I want to tell you why that’s really tough when they’re in, kind of inside the walls because once they notify you and they’re accurate and they point out that you haven’t done something right, well, from the human side, that begins to question a lot of your decisions as a leader or cause questions of, you know, what you’re saying, because as a leader, you got to fake it till you make it. So, you know, effective leaders are decisive even when they’re wrong, they’re decisive. And so when they discover that you haven’t been doing something so basic, so discoverable as to be found on the Internet and everybody understands the ruling, you’re not following it. That’s not a good place to be. That’s really not a good place to be. I want to make the case here that you shouldn’t become a victim of your success. Well, what are the basics? I mean, from our point of view, I’m not going to get into the payroll and getting your EIN number and all of that, but from us, we want you, at CEDR we’re like, ‘You need to get an employee handbook in place as soon as possible.’.

CeCe: Oh, absolutely. Yeah, whether you’ve got one employee or you’ve already got ten. It’s really important to have that structure.

Paul: Yeah. Very, very important and, and I got to tell you this, not a employee handbook or any employee handbook, but you need one that has been like, created for you.

CeCe: Absolutely.

Paul: Tendency is to get out there. We’ve talked about this, we’ll probably do podcasts on it forever but you know you think it’s a do-it-yourself project and it’s not. Yeah, which leads me a little bit to, I’m going to talk a little bit about how payroll companies work. So CeCe employee handbook, what else?

CeCe: I mean, you, you should have sort of a defined process for hiring and onboarding people. You should have some intention around those processes. Feedback mechanisms to get started with one on ones, even if you’ve got just a couple of people.

Paul: Yep. Solve problems as they’re happening not a week or two weeks or four weeks later when you’re finally mad enough to yell at somebody about it.

CeCe: Or especially when you’ve got a small team, sometimes people just let stuff go and then you start scaling your team. You’re bringing on more people and now they’re picking up all those bad habits. So really important to address, even if you’ve got just a couple of people, the things that you’re not liking that you’re seeing happening.

Paul: Job descriptions?

CeCe: Job descriptions, absolutely.

Paul: I think those really aren’t as important on day one. I mean, day one is you develop- when I say day one, I meant the day you opened your business. I don’t expect you to have great job descriptions or for you to even understand the value of them. But one of the values of good job descriptions is, is they help you write good job ads.

CeCe: Yeah.

Paul: Which attract people to do the actual job and tasks that you need them to do. So it’s a point of clarity.

CeCe: Yeah, really hard when you’ve got a really small team and they’re all wearing multiple hats. But as you start growing, yeah, sort of delineating where those responsibilities lie is very important.

Paul: Yeah. So kind of establishing a little bit of an understanding of hierarchy and then, you know, in this whole process that we’re talking about, when I said not just any handbook. Well, one of the points I wanted to make about that, about it not being a DIY project for you is that the handbook must come with some customization. Not you. I’m not talking about you. That you, the listener who’s opening your business. If someone puts a template up in front of you and says, ‘Hey, you can make changes to this, or you can look over here to the left and grab the things you want and put them over here to the right,’ that’s just wrong.

CeCe: Yes.

Paul: You don’t have the expertise to understand what you should and should not include and the way you would get that expertise in some way would be to have someone literally walking you through that process, explaining really why something’s there, what it’s used for and how it applies and how you would be able to carry that knowledge to out the rest of the life of your business.

CeCe: Yeah.

Paul: A handbook that you put together, whether or not, you know, some large handbook building company, payroll company puts it together, ‘Don’t worry about it. We’re the biggest, you know, you know, we’re the biggest payroll company in the world’. When they leave you to do your own work and give you a word document, that’s just a recipe to make a mistake. But that’s not why I’m here today CeCe, the problem is, is it didn’t come with any training. So could you imagine getting a new tool in your clinic that you’re going to use and not having the manufacturer of the tool either give you the training you need, do you want your surgeons to just, you know, do we want our surgeons to not have training on new tools, new implants, you know, when they put an implant in? I digress. Did you know when they put implants in and I know around or the orthopedic, I have a friend who works in that industry. He is literally in the operating room with the doctor, helping them to understand once they open the patient up to replace a joint or fix something, how that manufacturers item fits in and which tools to use and how it’s got to be placed. So there’s this, not just training but there’s this ongoing guidance on how to do this right. And it’s ever changing. And I think that’s what we want. And while employee handbooks and policies and compliance is not life and death, doesn’t seem like it is, when you need it to be right and it’s not there, it’s a life and death situation.

CeCe: Yeah. Or your financial life and death for sure. Yeah.

Paul: Yeah. You know, so I don’t know many small businesses that have a lot of extra money to pay attorneys and fines and backpay and penalties and all that kind of stuff, so. So, Mara is a victim of her success. 12 employees. She’s about to have two locations. She’s going to grow to 18. She did have an employee handbook in place. It was a template. I took a quick look at it. It is not customized for her state. And clearly we talked about it earlier. She missed all the training about exempt versus nonexempt, independent contractor. She didn’t get any of that information. And Mara got a little bit pissed when I told her about these things and about the cost and what she needed to do. And her first thing was, ‘Why didn’t someone tell me this at the payroll company?’ CeCe, what is our experience with payroll companies?

CeCe: Well they’re not, their responsibility isn’t to protect you from yourself. Their responsibility is to implement what you tell them to implement. So, you know, they’re not giving you that guidance of, ‘Well, what you’re asking me to do is wrong.’ You know, they’re just going to go put it in. They’re not asking the questions of, ‘Well, wait a minute, what does that person actually do?’ when you say set them up on a exempt salary.

Paul: Yeah. So it’s not really their job.

CeCe: Right.

Paul: Even though it feels like it might be.

CeCe: Feels like it should be.

Paul: And then we had an accountant who was running payroll. So it’s not even a big payroll company who’s basically trying to get you to, you know, they’re all in a race to the bottom. They’re trying to do as little work as they possibly can in order to provide the service that they provide. The accountant on the other side, she- I think it was a she, I don’t remember. They didn’t have the knowledge they needed. They were doing exactly what they had learned from the big payroll companies. So Mara now knows and she’s cleaning it up. She’s reclassifying. We’ve talked with her. She did change her payroll company out. She changed out her accountant. She got, got in with a CPA who recommended that she that she work with a payroll company. The CPA didn’t even have a payroll company in-house. And she’s reclassifying. It’s a little tricky because some overtime has been worked over the past few years by some of the people who were misclassified. So she’s just taken it head on. And I got to tell you, CeCe, I think that she had banked about a quarter of $1,000,000. She did pretty good. She kind of, you know, and she’s got to use it to buy this new practice. And it appears that she’s now being told that she’s going to have to allot about $45,000 of that to go back and pay some of the fees of the experts who are going to help her clean up, which she didn’t do. But they have to go back and file a bunch of Social Security matching funds and some state taxes. And they got to pay it. They got to go back and they got to clean it up. And so it’s just going to cost you know, the CPA is billing by the hour. They’re going to you know, it’s going to take them 15 or 20 hours at $400 an hour just to, you know, figure out what’s got to be filed and filed on her behalf. And as painful as it is, she’s lucky. She was successful and she has the money to do it. But when she opens this new practice, she’s not going to have any kind of a cushion.

CeCe: Yeah. And she’s lucky that she discovered it through the way that she did and not through a lawsuit. That’s got the latitude to go fix it and clean it up for a lot cheaper than if she were being sued.

Paul: Yeah. A whole lot cheaper. She’s and, she’s, you know, self they’re self-reporting it, you know, they’re going through that process. The other costs for her and for everybody out there listening, whoever owns a business and you’re running an especially small business is the time. She is having to gather records. She’s, she’s distracted by this while she’s supposed to be thinking about ‘How do I integrate this other team?’ A whole nother conversation about that CeCe. When I told her about strategic planning in HR and core values and setting a mission and everything she was just like, ‘Ugh that sounds like a lot of work.’ and I was like like, ‘It’s the only way you’re going to get these two teams to merge.’ Yeah, that’s for another, that’s another podcast. Yeah. So, alright CeCe, let’s kind of give everybody up before we go into our question, our listener question, let’s kind of give everybody a recap.

CeCe: Okay.

Paul: What’s our recap?

CeCe: Put the structure in place right away. Yeah. Don’t, don’t think just because you’re small, you don’t need to be formalized about these processes.

Paul: Right. Start figuring it out.

CeCe: Yeah.

Paul: Oh, oh, I want to make a point. If she had all of this stuff in place and she knew everything, merging that other team would be much better because they’re going to get given the employee handbook that’s already in existence, that’s already in compliance, it’s already going to communicate all the good stuff that’s in it. All the policies are set. There’s a, there’s a foundation. And so, you know, she’s going to clean it up and bring them in the right way. But she’s going to be in the middle of the cleanup when she’s doing it, using an established system. So employee handbook, start getting your understanding of these rules. Don’t rely on payroll companies or anyone else to explain to you.

CeCe: Please, yeah.

Paul: Put you in compliance.

CeCe: Go to an HR expert.

Paul: Yeah. Go to somebody who knows what they’re doing. Okay. Handbook, know the rules. How about if we just leave it at that? When you open your business, if you don’t want to become a victim of your own success, start looking at this stuff earlier and understand what the rules are, what your obligations are. And at the very least, set up a good employee handbook and get everybody on the same page.

CeCe: Yeah.

Britt: I have an employee who keeps putting her coworkers office supplies in jello, like fully encasing it in jello and leaving it on their desk to find later. I have no idea how to approach this banter between two employees and with like help on how to address it. What would you do, Paul?

Paul: Well, CeCe, you’re in the podcast with me today. What would you do?

CeCe: I’d give them a high five and laugh.

Paul: I think it’s hilarious. I love, I love this idea. I wouldn’t do anything. I would just sit back and see how this developed. No, we know we can’t. We can’t do that.

CeCe: No, unfortunately, we’d have to put our serious faces on.

Paul: We have to give them the poop sandwich. ‘Hey, we think what you did was really clever, however…’ You knowCeCe, this gets into something else. The way I would answer this question is, is that as much as I enjoy the creativity and now I’m thinking about how I can use this myself. I’m going, I’m headed over to CEDR, to the offices. Everyone’s going to find all their stuff in jello. This is about pulling off those pranks and starting to do this kind of and look, it’s not saying don’t let people be playful. I’m, I’m definitely not saying that. I mean, it’s okay to put an automatic, you know, a set of like, I don’t know, I did this here one time, like five years ago. I gave everybody Nerf guns. It got it got pretty out of hand. But the problem is, is that someone finally was running down the hallway from someone else. And, you know, we’re pretty relaxed here. And they were in their sock feet because they’ve been working all day and they fell down.

CeCe: My HR heart is beating fast now.

Paul: CeCe’s just like, ‘I hate this jello idea Paul, how they use this against us?’ And so you got to be careful. And we actually, we put a policy in place. You just have to be careful when people start fooling around with each other and pulling pranks. But you also got to kind of step back. I mean, I had somebody I don’t know who was mess with my office for about two weeks. They thought that was going to be funny. I did find out who it was and they never knew I knew it was them, but I think they knew by day three of me going into their office after they weren’t here, that that I had discovered what they were doing to me. So I was changing everything, their computer, their chair, just everything. I just, I raised their desk. I just made everything so awkward constantly. So I was a part of the problem. So the way I answer this question listener is you got to take you got to go in and say, ‘Cut it out.’ That was funny. I don’t know if you have to write a corrective action or anything like that, but you do have to just tell them, you know, ‘That was great. Stop it.’

CeCe: Yeah.

Paul: Yeah. Do you have anything else, CeCe?

CeCe: No, I mean, there could be some other hidden concerns if, you know, if you’re aware of some back story that makes this targeted and less funny, then you might handle it differently. But if it’s just someone pulling a prank and they, you know, the it was the wrong person who doesn’t find it funny, then they just need to stop.

Paul: Yeah, you just have to go in and talk to them. All right, everybody. So when I did the listener question, I just was told that it wasn’t an actual listener question. It was from the show The Office. And so of course someone from The Office was doing the Jell-O thing. I’m not saying that you should or should not do this yourself if you listen to the podcast. I’m just saying that I think it’s brilliant that you could in case someone stapler in Jell-O. But don’t do that. Yes, do that.

Paul: And for our final segment, ‘Man Shakes Fist at Clouds’, right? ‘Man Shakes Fist at Sky’. That’s that’s what we’re going to call the final minute where I rant about something. My current rant comes from this morning. I believe that companies, particularly companies that are like provide companies that provide like Internet service should be regulated in such a way as to have to put a customer contact number on the front page in clear view so that you can call them and try and get your problem solved as opposed to literally hiding that number so that people will go through the chat bot that doesn’t work. What I really want is I want to get into your phone tree, your terrible, awful phone tree, and not get my question answered there. But I need to call because the choices, the problem that I’m having, I can’t solve through your automated services. So man shakes fist at cloud. I think that, you know, if you’re providing utilities, you have to put a phone number and somebody has got to be on the other end of it. You have to incur those costs, whether you’re my cell provider, whether you’re my Internet provider, my electric company, or whatever that is, and I’m done shaking my fist at the cloud.

CeCe: You’re welcome for the retitling of that segment.

Paul: I like Man Shakes Fist at Sky, I think it’s pretty good.

CeCe: I do too.

Paul: That’s a Simpsons thing by the way everybody. All right let’s just, let’s let you get back to whatever you’re doing in your life. Thanks for listening, everybody. We’ll see you on the next podcast.

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