ebook: 7 Signs Your Cannabis Business Needs to Outsource HR to a PEO

Studies show the number of marijuana dispensaries reached nearly 7,500 across the country in 2019, with sales for recreational marijuana alone hitting $7.3 billion. – Kisi


The cannabis industry has grown exponentially over the last several years. As more states are legalizing recreational and medical marijuana, more and more grow rooms and dispensaries are popping up around the country.

While the industry is certainly growing rapidly, and cannabis businesses are following suit, the size of the cannabis businesses, i.e., number of employees, remains relatively small. This is due in large part to the need to staying on top of strict governmental regulations, as well as other operational challenges that small business face, one being human resources.

A cannabis business needs to ensure that they are maintaining compliance with cannabis laws and regulations at a local, state, and national level. Adhering to the ever-changing laws require significant time and attention. And this doesn’t take into account the HR side of business in general – staying current in hiring practices and employment law, payroll, updating policies, workers compensation, etc. Currently, many cannabis businesses have an existing employee or internal resource responsible for both HR and legal compliance, and they still have the multitude of responsibilities to fulfill on a daily basis for their ‘regular job.’

Hiring a dedicated HR professional in-house may not be feasible for a small business, but a Professional Employer Organization (PEO) may be the right choice for a small cannabis company. A PEO partners with your business to fulfill all things HR, from hiring and onboarding, to payroll and employee benefits, to ensuring your business stays out of legal trouble. Working with a PEO has helped many companies streamline their business operations and reduce administration costs, all while enabling employees and owners to focus on running and growing their business.

The HR administrative burden on a small business can be daunting. In this guide, you will learn seven signs that often indicate that it’s time to outsource HR to a PEO.

7 Signs It’s Time to Outsource HR to a PEO


1. Difficulty in adhering to regulations.

Not only are laws and regulations constantly being updated and changed, but they can also differ in each state. As a business owner or operator, you have to abide by several employee laws like the Fair Labor Standards Act (FLSA), the Family and Medical Leave Act (FMLA) and the Health Insurance Portability and Accountability Act (HIPAA).

As a cannabis business owner or operator, you also have to ensure you are legally licensed and have the right permit to operate your business, along with several criteria in place. For example, a California dispensary must have ID badges for all employees, security personnel on hand, alarm systems, commercial grade locks, and 24-hour video surveillance.

As if following the above laws and regulations isn’t time consuming enough, you must also abide by regulations regarding health and safety. For example, if you are operating a grow room, there are many occupational hazards that mandate a proper safety program in place. Without proper training on safety protocols, your business is at risk of violating OSHA Job Safety and Health laws and can be at risk of an employee lawsuit if an injury were to occur.

How a PEO helps with compliance

To say there are too many compliance issues to stay on top of is quite an understatement. Even if there is someone handling HR currently in your business, chances are it’s challenging for him or her to keep up with the legal landscape.

A PEO’s job is to understand the local, state, and federal laws, and more importantly, know what actions you need to take to maintain compliance.

1. A PEO can proactively see any future compliance issues and bring them to light.
2. A PEO can also be able to regularly bring new ideas about addressing compliance that can be accomplished more efficiently and less expensively.
3. A PEO can notify a business about issues that the business can lobby against, so the business has the chance to raise concerns with lawmakers before harmful changes are enacted.

Without a PEO monitoring the changing legal landscape and advocating on your behalf, your organization increases its litigation risk profile, and potentially misses out on cost-saving compliance strategies.

2. Can’t offer benefits because they are too expensive.

Medical insurance, health savings plans, and retirement plans are typically a major incentive for job candidates. In fact, a Glassdoor survey reported that four in five employees prefer benefits and perks to a pay raise, and a 401(k) Plan ranks in the top five requested benefits. If these benefits are major incentives in the job market, one would think it would make business sense to start offering these benefits to cannabis full-time employees. It’s a bit more challenging than that.

Large 401(k) retirement plan providers are afraid to get involved with an industry engaging in activities still illegal under federal law, and a decades-old ban on most federal tax deductions can make providing plans expensive for the companies.”

Not only that, but if a cannabis business has less than 10 employees, providers often decline service simply on the fact that they won’t be able to profit off that customer.

If benefits are expensive to offer employees, then it is certainly understandable to opt out of benefits packages. However, this places risk on losing good talent and crippling your workforce is high. Fortunately, all is not lost.

How a PEO can help with benefits administration

A PEO understands that small cannabis businesses do not have access to reliable and secure financial and employee benefits services. Therefore, a PEO works with the employer to overcome traditional barriers and adopt a suitable, affordable benefits package. Benefits service includes, fulfilling the administration and enrollment period responsibilities, conducting participant verifications, distributing necessary documentation to participants, such as benefits statements, and handling any compliance reporting.

3. Employee policy manuals are out-of-date or do not exist.

There’s a misconception that employee handbooks and policy manuals are only needed for large companies or for businesses with several full-time employees. Below are a few reasons why even a small cannabis business needs an updated employee handbook:

1. It demonstrates your company’s commitment to quality and compliance.
2. Employees feel more secure and know what’s expected of them.
3. It can help streamline operations during emergency situations.
4. It reduces risk for liability, e.g. if an employee claims to have been treated unfairly and seeks legal action, a handbook could help the business if policies were laid out explicitly.

What to include in an employee handbook:

  • Code of Conduct
    • Dress code/Grooming
    • Attendance
    • Code of ethics
  • Communications policy
    • Social media
    • Email/ text messages
    • Emergency plans
  • Hours of Operation & Holidays
  • Benefits/Vacation/Sick Time
  • Nondiscrimination and sexual harassment policy
  • Termination policy
  • Use of technology
  • Confidentiality agreement


How a PEO can help with employee policies

Policies and procedures are the best protection a business can have. However, too often, small businesses don’t have the time to develop and write down policies and focus on running operations instead. A PEO knows how critical it is to have a policies manual and is a great resource for assembling and updating a manual as needed. A PEO will work with you to develop the appropriate employee handbook and policies that can protect your business and foster a productive workforce.

4. Employee turnover is high.

Is your business a revolving door of good employees? Or is it just difficult to find good talent? Finding the right hires for your team is critical to the success of your business. Not just anyone can work in a grow room, you need the expertise to staff the perfect cultivation team. But, of course, if you’re a startup, you may not have the time or money upfront to fulfill a diligent hiring or screening protocol, which often result in the following two results: 1.) Poor talent rolls through the door due to improper screening. 2.) Your current employees take on more responsibilities, but because they’re inexperienced and not properly trained, their quality of work takes a dive. Cutting corners in your hiring and recruitment process can easily lead to delays in production, operational errors, and even compliance issues.

Factors to consider in hiring:

  • Skills
  • Job experience
  • Education
  • Background check
  • Cultural fit
  • Desire to work for company


How a PEO can help with talent management

You wouldn’t let just anyone install the HVAC for a grow room. The same should be said for hiring the best talent to ensure your business can operate optimally. Working with a PEO takes the stress away from recruiting and hiring top talent. A PEO is skilled in talent management and can help with developing and posting job descriptions, conducting screenings, performing background checks, and assessing salary compensation. In a grow room, a PEO can help recruit employees from the Director of Operations to frontline trimmers. In a dispensary, a PEO can help recruit your management team as well as sales associates.

According to NAPEO, companies that work with a PEO decrease employment turnover by almost 15%.

5. Employee training is inconsistent.

Small businesses too often grapple with employee training. Employees are needed at all times to be productive and training is often seen as time away from performing a job. Not just that, but there are no national standards for training employees, especially dispensary employees; therefore, training is inconsistent across the nation. Despite the lack of training standards, it is still important to conduct employee training – to avoid liability, and also to help employees perform their job better. Employee education can benefit a business in increased productivity and revenue.

3 Types of Employee Training:

  • Basic training – company policies, discrimination, and harassment
  • Continuing education – regular training on tools and skills needed to excel at job performance
  • Corporate training – new laws and regulations in the cannabis industry, new company processes or procedures.


A Case for Dispensary Employee Training

Your dispensary employees are the frontline of the business. With the growing legalization of medical and recreational marijuana, dispensary employees not only have to be versed in state regulations and dispensary operations, but they also need to have working knowledge of cannabis products. As with any business, the public will have questions on your products: What’s the difference between pill form and oils? Will this make me sick? How long is a single dose effective? Your staff are not physicians and not lawyers. Training will enable employees to know how to respond and reduce liability. Similarly, appropriate training will also help in the event of a robbery. The cannabis industry is attractive to criminal activity, so security training and robbery awareness are critical to the safety of your staff and to avoid loss.

How a PEO can help with employee training

A PEO helps you develop staff-wide training programs with the proper tools and channels that benefit your employees, your business, and your customers. Because a PEO is skilled in growing a business through staff training and development, it works with all levels of a business and offers services like leadership development, continuing education programs, performance evaluations, onboarding new employees, and corporate training.

6. There’s an increase of employee illness and injuries in your grow room.

Your business isn’t invincible from employee injuries and illness. In the cannabis industry, there are numerous occupational hazards specific to grow rooms. The hazards can be divided into three categories:

  • Chemical: Butane and carbon dioxide (from the extraction process and pesticide use)
  • Biological: Mold, fungi, and indoor air quality
  • Physical: Ergonomic issues from hand trimming or tending plants, noise, ultraviolet light, machine guarding, working at height, and slips, trips, and falls

Like any business where employees are at risk of injury or illness, the cannabis industry is regulated by Occupational Safety and Health Administration’s (OSHA) and requires illness and injury notification and reporting. To avoid a rise in illness and injury and employee lawsuits, it is recommended to have a proper workplace health and safety program in place. A safety program communicates all hazards to employees routinely, trains employees on how to handle the various hazards, while using proper personal protection equipment, and includes an emergency plan should the unfortunate occur. A cannabis grow room owner is also required by law to provide workers’ compensation to an employee should he or she be hospitalized or take an extended leave of absence due to sickness or injury from working on site.

How A PEO can help with your employee’s health.

While a PEO may not be certified in the safety profession, the PEO can help put together a safety plan and consult a safety professional to ensure your business is in compliance with OSHA and can reduce the incidence of further injury and illness.

Cannabis grow room owners are required by law to provide workers compensation to an employee that became sick or injured on site. However, workers compensation management requires meticulous record-keeping, attention to detail, and expedited, thorough and accurate communications, which is not always easy for a small cannabis business to perform. A PEO can help:

  • Manage Claims More Efficiently
  • Control Claims Costs
  • Lower the Potential for Litigation Claims
  • Improve or Maintain Employee Moral


7. Employee records are disorganized and not easily accessible.

Is it challenging to pull employee records from storage? A personnel file should be kept for each employee along with a HIPPA-protected folder that contains sensitive information like benefits, medical leave information, or worker’s compensation. A valid I-9 form is particularly important to have on file, and easily accessible should Immigration and Customs Enforcement (ICE) ever request it. In fact, I-9 audits are going to be increasing in the next several years, so it’s critical to conduct an internal audit routinely to avoid thousands of dollars in fines should employee I-9 forms be missing or incomplete.

3 HR Files to Store & Secure

  • I-9 folder
  • Personnel Folder
    • Job application and resumé
    • W-4
    • Background check information
    • Confidentiality agreement signed
    • Offer letter
  • HIPPA-protected folder
    • Health, life, and dental benefits forms
    • Drug testing results
    • Benefits enrollment
    • Worker’s compensation
    • Personal/medical leave information


How a PEO can help with employee records storage and audits

Human error runs high amongst employee records, so it’s better to outsource storage and maintenance to a PEO to handle the organization and routine audits. A PEO can help ensure that every employee has records accounted for that are stored in a safe place, yet easily accessible when requested. The PEO is also skilled in conducting internal routine audits of all employee records, can spot gaps in paperwork, and request that missing records be fulfilled. If there is training and policies that need to be signed by employees, a PEO can ensure that the necessary paperwork be completed or updated as needed.

Partner with OROleafhr as Your Cannabis PEO of Choice

OROleafhr is passionate about helping your cannabis business bloom. Our programs specialize in HR management and operations that support and grow your cannabis business. Oroleafhr clients enjoy cost-effective, full-service HR solutions that streamline major functions like benefits administration, payroll, tax compliance, risk management, and safety. Save time, money, and get peace of mind that your HR function is in good hands.

Contact us to outsource your HR needs and focus on building your business.

The content provided is for informational purposes only and does not constitute legal or tax advice. Federal and state laws and regulations are subject to change.


Download the ebook pdf for easier reading: