Owning a small business can be challenging because you have to take on multiple roles from management, accounting to human resources. Unfortunately this juggling act can increase the risk of errors which can lead to penalties and costly lawsuits. Here are a few common small business HR pitfalls to avoid.
Rushing The Hiring Process
One of the biggest mistakes a small business can make is having a hasty hiring process and selecting the wrong candidate. CareerBuilder reports that a single bad hire can end up costing a company as much as $50,000. A “bad hire” can adversely affect a company’s production levels, performance, morale and even bottom line.
Create a standard procedure for hiring and conducting interviews and stick with it. Make sure that the advertised job description is clear and concise. Don’t base your entire decision on technical skills; you’ll also want to ensure that you prospective hire will fit in with your company's culture. An investment in branding and reputation management can make your company more appealing to the best candidates. Monitor your company’s mentions on sites like Glassdoor and LinkedIn groups.
Lack Of An Onboarding Plan
Having a strong onboarding process can increase retention and production levels. Onboarding should be an ongoing process and help employees feel more welcome and motivated to succeed. Providing employees with the necessary training and tools to do the job should ultimately improve their performance.
One mistake many small businesses make is misclassifying employees. It’s generally more cost-effective for employers to hire independent contractors since they won’t have to offer benefits or pay payroll taxes. Unfortunately this tactic can also get you into hot water with the IRS and result in penalties if you are treating your contractors as actual employees. Familiarize yourself with the employee classification system and make sure that employees are classified correctly.
Not Having An Updated Employee Handbook
It’s imperative to have an updated employee handbook in order to reduce employee violations and increase transparency. No matter how small your company is you’ll want to have your policies in writing. Employees should also sign a form acknowledging that they have read and understand the rules.
Non-Compliance With State Laws
Small businesses are less likely to have proper checks and balances in the HR department. Seemingly small oversights such as asking an employee to work off the clock or not giving an employee their final paycheck can lead to expensive litigation. Be familiar with your local state laws; for example, final paycheck California regulations requires employers to issue a final check upon termination or discharge. It may be a good idea to have an employee attorney on retainer as soon as your business becomes profitable in order to avoid expensive mistakes.
Addressing and documenting performance issues can help avoid lawsuits when you have to terminate an employee. Documentation provides evidence that the employee failed to improve performance after a period of time. This information can also be used to discipline and promote your workers. Create a process for documenting absenteeism, tardiness, misconduct and low performance and make sure to update it on a regular basis.