5 Common Small Business HR Mistakes

Dealing with human resource (HR) issues can be challenging at times for any company, but especially for smaller companies. With business owners and management teams focused on growth, customer relations, and being as profitable as possible, small companies quite often lack the resources and expertise needed to make sure mistakes aren’t being made when it comes to handling employees.

It’s no secret that HR mistakes can cost companies a lot of time and money. In many cases, these mistakes are unintentional and arise when the business owners and management teams are unaware which HR laws apply to the company and therefore incompliant.

Below are the five common HR mistakes that many small businesses make. It’s important to avoid these common mistakes, which can cost a business a lot of time and money if they aren’t addressed properly.

    1. Not Having an Employee Handbook. Employee handbooks are not just for large employers—they are important for small companies, too.  A small business owner may not see a need for one to exist but there are many reasons why one should.  The employee handbook communicates expectations about how employees are to act, what happens if they don’t meet those expectations, and prevents unexpected “surprises.”  They also help protect employers as clear policies and procedures help prevent liability.
    2. Missing or Vague Job Descriptions. Quite often job descriptions are not clear or accurate.  Job descriptions are a critical tool for companies. They allow managers to gauge employee performance and without them employees and managers don’t know what they are responsible for.  They are also a critical component to a company’s recruitment and hiring process because they will help identify qualified candidates that can meet the basic requirements of that job.
    3. Not Properly Classifying Employees. Many small companies don’t know the difference between a full-time employee, part-time employee, contract worker, and independent contractor.  However, there are strict laws that apply to an employer regarding whether to pay someone an hourly rate or on a salaried basis.  Also, many companies think they have contracted with an independent contractor only to find out that this isn’t the case. To avoid costly mistakes in properly classifying employers, it’s important to check with a tax professional or the department of labor. Getting this right will provide protection from being sued by an unhappy employee for past-overtime pay or back wages.
    4.  Incomplete Documentation. One phrase that applies here is, “Document, document, document!” It is very difficult to discipline or fire an employee without the proper documentation.  It is also important to address any employee issues right away rather than wait. After an issue is addressed, it is important to document what happened and come up with a correction plan so the employee knows how to improve.  This includes everything from performance evaluations, raises, and time off requests.  If proper documentation doesn’t exist, legal issues are likely. Firing an employee without due diligence can be very costly.
    5. Not Understanding Basic Employment Law. Many federal and state laws are not well understood and some employers don’t think they even apply to them. This can be a very costly mistake. Some of these laws include: age and gender discrimination, overtime and minimum wage requirements, discrimination, family leave, pregnancy discrimination, military leave, immigration and safety in the workplace.  It is important to keep up to date with these laws as well as changes that happen. It’s an employer’s duty to stay on top of new legislation. These laws and regulations do change often.

These are just five of the common HR mistakes that happen in small businesses, but there are numerous others (like hiring the wrong person for a job) that can be costly in many ways, including workers compensation costs, finding replacement employees, and potential lawsuits.  It’s important to take the time to find reliable HR resources that be depended on. Many of these common HR mistakes can easily be avoided by dealing with them before they become problems.

HBE is Here to Help

Through our partnership with UNICO Group, HBE offers expert HR advice and answers to complex HR questions. For more information, please contact Mike Kottwitz, HBE Manager, at 402.423.4343 or Carl Zeutzius, Director of UNICO HR Solutions, at 402-434-7275.

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