11 HR Mistakes Your Small Business is Making

Your business and management team are (for the most part) focused on growth, customer service, and the bottom line.  But your employees are essentially the backbone of your business—shouldn’t they be taking up a little more of your time?  HR mistakes can lead your business down a dark and a dangerous path.  Improper documentation, hasty actions, and vague policies can all lead to legal entanglements, fines, or even forcible closure!

Even if you don’t have dedicated HR personnel (or even an HR person), you have to take these matters seriously in order to avoid painful, costly snags that can set your business back. The first step is recognizing what you’re doing wrong.

The following are 11 of the most common HR blunders that small businesses—even yours—are making right now.

Not Having Policies In Place

A policy handbook should be one of your first priorities once your business grows beyond its founders.  Even businesses with as few as two individuals may benefit from some actual concrete documentation.

The policy handbook should cover everything from sexual harassment to employee dress code – to even more complex issues like employee classification and benefits packages.  Having these policies clearly defined before an issue arises will allow you to avoid many of the typical showstoppers in the first place (and deal with them smoothly, should they occur).

Failure to Properly Onboard

When you hire a new employee, you have to do more than just point out where the break room and bathroom are.  These people are going to be the future of your business.  You should value each and every one of them and work hard to build a strong employer-employee bond.

Good onboarding goes far beyond simple orientation programs.  It’s a comprehensive training and culture acclamation system that even small businesses can use to build better employees.  Unfortunately, most businesses don’t bother, and – as a result – employee potential is often wasted.

Misclassifying Employees

For taxation and legal purposes, employees must be properly classified.  Everyone who isn’t an independent contractor should be classified as either hourly, salaried overtime exempt, or salaried overtime non-exempt.  These are legally binding classifications that have important implications about how you pay overtime, report income and much more.

For more information about how to define these classifications, contact a tax professional or your state’s department of labor.  You don’t want to have to pay back overtime because of a clerical error… do you?

Misunderstanding (or Ignoring) State and Federal Labor Laws

State and federal labor laws essentially dictate who can work where and for how long.  Minors, residents, and non-resident employees are all subject to different labors laws on both the federal and state levels.  It is your responsibility as the employer to understand when and where employees can and can’t work.

For instance, minors are often prohibited from working certain shifts when school is in session.  Again, refer to your state’s department of labor for more information and avoid the fines by getting it right the first time.

Incomplete or Inaccurate Documentation

Make sure your employee’s work history is being accurately recorded.  This includes everything from performance evaluations and raises, to disciplinary action and time off requests.  Having this information prepared beforehand is crucial when it comes time to terminate that employee for one too many tardy infractions. If you’re not recording it properly, you’re setting yourself up for a potential legal hassle.

Not Treating Every Infraction as Important

Every disciplinary action should be documented as if it were the most egregious offense you can imagine.  Small businesses tend to have a laissez faire attitude toward discipline – if infractions don’t cross an imaginary line, they’re often dealt with via a simple “talking to.”  That may be well intentioned, but letting bad behavior slide could set you up for even more offensive occurrences in the future.  If it’s bad enough to require any action, it’s bad enough to require the right action.

Vague or Missing Job Descriptions

Job descriptions are an essential managerial tool.  They allow your managers to gauge employee performance and provide leverage during counseling or training sessions.  Without them, not only do your employees not know what they’re responsible for, your managers don’t either.  This can often lead to a disastrously imbalanced workload, employee conflict, and bad attitudes.

Believing the Open Door Actually Works

The open door policies that many businesses put in place sound good on paper and in theory, but they often just won’t work for employees.  People don’t actually believe they can report wrongdoings without some sort of ramification—it’s not how they’ve been raised.

Instead, consider allowing your employees to report things anonymously.  By adding that additional layer of security, you’ll encourage one-way communication (and that’s better than no communication at all).

Failing to Keep Up with Legislation

Labor laws, wage laws, and licensing regulations have a nasty habit of changing at the drop of a hat.  While the departments of labor and other applicable agencies are responsible for getting the word out, businesses can be held responsible for infractions even if they “never got the memo.”  It’s your duty to keep on top of new legislation to make sure your business is operating as it should.

Firing Without Due Diligence

Even in at-will employment states (states in which employees and employers can terminate their working relationships without prior notice), you can’t just fire an employee.  Well, you can, but you should be expecting a lawsuit if you do!

There has to be accountability on both sides (which is where that aforementioned accurate documentation comes in handy), and you really do have to have a reason for terminating someone’s employment.  That reason may be as simple as, “we no longer need your services this season,” or as complex as multiple employee harassment infractions.  When you do your homework and keep accurate tabs on your employees, you’ll have the ammunition you need when the time comes (if it ever does).

Failing to Vet Applicants Thoroughly

The number one way to avoid employee headaches is to hire great people right off the bat.  Unfortunately, most small businesses don’t vet incoming employees well enough.  A few simple questions and the threat of a background check are pretty much all that’s offered before the person is hired on.

That’s not going to be good enough if you’re looking to build a solid staff of high-performance individuals.  Dig deeper, conduct second interviews, contact former employers, and actually follow up with references.  Do what you can so you’re not constantly relying on “your gut.”

Many of these common HR mistakes can be easily avoided by setting aside time to deal with them before they become problems.  Take the time to call your department of labor and ask for literature on applicable labor laws, write an effective policy book, and encourage employees to respect and value the company they work for—your company!  It’s not rocket science, but it will take a good deal of effort.

After all, everything from profits to potential hinges on your employees.  They are the most important part of your business.  Isn’t it time you started treating them like it?