Employer Insights

Common HR Mistakes Small Businesses Make & How to Avoid Them

by Employer Pass, on Apr 12, 2021 11:44:30 AM

Small businesses -- companies with fewer than 500 employees -- tend to find it challenging to keep up with the businesses' human resources (HR) needs whether they have HR software solution or not. Managing a workforce and the effort required to keep up with constant changes in labor and employment laws, tend to be costly burdens for small businesses. Falling behind can include consequences such as an inability to attract the best talent, low employee retention rates, poor employee performance, and the risk of lawsuits with steep fines or penalties.

HR problems are one component of the seven hazards facing growing businesses that can threaten the livelihood of your small business. Learn more about common problem areas in which these HR mistakes occur and ideas on how you can sidestep them.7 Hazards Facing Businesses CTA Vertical

Poor Recruitment Process Planning 

Attracting the best candidates through good talent acquisition practices is one of the top priorities of a well-run HR operation for small businesses. Recruiting strong candidates, however, requires that you have a clear understanding of the kinds of qualities, skills, and experience needed to fill open job requisitions. Identifying the ideal candidate for these roles requires you to be cognizant of your company culture and whether or not this person can be an ideal culture fit. This tends to be especially important in the intimate work environments that small businesses present.

Building an image of the ideal candidate, assembling well-defined job descriptions of open positions, and creating a straight-forward process for screening resumes, interviewing applicants, and hiring employees can require a great deal of recruiting skill. To do it all quickly enough to ensure that candidates aren't lost to the competition requires a system that is designed to track applicants efficiently. A fast-moving HR department that isn't mired in corporate bureaucracy is often a quality that attracts great candidates away from bigger companies that can offer better compensation and benefits. Recruitment can be challenging for small businesses, ensure you allocate the proper internal resources or leverage third party recruiting firms / recruiters up front to prevent falling behind.

Limited Focus On Employee Performance and Feedback 

Many small businesses tend to be informal when it comes to providing employees with feedback or conducting performance reviews. Feedback tends to be sporadic and verbal, with limited to no written records or documentation. 

It's important to understand, however, that when underperforming employees are terminated, not having proper supporting documentation or paper trails can open up employers to risk of lawsuits around discrimination, unfair behavior, or related accusations. A performance evaluation, will help document communication for under achieving, problem employees as well as top performing employees, so the appropriate action can be taken to continuously maintain and improve the business. 

Local, State, and Federal Employment Law Non-Compliance

Laws governing employment, commonly referred to as labor laws, tend to change on a regular basis. Recent rights movements, especially, have pushed various employment jurisdictions to enforce higher minimum wage rates, improved sick time and leave benefits, and other employee protections.

Some of these labor laws only govern businesses with more than 50 employees; others, however, affect businesses of every size and shape, or industry... Being unaware of constantly changing legislation can place employers at risk of large penalties, fine, or even lawsuits from employees. 

Not Documenting Policies and Procedures in an Employee Handbook

Small businesses often skip the essential core HR step of recording and distributing information about workplace policies and procedures in an employee handbook. When there are no clearly written rules on discipline, discrimination, and workplace conduct, it can be hard to prove in a dispute that employees are treated in a consistent manner. Especially when employees' rights are not properly documented in the workplace with up-to-date labor law posters. conveying employees' rights in the workplace.  

Neglecting Employee Training and Development 

Investing in ongoing development of employees is essential - from the moment an employee is hired to the time they leave the company. Making it clear that you believe in your employees, are invested in developing their skills, and that they have a future with the company beyond their current job can offer a variety of intangible benefits to both employers and employees alike.

Even for small businesses with modest budgets, neglecting to make room for ways to invest in continued workforce development and education can result in employee dissatisfaction and poor performance.

Classifying Employees Incorrectly

Small businesses often misclassify employees as independent contractors in order to save on the considerable burdens of workers' compensation insurance, employee benefits, and payroll taxes. The IRS is aware of this practice, however, and tends to audit small businesses for such transgressions. To avoid stiff penalties, employers need to consult payroll or HR experts or labor law attorneys to make sure that worker classifications are in compliance with various laws. Unfortunately, the need for staying within payroll compliance tends to get lost amid the pressures of various day-to-day responsibilities.

Whether your small business runs an in-house HR department or not, it's important to consider bringing in outside expertise or HR software to help manage and streamline processes. Signing up with a professional HR outsourcing provider is likely to offer small businesses the kind of professional HR compliance, benefits administration, and worker morale that larger businesses take for granted.

An HR services provider is able to commit resources to keeping on top of regular changes in employee rules and statutes and giving small business employees the talent management they deserve, all while helping make sure that small businesses are able to concentrate on what they do best. Outsourcing HR for  small businesses allows them to free up time and resources to focus on the business of their business. 

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Topics:ComplianceHuman Resources

About The Employer Insights Blog

The employer insights blog is where you can stay up-to-date with all the latest developments you need to be aware of as an employer, so you can focus on the business of your business. 

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