4 HR Mistakes Your Small Business May Be Making

When you are busy starting or running a small business, it is easy to push human resource management to the side, failing to give it the proper attention it commands. Even innocent mistakes can carry serious monetary fines, penalties, and costly legal action.

Here are a few we see regularly:

Mistake #1—Lax Vetting of New Hires

Ensuring you hire the right people is key to the success of your business. Sometimes, however, managers hurry through the hiring process to quickly “staff up,” hastily hiring candidates. Assuming you can take someone “at his/her word” can be a costly mistake.
Taking a simple step such as checking references or conducting background investigations (depending on state laws) may seem to slow the hiring process down but these efforts can prevent major headaches in the long run.

Mistake #2—Falling Behind Regulations
Keeping up with the myriad of state and federal labor laws can be a daunting effort for businesses of any size. Don’t be tricked into thinking that just because you are “small,” you don’t have to comply. Even businesses with only a handful of employees have to uphold basic labor laws governing minimum wage, overtime requirements, record keeping, employing minors, and more.

Mistake #3—Misclassifying Employees
Correctly classifying employees can prove to be a challenge for any business that might make mistakes when trying to lower costs or simplify payroll. Incorrectly classifying employees will cost you significantly more in the long run, however, risking legal action that finds you at fault and responsible for back pay, back taxes, penalties, applicable attorneys’ fees, and more.

The most common classification errors relate to the following:

Independent contractor vs. employee – affects wage rate, work hours, overtime payment and withholding tax decisions.
Nonexempt vs. Exempt employees – affects wage rate, work hours and overtime payment decisions.
Regular full-time vs. temporary full-time employees – affects work term and schedule decisions and benefits eligibility.
Regular part-time vs. temporary part-time employees – affects work term, schedule and weekly hours decisions, as well as benefits eligibility.

Mistake #4—Outdated or Nonexistent Employee Handbook
Employee handbooks are important for both the employee and the employer. Employees benefit from a tangible reference guide. Employers benefit from a resource that they can point to should any disciplinary disputes or lawsuits arise.

To be effective, however, you must ensure your handbook is:

Regularly updated to reflect current policies and procedures
Repeatedly disclosed to new and existing employees, particularly when updated
Supported by a signed form confirming each employee’s receipt of and agreement with company policies.

It is also important to maintain proper documentation— of employee performance evaluations and raises, disciplinary action and time off/leave requests. Both of these efforts will keep you doubly prepared should any legal action be brought against you or your organization, and can help to reinforce any termination decisions.
Don’t fall prey to these common mistakes. Outsource to an expert. Whether you need comprehensive HR and risk management, benefits administration support, or customized payroll solutions, Sheakley can help. Contact us today (1-800-877-5055) to learn more.