The 10 Biggest HR Blunders Small Businesses Make

Do you think managing a small business is easy? Well, the answer is no. From marketing, accounting, to human resources, there are a multitude of responsibilities to take care of. While most businesses lay more stress on marketing, and accounting, human resources management often lags behind. Juggling a plethora of HR tasks often leads to mistakes, which can further impact your business. That is why it is important to manage human resources in an efficient manner. Read this article to know about the roles and responsibilities of the human resources department and the common HR mistakes that small businesses make.

Table of Contents

What is an HR department?

The HR department is responsible for managing the yeeyee life cycle right from recruiting, training to firing employees. It is also responsible for administering employee benefits.

What are the roles and responsibilities of an HR department?

Let’s take a look at the roles and responsibilities of an HR department:

Recruit Candidates

Before recruiting new candidates, HR needs to understand the needs and requirements of the organization. For this, it is important to analyze the market, consult stakeholders, and manage budgets. Proper research needs to be done for recruitment so that the right candidate is found.

From arranging interviews, coordinating hiring efforts to onboarding new employees, the HR department is responsible for all recruitment activities. They also need to make sure that all the paperwork is done correctly.

Process Payroll

It is the responsibility of the HR department to calculate the taxes for each payday. All the expenses need to be reimbursed and bonuses need to be added. HR needs to make sure that all the calculations are done properly.

Conduct disciplinary actions

If any employee violates the rules and regulations of the company, then it is the responsibility of HR to take disciplinary action. If not handled properly, disciplinary action can even result in loss of an employee. That is why it is very important to investigate the case properly and take necessary action only when required.

Update Policies

It is the job of the HR to update the policies of the organization regularly. Also, an HR manager can suggest any changes that need to be made in the already existing policies of the organization. In case, the employee has any queries related to the company policies, HR should be available to resolve them.

Maintain employee records

It is very important to maintain HR records as it is mandated by law. Through these records, employers can easily identify any skill gaps which can further help the hiring process. They also contain personal details and emergency contacts for each employee.

Conduct benefit analysis

In order to attract the best candidates, it is very important to stay competitive. A good employee may choose another company with lesser pay if the benefits are more appealing. That is why it is important for the HR to conduct a thorough analysis of similar companies to check if the benefits are comparable.

Common HR mistakes that small businesses make

Let’s take a look at some of the HR mistakes that small businesses make:

Not completing the employee handbook

If you have an incomplete employee handbook, then it can result in regular violations of the company policies and can hamper employee performance. The handbook helps in handling work-related issues with the employees. If you want your employees to follow the rules and regulations of the workplace, then you must get that written in the handbook, only then can they will be legally valid. This will ensure compliance with the employment laws.

Messing up tax documentation

One of the biggest mistakes that small businesses make is not classifying the employees correctly. If you don’t register the employees correctly with the IRS, then it can result in tremendous financial penalties.

Also, you need to keep a copy of forms W-4 and W-9 of every employee with updated social security numbers, names, and addresses with your records. This will help you sail through the process smoothly even during the IRS audit.

Failing to adhere to Labor Laws

Understanding labor laws can be very difficult as they vary by state and due to the overlapping federal, state, and municipal laws. For example, federal laws enable children to work while school is in session, but local laws depict the exact date of the beginning and end of the session.

Make sure your business complies with all labor laws-especially child labor laws, non-resident labor regulations, and equal rights legislation. These are the most important laws related to small business. violating such laws can result in huge losses.

Inaccurate overtime payments

Overtime law can turn out to be quite confusing for small businesses as it varies by state. For example, in California employees are paid time and a half payment for more than 40 hours. However, the employee needs to work for more than eight hours in one workday. If the employees work over 12 hours a day, double time is guaranteed. On the other hand, in Maine, employees are only provided time and a half payment if they work for over 40 hours.

It is very important to classify the job of the employee correctly to calculate correct overtime. Hourly workers require overtime after 40 hours, while salaried workers are often exempt unless they are classified as non-exempt. In such cases, employees need to be paid overtime according to federal and state laws. This can be very confusing. That is why HR professionals need to have a clear understanding of federal and state overtime laws.

Incorrect employee documentation

As Department of Labor officials, IRS agents, and investigators from Immigration and Naturalization Services, check employment records regularly, it is very important to have accurate employee documentation. This will include the employee’s residency status, job classification, tax and social security information, legal residence or mailing address, and other information as required by law. In case the information you provided is incorrect, incomplete, or fraudulent, then your business could face substantial financial penalties or even legal action.

In case you have any doubt regarding the information, you can take help from your employment lawyer.

Unclear Job Descriptions

Having clear and concrete job descriptions is very important for the smooth functioning of the workplace. Having unclear job descriptions would make employees have their own ideas about their job. This could lead to great confusion. That is why it is important to sit down with HR representatives and department managers to frame clear job descriptions.

The descriptions should include the physical requirements of the job, hours of availability, and certain skills or certifications if required. You should also tell the employees beforehand whom to report to for guidance. This will help in preventing any disputes related to the roles and responsibilities of the employees.

No proper training of the employees

Most employers think that training employees will cost more time and money. However, this is a common mistake that people make. Hiring a replacement is more expensive. Also, every new employee will need more time to adjust to the surroundings. That is why training the employees is a much better idea as it will also improve the morale of the employees and help them understand your business in a better manner. The orientation process and the training can begin during the onboarding process.

Poor retention planning

Recruiting good candidates is not enough, retaining them is important too. Do you know the average cost of losing a good hire can be $29,600? Most good companies leave no stone unturned to figure out what really motivates employees in order to improve the retention rate.

According to research, it has been found that top employee needs and experience factors are job security, work-life balance, financial stability, physical and mental health, having supportive coworkers, etc. When you take initiatives in these respects, then you will see an increase in productivity, engagement, and employee well-being.

Unsecured data

Whether you have a small company or a mid-size company, you can face huge risks due to data theft and breaches. This can result in huge losses along with brand reputation issues. That is why it is important to train employees on using best practices for data security. Passwords should be strengthened and updated regularly in order to avoid malicious breaches for companies.

Skipping the Performance Review Process

Most employers in small businesses don’t give importance to the formal review process as they give feedback to the employees regularly. So, they think that it may be unnecessary to conduct a formal review process. But this is a wrong practice that should be avoided. Giving feedback is good, but it is quite important to schedule time regularly for assessing the performance of the employees in a more structured manner.

Such types of quarterly or annual reviews help to evaluate the employee’s role within the company. They also help to set clear goals and objectives. Another benefit is that they help in determining employees’ pay and benefits packages. In case anyone is not performing well, you need to deal with them and document it in the formal process so that no problems arise later. That is why performing job performance evaluation is important.

Conclusion

Most businesses make such HR mistakes at some point or the other. Talk with your HR professionals and pay more attention to authenticating things accurately. Always cross-check your work before dropping your records. Being more careful during the hiring process can save your company a few bucks in the long run.

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Key Takeaways

The HR department is responsible for managing the employee life cycle right from recruiting, and training to firing employees
There are various roles and responsibilities of the HR department including recruiting candidates, processing payroll, maintaining employee records, taking disciplinary actions when required, updating company policies, conducting benefit analysis, and a lot more
There are a multitude of common HR mistakes that small businesses make
Having an incomplete employee handbook can result in regular violations of the company policies and can hamper employee performance
One of the biggest mistakes that small businesses make is not classifying the employees correctly. If you don’t register the employees correctly with the IRS, then it can result in tremendous financial penalties
Understanding labor laws can be very difficult as they vary by state and due to the overlapping federal, state, and municipal laws. Make sure your business complies with all labor laws-especially child labor laws, non-resident labor regulations, and equal rights legislation
Overtime law can turn out to be quite confusing for small businesses as it varies by state. It is very important to classify the job of the employee correctly to calculate the correct overtime
As Department of Labor officials, IRS agents, and investigators from Immigration and Naturalization Services, check employment records regularly, it is very important to have accurate employee documentation
Having clear and concrete job descriptions is very important for the smooth functioning of the workplace
Most employers think that training employees will cost more time and money. However, this is a common mistake that people make
Recruiting good candidates is not enough, retaining them is important too
Whether you have a small company or a mid-size company, you can face huge risks due to data theft and breaches. This can result in huge losses along with brand reputation issues. That is why it is important to train employees on using best practices for data security
Skipping the performance review process is a big mistake that should be avoided
Paying more attention during the hiring process can help to avoid such common HR mistakes