When you have a small business, every task counts.
There are no jobs that can be cut, or teammates that can take extended vacations without being missed. Therefore, business owners tend to focus on the roles and tasks that bring in immediate money—sales, engineering, marketing—and tolerate the necessary administration side with an accountant or finance person. Because hey, money matters, right?
Then, the big human resources question looms. HR tasks don’t bring in sales and they don’t create new products, but every small business needs to handle the people side of things. And if you don’t have an HR person, how do you know which tasks to prioritize?
If you’re the one calling the HR shots, here are the functions that will give you the best return on your investment.
1. Staying compliant.
Hands down, your first HR dollars should be spent on staying compliant. You don’t need a full-time HR person to do this, however. Depending on your business size, industry, and whether you have basic HR knowledge, an online resource, consultant, or part-time person can work just fine.
Why is compliance important? Because as soon as you hire your first employee, your business becomes subject to the Fair Labor Standards Act in addition to a bunch of state and local employment laws. That means you need to know how to pay people properly, which includes dealing with the intricacies of overtime pay. From there, the compliance issues keep stacking up:
- How long do you have to keep job applicants’ resumes?
- What does it mean to provide a “reasonable accommodation” to a disabled employee?
- Can you require your religious employee to work on Sunday?
- Are you required to hold a job for a new parent with a baby?
Having a dedicated person or resource that knows the answer to these questions—or even someone to help you come up with the questions that need to be asked—can offer a huge return on your investment.
Not knowing the law can open your business up to government fines and lawsuits from both employees and job candidates. A lawsuit, even one that you eventually win, can easily cost you six figures to fight. In fact, research found that an average employee lawsuit for companies with under 500 employees can cost $125,000 to defend.
While HR experts aren’t (generally) attorneys, they are responsible for knowing enough employment law to keep your business in check, and when to call an attorney for further advice. So hedge your bets and focus on keeping your business in line with the law.
Here are some resources to help you stay compliant:
2. Hiring talented people.
If you currently have 10 people and intend to have 10 people next year and the year after that, it sounds like hiring isn’t crucial. Yes, it may mean you have to hire an outside headhunter to fill the hard-to-find roles, but you most likely don’t need someone full time.
However, if you hope to have 20 people next year and 40 the year after that, spending time on recruiting can be a fabulous return on investment.
Why? Because a vacant position is money lost. When you fill a position it can take months to bring that person up to speed, regardless of their experience and qualifications. Studies have shown that it usually takes around two years for an employee to reach their “optimal productivity.” In other words, you want to get the right person into the job pronto.
To recruit well, you need to understand your industry and have contacts to help bring in people who are a great fit for your business. And remember, hiring is a two-way street. You’re not just looking for someone who can do the job, you’re looking for someone who will be happy and engaged at your company.
Get a leg up on hiring with these three articles:
- How to write a job description people will actually read
- 35 interview questions you should never ask candidates
- An employer’s guide to negotiating salaries
3. Investing in employee relations.
In theory, we left our petty behaviors behind in high school. But in reality, you still have conflicts.
You might have managers who don’t know how to manage and employees who are jealous of other employees. You might have people who think exempt means they don’t have to keep a set schedule or that you can force employees to be on call 24 hours a day. All of these scenarios aren’t dire, they just need to be sorted out.
A good grasp of employee relations will allow you to coach managers on how to effectively lead. This is important—during exit interviews, 11 percent of employees say their managers’ behavior is why they decided to leave.
How is this a return on your investment? Well, that’s easy—engaged employees work hard and don’t quit. One out of five employees leave their jobs simply because they’re not happy anymore. Plus, it costs companies 33 percent of an employee’s annual salary to replace them. So fixing these problems before they get out of hand will save you a fortune in turnover costs—while increasing your team’s ability to stay productive.
Stay ahead of the curve with these resources:
- How to run meaningful one-on-one meetings
- A 4-step plan that will transform your company’s PIP process
- What to say to your team after firing someone
The main thing to keep in mind? Don’t think of HR as a money pit. Proper HR support can keep you compliant, help you find the best candidates, and simply make your office a better place to work. And that’s worth every penny.
The opinions expressed in this article are those of the author and do not necessarily represent Gusto’s views.
This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business.