Team Management

The 6 Biggest HR Blunders Small Businesses Make

Matt Faustman CEO & Co-Founder, UpCounsel 

Who said starting a small business was easy?

One particular operational headache facing owners is small business human resources (HR).

Without a doubt, you’re looking at a massive undertaking to ensure the human resources for your business are properly managed. Think about it. If your employees aren’t regularly getting their paychecks, benefits aren’t received correctly, or your employees don’t have the proper training to do their job, your company isn’t going to last very long.

The key to successfully managing HR is to keep in mind these common HR mistakes—and to learn how to avoid them completely.

1. Your employee handbook isn’t complete

Most companies have one in some form or another, but employee handbooks are infamous for being incomplete and dated. This one book can be considered a corporate bible.

You want your employees to follow certain rules, but if they’re not in the handbook in plain English, you won’t have much legal recourse if an employee falls out of line. Written information is power. Legal power. Be sure it’s all written down.

2. Screwing up your tax obligations

Who doesn’t wipe their brow of stress over dealing with taxes? There’s a reason Benjamin Franklin labeled it next to death. The IRS is absolutely notorious for sheer accuracy and methodology.

So as a small business owner, you have to make sure you classify your employees correctly. Improperly registering your employees with the IRS could result in financial disaster for you and your worker.

In addition, make sure to keep a copy of every employee’s W-4 and I-9 form with updated Social Security numbers, and names and addresses with your records. It will ensure smooth sailing and reduce the time spent wading around old documents in the event of an IRS audit.

3. I fought the law… and the law won

Honestly, this concept makes taxes look like a cakewalk. It’s no surprise that small businesses out there can flub the issue of ensuring their business is operating legally—municipally, statewide, and federally.

You might have a particular business where you can hire individuals below the age of 18. Be sure you don’t schedule those kids during school sessions, because federal law prohibits that. That’s just one example of how you need to monitor the laws and ensure that you adhere to them.

Specifically, there are three aspects of labor laws you need to keep watch over:

These three aspects of legal issues for your business can make or break your company.

4. Overtime can be plenty confusing

Even large corporations can have trouble with overtime laws. Why? Because even employees may end up not paying attention to just how many hours they work per week. It requires a lot of math.

Here’s an example of how overtime can be utterly painful. California, specifically, requires time and a half payments for hours worked over 40 per week as well as hours worked over an 8-hour shift per day. Additionally, double overtime is allowed for employees working over 12 hours in one day.

So let’s say you have an employee who worked 46.5 hours in one week, working one shift of 10.5 hours, and another on another day for 13 hours.

You do the math.

And to make it more of a headache, this labor law of overtime not only applies to hourly employees—but to salaried employees, non-exempt employees and even independent contractors. Imagine doing the math for someone receiving a yearly salary.

5. Paperwork, paperwork… not documenting your employees correctly

I mentioned that the IRS is a stickler for accuracy. So is the United States government. Just as you should observe the labor laws as well as document that employee handbook to a tee, you need to ensure that documentation of every single employee is completed successfully, succinctly, and correctly. You’d be dealing with any or all of these at the same time to ensure everything about your employees is correct:

  • Department of Labor Officials
  • IRS Agents
  • Immigration and Naturalization Services Investigators

Moreover, you’ve got to be dead-on accurate in documenting these pieces of information:

  • Residency Status
  • Job Classification
  • Social Security Information
  • Mailing Address
  • Taxes

Double-check, triple-check, infinity-check. Make sure it’s all correct. The worst of it is this: if they’re not correct, you could be penalized financially, possibly even facing legal action.

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6. “This was not in my job description”

It is, of course, a given that an employer would naturally assume that the job should be done correctly. But how can your employees do their job correctly if they don’t know what their jobs are?

Vague job descriptions are a death sentence for business operations. You’ll have everyone stepping on everyone else’s feet, crisscrossing, looking confused. And in the midst of that chaos, nothing in your company is getting done.

Before you get those new job postings up, sit down with your HR team and write succinct, clear and defined roles. Make sure your potential candidates know exactly what it is they’ll be doing in your office so that there’s no confusion whatsoever.

Common details include:

  • Hours of availability
  • Skills/certifications required
  • Organizational structure (Who Does the Employee Report to?)
  • Physical requirements (Heavy Lifting, Bending, Sitting, Standing, etc. etc.)

Don’t let these HR mistakes bring you down

They’re simple; and that’s what makes them so confusing.

Every small business, at one point or another, has either made one or more of these, or is faced with the sudden prospect of making one or more of these. Don’t be that small business owner.

Consult with HR professionals if you need to. Talk to a qualified business lawyer if you have to. More importantly, just make sure you dot that ‘i’.

Updated: November 1, 2019

Matt Faustman
Matt Faustman Matt Faustman is the co-founder and CEO at UpCounsel, the fastest growing legal solution for businesses.

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