“I can’t afford to pay my employee overtime, so I made them salaried.”
I get this type of email from readers all the time. In every case, it’s a small (and often family-owned) business and the owner has no clue that you can’t just “decide” to make someone salaried.
Being a first-time manager ain’t easy. There are tons of employment laws and it’s pretty hard to memorize them all. Plus, managing people is just plain hard. How are you supposed to balance your employees’ needs with what’s truly best for your business?
That’s why business owners tend to make a lot of rookie missteps. Luckily, here are five mistakes you can easily avoid.
Mistake #1: Forgetting employment laws actually apply to you.
Just because all your employees are family, or you only have six people working for you, you might think it’s okay to make paychecks a bit late, or give everyone a salary rather than pay overtime.
While many laws kick in when a business hits certain employee levels, they usually don’t affect things like pay.
Even with one employee, you have to pay that person correctly. The Fair Labor Standards Act requires you to provide overtime pay to any employee that doesn’t meet one of the exemption categories.
These are the three big rules you should remember:
- You need 15 employees before you’re subject to Title VII of the Civil Rights Act of 1964.
- You need 50 employees before you’re required to grant protected leave under the Family Medical Leave Act.
- There might also be state-specific regulations that apply to your business, even if the federal ones do not. Visit your state’s labor department for more details.
How to stop making this mistake:
- Check with an HR consultant or an employment attorney before you put anyone on salary. State law governs when and how employees have to be paid—even when that employee might be your nephew. This FLSA exemption test will give you a good place to start.
Mistake #2: Acting way too strict.
Good managers are fair. And “fair” means that you have to treat everyone the same, right? This is one of the biggest mistakes I made when I was a new manager.
One day, my boss told me that no one was allowed to work from home. Because she was my boss, obviously I took what she said to heart. The only problem was that I enforced her rule when an employee I managed had a serious personal issue. And that wasn’t okay.
My boss overruled my decision, as she should have. But it taught me a valuable lesson: Rules are good, but you shouldn’t always follow them.
How to stop making this mistake:
- Run through this list of questions that will help you think through any tough workplace decisions.
Mistake #3: Only promoting and hiring your friends and family.
Here’s another question I get a lot from readers: “Can I promote my brother?”
Yes, of course you can. But only do it if they’re truly qualified for the job.
If your employee isn’t qualified, they aren’t the best fit—period. Plus, nepotism and favoritism are types of discrimination and shouldn’t be tolerated by you or anyone at your business.
Sharing blood or history doesn’t automatically make someone a good manager. This isn’t to say you shouldn’t hire your friends and relatives, but only do so if you make it clear that they will be treated like everyone else—and that means earning their pay.
How to stop making this mistake:
- Cover your bases by putting together an anti-nepotism policy with an employment lawyer.
Mistake #4. Forgetting to take a break.
Your business is your baby, and like any good parent, you’ll do anything to take care of it.
The reality is, as any new parent will tell you, you need a break from that baby before you lose your mind. Babies take naps, but businesses never sleep. And therefore, it can be easy to burn out.
Yes, a business requires a huge time investment. But if you never take any time off you won’t be the best boss you can be. Your employees need time off and so do you.
How to stop making this mistake:
- Read this primer on how to set up a solid PTO policy. Then, put it in place and take some much-needed time off.
Mistake #5. Not calling in the experts.
If you’re an entrepreneur, you started your business because you had a genius idea. You could do something better than other people and/or you had an idea that would make people’s lives easier.
The thing is, being a business owner doesn’t mean you’re an expert in everything. Some new managers balk at the thought of paying for advice. But remember, it’s usually cheaper to pay an attorney for advice than it is to pay that same attorney to defend you in a lawsuit.
If you aren’t 100 percent sure about something, find someone who is.
How to stop making this mistake:
- Hire an accountant and other experts like lawyers and brokers.
- Join small business networking groups.
- Get advice from certified HR pros.
Being a new manager is hard, so don’t make it harder by falling for these mistakes. Luckily, you can nip them in the bud by setting up policies, talking to experts, and using good old-fashioned common sense.
Lots of business owners make these missteps, but if you can avoid them altogether, your business—and your team—will be way better off.
