Top 9 Small Business HR Mistakes Employers Should Avoid

DEC 29, 2020

HR issues are often overlooked the in the scramble of managing a small business. Here are the top nine HR mistakes employers make and how to prevent them.


Starting a small business takes commitment.


From the work involved in creating a detailed business plan to simply building the motivation and confidence to embark on such a significant endeavor, entrepreneurs must be all-in if they are going to make it work.

Unfortunately, that commitment to so many aspects of running a business often means business owners are stretched thin. They must perform multiple roles, from management to marketing to payroll. While sheer force of will allows many small business owners to overcome these hurdles, it’s natural for some responsibilities to fall through the cracks or at least receive less attention. The human resources element of the business is no exception.


Ineffective HR practices can be costly to a small business. Even when dedicating a specific manager for HR duties, small-business HR departments are often as buried with responsibility as the owners.


Here are nine common small business HR mistakes to avoid when building and running your business.


Unspecified Policies


When starting a business, it is essential to clearly outline your company’s policies. This may not seem as important as getting bills paid, but these guidelines for how you expect employees to interact with one another are essential. Too often, new businesses do not put together an employee handbook, and established businesses do not update theirs to reflect changes.


Clarifying your expectations can only benefit your business, avoiding headaches down the road with a staff operating on a mutually recognized set of guidelines. Employees should sign off that they have read and understand the company policies to make sure you’re all on the same page.

Poor Hiring Practices


The hiring process can be lengthy and difficult, but that effort is essential in finding qualified candidates who fit the role you need to fill. Without dedicated hiring efforts, you could miss out on the best candidates. In some instances, complacency could even mean possible discrimination claims if your job posting and hiring process isn’t up to EEO standards.


Take the time to carefully vet candidates from resume review to their first day of work. Don’t skip any step in your process and do your best to really get to know who you’re hiring. In fact, WHO by Geoff Smart and Randy Street is an excellent resource to consider.

Not Documenting Performance Problems


Having a defined record of any performance issues can not only mitigate risk but also help employers notice troubling trends to remedy in their workplace. Communication is key. Make sure to have open and honest conversations complete with notes and follow up documentation. Utilize standardized forms and follow the same process each time for consistency and compliance.

Deadline Delinquency


So many small business owners are short on spare time. Still, there are many paperwork deadlines they need to be aware of. Some may view human resources as balancing the relationship between employers and employees, but compliance with benefits is another essential HR responsibility. For example, the government sets time limits for submitting new hire, tax, and healthcare information and missing those deadlines could be costly.

Payroll Problems


Payroll errors can be costly. Examples might be misclassification of employees, improper timekeeping, incorrect tax calculations, minimum wage updates, or overtime mistakes. There are payroll and timekeeping services that can take these responsibilities off a business owner’s plate by providing direction and expertise.

Insufficient Onboarding


The onboarding and training process is essential to getting employees up to speed as quickly as possible. Develop a standardized and automated way to bring your new employees into your business so that they feel welcome and ready to go on day one. This will also mitigate any problems that may arise from incorrect or missing paperwork that could affect payroll, benefits, and training.

Unavailability for Complaints


When small-business owners and their HR reps are so short on time, it can be difficult to set time aside to allow employees to voice their concerns. Go the extra mile to have an open-door policy as much as possible to make sure your employees feel heard and valued.

Sharing Confidential Information


When new employees join your team and take part in the onboarding process, they trust you with their personal information. Confidentiality is not merely a hope, it is an expectation (and in most states, the law). While many small-business HR departments can get friendly with the entire workforce, it is crucial that personal comfort does not result in somebody’s information being divulged, even in a casual or off-hand manner.


Make sure to be clear with all employees as to how their personal information is processed and stored. This is good information to have in an employee handbook which is regularly updated and shared with the entire staff.

Forgetting the “Human”


Human Resource managers have a tough job in maintaining a delicate balance. They must simultaneously shield the company from various risks while making employees feel valued.


Though there are certainly financial and practical aspects to the responsibilities of an HR department, it is important for them to remember the human element of the people in their care.



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