3 Common HR Errors That Can Cost Your Small Business Money

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If you launched your business with only a few employees, a professional-dedicated HR department may seem unnecessary. However, failure to lay the groundwork for solid policies and procedures can cost you in the future. Personnel issues can become unwieldy as your small business grows, forcing you to take a new tack that may not sit well with employees who have grown accustomed to the way things are. Think ahead to where you want to be and avoid these common mistakes.


Devoting too much time and too many resources to hiring and onboarding

Turnover is costly, so you do want a rigorous vetting process when hiring. However, spreading job interviews over days and weeks can result in losing great talent to larger firms with more aggressive recruitment methods, particularly as the labor pool tightens. Collect resumes and quickly sort. You should be able to toss ones that are unsuited for the position and narrow down the talent pool to a number you can interview in one day. There is no need to drag out the process. Ask each interviewee the same set of questions, and at the end of the day, select the best candidate. Create an onboarding packet of necessary forms and instruct the successful applicant to have them completed before the first day of work. Look into automating as much of this process as possible.


Lack of clear, consistent and fair policies

Don’t put off creating an employee handbook. It is imperative that all employees understand policies and expectations. The handbook should include job descriptions, a comprehensive explanation of benefit packages and company policies. There should be no doubt about what an employee can expect from you. Is there a dress code? Does vacation time rollover year-to-year? Failure to provide this information can result in lawsuits and claims with the Department of Labor, which are costly propositions that can be avoided when policies are in writing.


Failure to keep up-to-date with employment laws and regulations

Do you know the difference between exempt and non-exempt positions? Are your contractors truly contractors, or will the IRS view them as employees? Are you making appropriate accommodations as required by the Americans with Disability Act (ADA)? If you aren’t sure of the answers, you could be making costly mistakes. Either read up on federal and state labor laws yourself or hire an employment expert, preferably a lawyer, to clarify how your employees should be classified and accommodated.  


Think of your HR department as a foundation from which your workforce will grow. A hastily built structure may support your employees for a while, but as you grow, the complexity of personnel issues will require a concrete platform. Begin with that solid foundation, and you won’t lose time and money trying to retrofit your HR department.



This article was written by Gillian Burdett for Small Business Pulse