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8 HR Traps Your Small Business or Startup Should Avoid

Small businesses and startups can be adept at using limited resources to handle a variety of tasks. Or, they may hire inexperienced HR people to manage projects that may be better led by more experienced employees. Ultimately, they do what’s needed to stay on budget and get the job done.

In the area of human resources, these practices are not unusual, but at what cost? Here are some common HR mistakes we see with small and new businesses, and ways to avoid them.

1. Not managing resume flow

When companies are hiring, the influx of resumes can be daunting. Without properly managing the flow of resumes, it can result in an organization paying more than one source – like an agency or employee referral – for the candidate. It can also make it difficult to track where an applicant is in the interview process, and a variety of other problems can arise.

Most startups and small businesses don’t have an Applicant Tracking System (ATS), but a simple spreadsheet can do the trick for keeping tabs on submitted resumes. Your spreadsheet should include the following fields:

• The candidate’s name

• How the candidate found you – i.e. job board, employee referral, recruitment firm

• The position they are interviewing for

• The name of the hiring manager

• The people the candidate met with and when

• The results of the interview

• Communication to and from the candidate

Remember not to make any disparaging or discriminatory comments on the resume or spreadsheet. Also, a best practice is not to write notes directly on the resume.  

2. Not understanding employment laws 

When it comes to hiring, retaining and terminating employees, there are not only best practices, but also laws and regulations that dictate what can and cannot be said and done. When less-knowledgeable managers step into these roles, they not only can offend a candidate or employee, they can set up your organization for a lawsuit. To avoid this, we recommend:

• Make sure managers and interviewers ask job-related questions. You can certainly see if candidates will be a cultural fit by asking behavioral interviewing questions, but try to steer clear of any discriminatory questions that relate to age, sexual orientation or religion, to name a few.

• Arm managers with a list of do’s and don’ts on interviewing and managing candidates.

• Find reputable training sessions or online sources to empower your teams.

3. Misclassifying employees

Exempt employees do not receive overtime while non-exempt employees receive overtime for hours worked over 40 in a week. Smaller companies may not have comprehensive job descriptions but they should have enough information to determine whether the job is exempt or non-exempt. Paying a “salary” does not automatically qualify an employee as exempt; the responsibilities also need to be considered. Things like how much autonomy the employee has, if the job is repetitious or if it requires regular supervision. Help Desk jobs in particular are frequently misclassified as exempt when, in many cases they should be non-exempt and paid overtime. Make sure your teams understand the nuances and apply them appropriately when classifying employees.

4. Not having an onboarding process 

When a new employee arrives on their first day and no one is ready, it’s a tough way to start a new job; it could send a message that the employee is not valued. You only get one chance to make a good first impression; make sure the new employee’s first day is the best it can be. Creating a simple onboarding process will welcome your new team member and ensure you’re covering the necessary steps and topics to create a positive working relationship. Some onboarding tips to consider include:

• Make sure the manager is on-site prior to the new hire’s arrival. The manager can greet the newbie and explain the plan for the day and week. This is the time for the manager to encourage the new hire to contact him or her with questions, and to provide contact information such as extension, email, and cell phone number. 

• Set-up the new hire’s desk. Provide information for their email access, intranet log in, desk supplies, training schedule that includes training topics and people they’re meeting with, as well as the location of the training. Don’t forget a phone list and a floor plan that shows where the restrooms, conference rooms, kitchen and other key areas are located. If you have an organizational chart, include that, too. A small company-branded welcome kit is always a nice touch.

• Walk around and introduce the new employee to others in the office, and make a more formal introduction over email to all employees. Include a picture of the new employee in your email; it will help your colleagues remember to say “Hello” and to welcome them.

• Make sure the new employee is invited to lunch on his or her first day!

5. Not understanding legal, compliance and security requirements

The way you onboard, track and maintain employee files should treat employees and their information with respect and confidentiality. There are also legal requirements to which employers must adhere. Here are some examples to keep in mind:

• Paperwork: Be sure paperwork is complete and filled out correctly. With the I-9 employment eligibility verification form for example, the employees’ identifications must be up-to-date and need to be seen physically, which means this part of the process has to be done face-to-face.

• Compliance: They may not be pretty, but companies need the required posters hung in appropriate places so employees can easily see the information. These posters describe things like wages, hours and workers’ compensation information to name just a few. Certain policies need to be updated and circulated annually, such as the anti-harassment policy. Other policies require trainings. It’s important to know about the compliance laws and to follow them at work. Websites like this can provide more detail.

• Security: Employee information must be secure and not at risk for a data breach. Work with your IT folks to find ways to keep employee information protected. Along those lines, never send confidential information by email unless it’s encrypted.  

6. No off-boarding process

When an employee terminates – either by their choice or yours – have a process in place to help with logistics and to avoid legal issues. Some things to consider when putting together an off-boarding process include:

• Always treat the outgoing employee with dignity and respect. You not only leave an impression with the departing employee, your other employees will be watching to see how you treat people when they leave.  

• Information on final pay and benefits should be properly communicated to the departing employee. In some states, an employee must be paid their final wages on their last day, especially for involuntary terminations.  

• For involuntary terminations, there also may be a requirement to provide information such as “How to File an Unemployment Claim.”  

• Inform the appropriate internal employees of the departure to ensure access to company systems and materials is shut off. Have a process for returning company equipment and files.

• Communicate the termination to other employees and external clients if appropriate. The message should be respectful and not provide too many details.  

• If the relationship is sound, use the opportunity to interview the employee and find ways you can improve your organization. 

7. Improper handling of employee files

It may seem simple enough to create a secure file to house all of an employee’s paperwork. But, it’s important not to lump all of the contents together in one place. There are confidential documents within an employee’s file that others should not have access to. In fact, who has access to certain parts of employee files should be limited to people in HR, payroll and the employee’s manager.  

Folders within the file – electronic or physical – should have separate sections for benefits forms, I-9s, non-disclosures, performance appraisals, payroll information and other items.

The file should never leave the HR office, nor should originals be removed. Requests for employee documents should be made, and an HR rep should make a copy. Creating folders in this way is not only respectful to the employee, it’s the law.

8. A lack of information sharing, training and development

Employees and managers need initial and ongoing training. Training is sometimes overlooked and done “on-the-fly” with startups and smaller companies, but allocating the time to develop and use training programs will save your company time and money along the way; employees get up-to-speed faster and are better able to handle the responsibilities of their job. And, don’t forget to set the proper expectations of dress code and acceptable behaviors in and outside the office, on social media and anytime an employee is representing the company.

These are only a snapshot of the processes and systems you need in place to have a well-run organization with a solid HR function. Even small companies and startups can put these functions in place; it’s just a matter of taking the time to learn what you need to do.