As a business owner, you're challenged with a variety of tasks every day. Small business owners take on multiple roles, from accounting to legal to human resources. Regardless of whether you handle human resources yourself or delegate it to someone else, your company is bound to make mistakes. These human resource management mistakes can be devastating for your company in numerous ways -- from litigation to employee replacement costs. Therefore, it is imperative that you make sure your company avoids these common, costly mistakes.
#1. Not Hiring the Right People for the Job
Some small business owners hire people they know for open positions, rather than interviewing for outside, qualified options. Perhaps you don't have the finances, so you don't do background checks or pull references to verify what a candidate says on his or her resume, or perhaps you just hire someone because you feel bad for them. Regardless, hiring the wrong person is costly. Not only are they not qualified; eventually you will have to replace them, which is another added human resource management expense.
#2. Not Creating Clear Job Definitions
When you create a job listing, you create a description for that position. But most small business owners neglect creating an accurate, clear job description. This is imperative if you want to attract the right people for the job. Your description should include the skills, training, and education, an ideal candidate should possess, and you should only accept interviews with candidates that meet those basic requirements.
#3. Not Addressing or Documenting Performance Issues
If you have employees with performance issues, do not ignore them or hope that they go away on their own. You must create a performance review with a correction plan for the employee so that he or she knows how to improve. Also, make sure you address any employee issues right away rather than wait. By having all of the issues in writing, you can also back yourself up if you ever need to terminate that employee because of his or her performance.
#4. Not Understanding Basic Employment Laws
There are many human resource management laws that most small business owners ignore, but ignoring these laws could be detrimental to your company. Familiarize yourself with:
- Overtime and minimum wage requirement
- Family leave
- Age and gender discrimination
- Military leave
- Gender-pay differences
- Safety in the workplace
- Pregnancy discrimination
Never assume that employment laws don't apply to your company. Ignoring them can cost your small business millions of dollars -- or at least more than you realize.
#5. Misclassifying Your Employees
Do you know the difference between a contract worker, full-time employee and part-time employee? If not, you need to familiarize yourself with these classifications. The U.S. Department of Labor has strict guidelines, as does the Internal Revenue Service. Do not try to classify employees as "contract workers" to save on benefits either. The duties and pay of employees classify whether or not they are permanent employees. In general, a person is only an independent contractor if you:
- Don't have control of their job and the work they do
- Don't have any written contracts, benefit plans or vacation time spelled out
- Don't control the financial aspects of the worker's assignments