6 Small Business HR Nightmares You Should Try To Avoid At All Cost

Jun 07, 2018

6 Small Business HR Nightmares You Should Try To Avoid At All Cost

Human resource errors can be costly, and some of them may even be completely out of your control as a startup owner. It helps to be on the lookout for situations that can turn into small business HR nightmares. Here are 6 situations you should try to avoid at any cost.



Small business HR can be a nightmarish experience. It's an area often wrought with legal issues and the potential to damage your hard-earned reputation.

Small businesses and startups don't usually have a huge HR team to help them. Rather, they're forced to navigate the complexities of workplace politics and legal requirements alone. They must rely on research or learning the hard way.

From hiring to firing and everything in between, a single error in the HR department could prove costly.

Don't let these six small business HR blunders become your worst mistakes:

Mistake #1: Not Prioritizing Your Small Business HR Needs

HR in small businesses is often seen as a necessary evil. It's something many small businesses would rather not have to deal with.

The truth is, HR is an essential part of your daily operations and should be treated as a top priority.

Letting an employee-related issue simmer or failing to fill needed positions quickly will only damage your business in the long term.

You should prioritize HR just as you would focus on any other part of your business.

Mistake #2: Failing to Keep Accurate, Thorough Documentation

There are hundreds of moving parts to any HR department, even in small businesses. Hiring, interviewing, onboarding, terminations, and the daily management of current employees are each composed of numerous smaller tasks.

It's important you keep careful documentation of important activities so that details don't become dwarfed in the day-to-day operations.

When an issue arises, such as a repeatedly tardy worker, you should record each occurrence as well as the counseling you provide to the worker.

If the time comes to terminate the employee, you'll have clear documentation regarding the situation to combat potential unemployment claims.

One thing many businesses don't realize is that documentation doesn't have to be formal. Keeping notes in a file or on a calendar can serve as helpful reminders.

Getting an employee's signature on a form can be a double-edged sword. On one side, it can place a burden of proof on them and help them understand the severity of the situation. However, they may feel threatened by being documented, which could, in turn, lower their morale and motivation.

Exercise your best judgment when involving the employee in documenting specific activities. It isn't always necessary, especially if the trends you're documenting are short-lived.

Mistake #3: Not Testing Candidates During the Interview Process

Studies show it costs about six to nine months' salary to replace an employee. This includes the potential costs of recruiting, training and onboarding, and any productivity loss by having someone starting from scratch.

HR managers want to ensure they're considering serious candidates who will not only be capable of doing the job but will also stick around.

There should be more to your recruiting process than reviewing resumes and checking references.

Give your candidates a small project to complete as part of the interview process. It's become fairly common to offer test assignments to potential new hires to gauge the quality of their work.

Make sure the assignment is relevant to the job you're hiring for. For example, you might offer a writing assignment for a position that requires heavy emailing, marketing, or blogging.

Keep it short and simple, and make sure your candidates realize it's part of the interview process. You might consider offering the test only to those candidates you're seriously considering.

Mistake #4: Dragging Out the Interview Process

That said, while properly vetting candidates is important, it's also important to act when you find the right person. One of the biggest mistakes small businesses make when hiring is not moving quickly enough on great candidates.

Granted, you want to spend enough time considering your candidates to make the best decision. Hiring the wrong person for the job can be a costly disaster, especially for small business budgets.

Small businesses often go about the interview process incorrectly. They might interview a candidate on Wednesday, another on Thursday, and a couple more the following week. Then they might wait until all interviews have been conducted before narrowing the field or moving to the next step.

It could take weeks to fill a single position this way. By this time, your best candidates may have moved on to other offers.

Instead, try to conduct your interviews in a day or two and narrow your pool as you go. Try to schedule a follow-up interview soon after the initial interview to keep the candidate interested.

The more concise your process, the better chance you have of landing a great candidate.

Mistake #5: Not Updating Your Policies Often

HR departments are the "policy gatekeepers." Policies should be reviewed and updated frequently to keep up with the evolving workforce.

Having outdated policies can be frustrating to employees and leadership alike. There should be a valid reason for having a policy in place. There also needs to be a concerted effort to enforce existing policies.

Once you do update your policies, it's crucial you ensure your employees know about the change. Post the revised policies in a common area, send a company-wide email, or issue paper copies of the policy to ensure widespread adoption.

Mistake #6: Failing to Properly Classify Employees and Contractors

This is a huge stumbling block for many small business HR teams and could cost you hefty penalties.

Many companies make the mistake of classifying employees as exempt to avoid paying overtime. The FLSA has established clear guidelines to help you understand how to classify employees.

If you're hoping to save on payroll costs, you might think it wise to hire independent contractors instead of employees. But doing so in the wrong situation can result in back pay, tax issues, and fines.

Here's a hint: if you want to be in control of a worker's schedule and how the work is performed, your only option is to hire employees, not contractors.

Where to Find HR Support for Small Business

Even though you're in business for yourself, you never have to be in business by yourself. You can outsource your small business HR to ensure you never miss a beat. Jumpstart your HR practices by downloading your free HR Starter Kit today!

For Colorado employers, becoming an HR Branches member will keep you compliant with state-specific employment laws and give you access to an on-site startup that is included in our Platinum package. Please visit the HR Branches Store to learn more.


Disclaimer: HR Branches provides general information about Human Resources. Please note that the information provided, while reliable, is not legal advice. Please seek legal assistance, or assistance from State, Federal, or International governmental resources, to make sure your legal interpretation and decisions are correct for your location and circumstances. The purpose of this information is for guidance, ideas, and assistance on general HR matters.

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