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Human Resources Mistakes Small Businesses and Startups Should Avoid

Entrepreneurial by nature, small businesses and startups can be adept at using limited resources to handle a variety of tasks. When it comes to Human Resources, though, they may think their size or growth stage doesn’t warrant hiring a dedicated professional. Or, they may hire an inexperienced HR person to manage projects that may be better led by more experienced specialists. 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 businesses and startups, 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 to respond to all candidates in a timely manner. A variety of other problems can also 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 applicant found you – i.e. LinkedIn, 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 each stage of the interview process
  • Communication to and from the candidate

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:

  • Make sure managers and interviewers ask only job-related questions. You can certainly determine if candidates will be a cultural fit by asking behavioral interviewing questions, but steer clear of any 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.
  • Ask only for salary expectations and not salary history.
  • Find reputable training sessions or online sources to empower your teams.

3. Misclassifying employees

All employees should be classified as exempt or non-exempt. In general, 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 as the responsibilities also are considered. Moreover, it’s the job duties and not the job title that determine exempt status.

Things to look at to determine exempt status include, but are not limited to:

  • how much autonomy the employee has
  • whether the job requires the use of independent judgement and discretion
  • if the role 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

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:

If starting on site:

  • Make sure the manager is in the office or lab 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 and indicating whether or not it’s an in-person meeting.
  • Provide a floor plan that shows where the restrooms, conference rooms, kitchen and other key areas are located.
  • Make sure they know about all safety protocols, including rules for mask wearing and social distancing.
  • Walk around and introduce the new employee to others in the office.
  • A small company-branded welcome kit is always a nice touch.
  • Make sure the new employee has a plan for lunch on his or her first day.

If starting remotely:

  • If the employee will start remotely, set up a video meeting with the manager (and/or team) for the beginning of the day.
  • Make a more formal introduction over email to all staff. Include a picture of the new employee in your email to put a face to a name. And, encourage your colleagues to reach out and say “Hello” and welcome them.
  • Provide a packet of online information like a phone list and organizational chart.
  • Send a package of company swag to the employee’s home to coincide with their first day. For efficiency, bundle it with their technology and resources or have it waiting for them when they drop by to pick up their laptop.
  • Set up a virtual happy hour or lunch for the new hire and your team to help everyone get to know each other.

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: During the pandemic, the U.S. Department of Homeland Security (DHS) announced that it will defer the physical presence requirements associated with reviewing Form I-9 documents for employers and workplaces operating completely remotely. Ordinarily, however the employee’s current identification must be seen physically for this employment eligibility verification form, which means this part of the process has historically been done face-to-face. Either way, ensure the paperwork is complete and filled out correctly depending on your company’s working status.
  • 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 training sessions. It’s important to know about the compliance laws and to follow them at work. It’s also necessary to know which policies are applicable to remote workers and that you have a plan for tracking cooperation.
  • 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 needs to be properly communicated to the departing employee. In some states, an employee is due 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 for unemployment.
  • 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.
  • Make sure they have all the information they need regarding COBRA or 401(k) roll over, if applicable.

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 must 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. If a request for employee documents is made, 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 ramp up quicker and are better able to handle the responsibilities of their job with proper development. 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.

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