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Running a small business is a challenging endeavor. Between meeting customer demands, handling tasks and juggling deadlines, it's no surprise that HR issues can sometimes fall through the cracks. While HR issues are not exclusive to any company size or age, there are certain challenges that frequently emerge for small to mid-sized businesses.
Drawing from years of industry experience, this article will spotlight the eight most recurrent HR issues I've observed in smaller enterprises and provide guidance on how to course-correct if you recognize them in your own business.
Remember, you're not alone in navigating the complex world of HR challenges.
According to the American Society of Employers, the average cost of hiring the wrong employee can range from $17,000 to as high as $240,000 (figures based in part on 2021 research conducted by the U.S. Department of Labor). The Society for Human Resource Management has acknowledged this figure and noted that “several variables” go into calculating the cost a bad hire can pose to a company, including:
The hasty hire results from a need to get tasks handled as quickly as possible—after all, in a small business, there are plenty of tasks to go around, and not a lot of employee bandwidth to handle backfilling when an employee departs. Often, small businesses feel they must make an immediate decision to hire a replacement after an employee is lost.
A PEO can help you work through the process quickly and properly when the problem comes up, and help you design a thoughtful cross-training strategy to avoid future emergencies in the meantime.
RELATED: Why It Makes Sense to Hire a PEO Instead of an HR Person >>
The Fair Labor Standards Act (FLSA) provides that some employees must be paid overtime pay for hours worked beyond the typical 40-hour workweek. The process of deciding which employees must be paid overtime, or “classifying” them as exempt or non-exempt from the FLSA’s overtime requirement, is easy to confuse.
However, the correct classification of your employees is critical to tax, payroll and other federal and state compliance concerns. In order to avoid a costly misclassification issue, it’s always best to consult with experienced HR compliance professionals.
RELATED: Exempt vs. Nonexempt: What's the Difference? >>
Performance and disciplinary issues are not documented. Do you have standard operating procedures in place for employee disciplinary or performance issues? If you don’t, you may be exposing yourself to unnecessary risk and, potentially, legal risk.
Having rules around performance reviews and employee discipline is critical to prevent HR issues, but one key reason is that employees who believe they are being treated unfairly have little to hang their hat on when strict operating procedures (which apply in the same manner to all employees) are being followed and documented every step of the way.
One of the surest ways to avoid or mitigate the risk of a disgruntled employee lawsuit is to document performance or disciplinary issues systematically.
On a brighter note, having a solid documentation process in place can help save the employer-employee relationship before things go awry.
Documentation, including as part of a broader performance improvement plan, encourages regular manager check-ins with the struggling employee. Course-correcting early on can help you retain employees with strong potential and ensure performance issues don’t become insurmountable.
Employers who invest in their employees are essentially making long-term investments in themselves. Failing to provide a proper onboarding process and ongoing training for new hires can lead to quite a few HR issues, including misunderstandings, low productivity and decreased employee morale. Proper onboarding sets the tone for a positive work experience and sets employees up for success.
Many small businesses only have time for employee orientation—and may not realize the distinction between orientation and onboarding.
Onboarding is a much longer process (lasting up to a year or more) during which new employees become so effective in their roles that they start to create lasting value for the company. However, investment in the employee shouldn’t stop after onboarding.
Both periodic and long-term training efforts must be prioritized throughout an employee’s tenure to ensure they understand the many facets of the business and can become innovative leaders within your organization.
RELATED: How to Get Your New Employees Acclimated Effectively & Efficiently >>
Ignoring or misunderstanding employment laws and regulations can result in legal troubles and financial penalties. It's crucial for small businesses to stay up-to-date with local, state and federal laws to ensure compliance in areas like wage and hour regulations, workplace safety and anti-discrimination laws.
For small businesses, it can be hard to manage HR compliance issues, including changing laws and regulations, especially if the company doesn’t have an experienced team of HR compliance experts in-house.
Outsourcing these tasks is a popular and effective option for companies that need to focus on their core business instead of hiring dedicated staff. Certified professional employer organizations (certified PEOs) can help identify and tackle compliance tasks from day one, helping you make sure nothing falls through the cracks.
RELATED: 50 Employees Compliance - What Employers Need to Know >>
Lack of clear and open communication can lead to misunderstandings, conflicts, and low employee morale. It’s critical that small businesses establish effective communication channels to keep employees informed about company news, policies, and changes.
One way to ensure communication is consistent is through the implementation and upkeep of an employee handbook. Simply having a handbook is not enough, however.
If your employee handbook is out of date or missing key policies, it won’t be as useful of a human resources tool as it could be. An experienced PEO can help you review your employee handbook and make sure you have all the necessary policies in place to benefit your company and its employees, and that those policies are sound from a compliance standpoint.
Employee engagement is one of the most critical metrics to capture for your business’ long-term growth ... but when things get busy, engagement can become an afterthought. Failing to prioritize employee engagement often leads to unmotivated staff, a negative impact on productivity and poor employee retention.
To combat low engagement, small businesses should focus on building a positive work culture, recognizing employees' contributions, and offering growth opportunities. Knowing where your engagement metrics stand will help you avoid being blindsided when an employee leaves—or better yet, it can allow you to prevent a regrettable departure before it occurs. For many organizations, the first step to exploring and boosting employee engagement is conducting a simple employee survey.
RELATED: How to Conduct an Employee Engagement Survey >>
Poor record-keeping related to employee contracts, benefits, performance evaluations, and other HR documents can lead to HR challenges, including confusion, disputes and legal issues. It’s mission-critical that small businesses establish proper systems for organizing and maintaining HR records.
Many small businesses and start-ups know they should start keeping more complete and accurate records, but often, they don’t know where to start—which makes putting off the revamp that much more tempting. When you partner with a PEO, you can delegate these ongoing tasks (or even kick-start the process) to HR experts.
Facing HR issues? Consider them handled with Axcet HR Solutions. From HR compliance and payroll to employee onboarding and training, Axcet has your HR needs covered from end to end.
With Axcet, you’ll find that there’s no end to the benefits a growing company can reap by working with a PEO. Wondering if outsourcing human resources is the right call for you? Reach out to our consultants today to learn more.
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