9 Tips to Help Your Small Business Avoid Costly Human Resource Errors

If you run a small business, you know better than anyone that your employees can be your greatest assets — or your biggest challenges. Whether you're in a retail store or an auto shop, working with people in close quarters requires clear policies, excellent communication and careful human resource management to avoid common small business mistakes. 

Knowing how to avoid costly HR pitfalls for small businesses comes down to staying agile and proactive in your approach to handling personnel issues. Consider these tips to help your growing company prevent expensive HR errors and develop a team that contributes to your success. 

1. Regularly Evaluate and Document Employee Performance

Small businesses need skilled, motivated employees who will help them thrive. In most cases, however, workers don't excel at their jobs immediately. Becoming an excellent employee in any field takes time and coaching, and you'll never know how far someone has come if you don't have a performance baseline to reference. 

To gather that data, regularly assess your workers' performance and collect detailed notes. Be clear about what you expect from them and whether they are delivering on it, taking care to note any special instructions given or disciplinary actions required. Doing so will help you keep track of their progress and provide a valuable paper trail if you ever face litigation after letting someone go. 

2. Create Standard Processes With an Employee Handbook

Much of HR for small businesses involves being proactive. Even if your personnel roster numbers are in the single digits, it's wise to draft and maintain an employee handbook that lays out exactly what you expect of your workers and what they can expect from you. 

You want your book of policies and procedures to minimize confusion by answering questions before they're asked. Cover points like time-off policies, dress code, legal requirements, safety training, personal device use policies and anything else you consider important. For instance, an upscale restaurant may have certain appearance-related requirements for its waitstaff, while a painting service will likely be more relaxed — these rules should be made clear upfront and articulated in writing for reference. 

Also, keep in mind that the Wage and Hour Division (WHD) of the U.S. Department of Labor requires that some policies be posted where employees can see them even if they never pick up the handbook. The WHD provides a toolkit to clarify compliance needs for employers.

3. Establish an Efficient Onboarding Process

Once you know what you want from your employees, plan to present that information on day one. One of the best ways to avoid human resource mistakes is to make your expectations clear. Developing a robust onboarding process that applies to every new employee will help new workers settle in and start meeting performance benchmarks.

Additionally, following an established procedure helps ensure you have all the paperwork you need to process compensation packages and start training without delay.

4. Invest in Employee Training and Development

Training doesn't stop at onboarding. You can turn a good or average employee into a great one with the right instruction, so it pays to provide ongoing learning opportunities that help your workers sharpen current skills and develop new ones.

By offering professional development opportunities, you're making your employees more capable and valuable while also helping them grow in their careers. This measure makes working for you an extremely attractive option for forward-thinking individuals, helping you attract and retain better talent. 

5. Utilize Automated Systems

Running a small business requires you to take on many different roles — along with working as a party planner, you may be the marketer, the accountant, the product manager and even the janitor at times. Keeping up with all those daily operations can make it difficult to stay on top of human resource issues, as well. 

Today, there are many software solutions available to streamline the work that goes into running a business. Explore options like automated time clocks that simplify payroll or self-serve sites that let workers manage their benefit plans without having to go through you. 

6. Stay up to Date on Laws and Regulations

Any operation with any number of employees — even just one — must abide by at least some of the labor laws set by the U.S. government. Laws such as the Fair Labor Standards Act (FLSA) impose overtime rules, minimum wage, working age requirements and other employment standards to ensure workers are being treated fairly. 

Your business will likely be subject to state and local laws, as well. It is your responsibility as an employer to stay up to date on these laws and ensure your business complies with all applicable mandates. Breaking one of these regulations could result in severe consequences, such as heavy fines.  

7. Act Quickly on Employee Issues

Everyone wants to feel like they're being heard. If an employee comes to you with a problem, question or concern, do your best to devote your full attention to it as soon as possible. Doing so will demonstrate that you value them and what they bring to your company. Even if taking action isn't feasible at the time, be sure to hear what they have to say.

You also want to act swiftly if you notice a decline in morale or a particular employee contributing to a toxic workplace. Allowing issues like this to fester will hamper productivity and can cost you good people. 

8. Promote Effective Internal Communication

Just as it's important for you to have an open line of communication with your workers, you want to be sure everyone in your operation feels comfortable talking with one another. This measure is especially critical in industries that involve potential hazards, such as construction.

Small business leaders can avoid HR mistakes by rigorously enforcing an attitude of respect and openness throughout their companies. When every worker is comfortable relaying key information like safety issues, project developments and situation reports, you'll have a happier, more loyal workforce. 

9. Don't Do It Alone!

When you're already doing so much in the course of running your business, it's hard to find time for taking on employee training, learning hiring laws, coordinating professional development and doing all the other things that go into maintaining a healthy workforce. You want to avoid costly HR errors, but you still need to focus on your operation if your employees are going to have anything to do. 

If hiring a dedicated HR person is beyond your current capabilities, a third-party solution could be the answer. With an external service, you can reach out for human resources support as needed rather than keeping someone on payroll. They can manage hiring, onboarding, benefits administration and compliance issues for you, leaving you free to focus on expanding your operation. 

Access HR Resources Through a Business Consumer Alliance Membership

Business Consumer Alliance is a nonprofit connecting small businesses to resources like legal guidance, arbitration services, collections assistance and HR support. We serve everyone from attorneys and plumbers to auto repair shops. 

Our business membership program includes access to experienced professionals who help you avoid expensive human resource mistakes by staying compliant with regulations and developing the resources and procedures you need to attract and retain great employees. Whether you need advice on labor laws or help designing an employee handbook, we'll be here for you. 

Explore our business membership offerings and request a free consultation to learn more about our services.