Eddy’s HR Mavericks Encyclopedia
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HR for Small Businesses
HR has a lot of responsibilities, from recruiting and training to employee relations and administration. In a small business, these tasks often fall to one person, which means the responsibility can be overwhelming! Small companies may not see the full value of HR or understand the breadth of skills it requires to be successful. Similarly, how one person sees the role of HR doesn’t necessarily align with how another person views the role. This speaks to the versatility of a small business HR professional. Read on for a summary of important topics for small businesses to consider and the impact that HR can have.
What Does HR at a Small Business Look Like?
HR in a small business is responsible for a wide variety of things. The primary functions include:
- Recruiting and hiring
- Training and development
- Total rewards (compensation and benefits)
- Regulatory compliance
- Tracking time worked and paid time off (PTO)
- Collecting and storing employee documents
- Employee engagement and experience
- Employee relations
- Upholding company culture and policies
- Balancing company needs with employee needs
HR in small companies differs from HR at larger companies for a few different reasons. Small businesses have fewer HR professionals. Whereas HR departments are structured differently the larger they become, small business HR professionals need to have functional knowledge about a wide range of topics (like those listed above) to be successful. Similarly, HR professionals in small businesses have a lot of interaction with the individual workers and are intimately familiar with how each department functions and the personnel behind it.
Why Small Businesses Need Great HR
There are some common issues or wrong turns that small businesses can take in the path to navigate employee relations issues or compliance requirements. HR takes point on these and a variety of other tasks to support company objectives that allows small business owners or primary decision-makers to focus on growing their business.
Compliance
FLSA, ADEA, ADA, ADAA, Title VII, ERISA, FMLA I9s, file retention, state and local laws—the regulations could fill up this entire page. Small businesses have a unique challenge of needing to navigate these laws while growing their company with minimal resources. An HR professional can help you avoid common pitfalls with these laws, keeping your business safe from unnecessary risks and costly penalties.
Safe Employment Practices
HR professionals can help identify potential safety risks in the workplace and identify opportunities or solutions to mitigate or avoid those risks. They can also educate employees on safety and ergonomics.
Managing Company Policy
Creating handbooks and policy development help define company practices formally. They are then easier to enforce and maintain and easier to monitor employee activity. Not only does policy development help to protect the company from risk, it also sets clear expectations for employees.
Business Continuity Planning
HR is in a unique position to be able to understand impacts to personnel or employees in the event of a disaster, shut down, logistical interruption, staffing shortage due to illness or technological issues. They know the skills, knowledge and abilities of the workforce, can help perform risk assessments, look at potential staffing shortages, what needs to be replaced or who needs to be trained, and they can use this knowledge to help a company build a comprehensive plan for business continuity.
Employee Relations
Not only is HR responsible for recruiting and onboarding, they are also key to effective employee discipline. Termination requires taking action to resolve concerns in a way that will protect the company as well achieve the desired result (improved performance) without damaging employee morale. A lack of consistency, avoidance of these issues or managers that are undertrained or overwhelmed can lead to more issues or put the company at greater risk. HR can help to ensure that employees get the support they need by training managers on best practices, reviewing for potential compliance risks, developing employees for success and establishing effective employee relations processes.
Compensation and Benefits Planning
The employee landscape can be volatile and changes quickly. Small businesses don’t always have the capital to match what larger organizations do, but there are a lot of ways they can stay competitive. HR can help businesses develop total rewards programs that incentivize employees and that increase overall engagement. Employers should consider health equity compensation, insurance, commuter programs, paid time off, flexible work arrangements, retirement plans, discount programs, non-monetary incentives and other wellness benefits. When created strategically, these programs can drive retention and lower overall costs to employers. For example, smoking cessation programs can positively impact health care costs.
HR Small Business Mistakes to Avoid
There are some common pitfalls that small businesses are more vulnerable to due to having less resources, training or time. Other priorities become the center focus, so it’s important that small businesses carve out time and are purposeful when developing HR practices.
Ineffective Hiring
Start with job descriptions, which need to be accurate, detailed and provide a realistic preview of the job. Determine what the “perfect” candidate’s profile would be, what your priorities are and work from there. Use the right recruiting platform for the role you are hiring for–different job boards cater to different workers, consider direct hire placement or other targeted recruiting efforts. Ask questions that are appropriate and can be benchmarked. Avoid interview questions that stray from job-related topics. Determine a way to fairly rank and compare candidates. During onboarding, consider the employee experience. Map what you want their experience to be, including to whom and how they will be introduced. Create a training schedule and culture overview and consider whether there are additional costs that may be incurred to the employee–would relocation services help attract the right talent?
Employee Misclassification
There are different types of employee classification, and it can be confusing when trying to determine the correct classifications for each employee in your workforce. Consider:
- The type of employment: regular, temporary or seasonal
- Full time or part time
- Exempt or non-exempt
Exempt or non-exempt tends to be the most challenging area, so be sure to review the classification rules of the Department of Labor and potentially consult with legal counsel prior to classifying a role as exempt. Many organizations make this error, and unchecked, it can be costly.
Compliance
Managers need to have an understanding and be aware of employment regulations. They also need to know what resources are available to them to stay up to date on state and local laws or where they can go if they have questions. Misunderstanding of required documents like the I-9, insufficient handing of potential discrimination or misclassifying an employee (exempt, 1099, etc.) could be costly to the organization. Compliance is especially important as businesses begin to expand.
“When smaller businesses start hiring people in different states without researching the relevant labor and HR laws of those states, that can put them at risk of not being compliant and then they can run into lawsuits.” – Chris Ruddy
Inconsistent Policies or Practices
Every business, despite its size, would benefit from having formally outlined expectations and procedures. With the ever-changing legal landscape, employment regulations also need to be updated. A best practice would be to review handbooks or documented policies annually. Policies should be complete and answer questions that may not be immediately pressing but will serve as a guide in the future. For example, a non-solicitation policy would be something an employee can reference in the future when they find themselves in that situation. It’s also important to ensure that managers are trained and understand those policies so they are able to hold employees accountable or guide them through complex issues.
Lack of Documentation
Documentation serves multiple purposes. First, it demonstrates to employees that performance is taken seriously. Second, it creates an affirmative defense for the employer. This can seem like a low priority or too time consuming at the moment. It is important in these times to remember that employee development and performance management is a long game. Few situations are so urgent that there isn’t time to document, but when those moments do occur, make time afterwards to record the situation. Lastly, when a business has inconsistent practices related to documentation it can inadvertently lead to discrimination or disparate impacts.
Insufficient Training
Training should begin at onboarding and continue through the entire employee lifecycle. Training can cover a wide range of topics, from company culture, practices and policies to development for future roles. Ongoing learning and development opportunities motivate employees and lead to lower morale over time. Training plans can also come from performance gaps and provide a clear path forward for employees to learn and grow.
Poor Employee File Maintenance
There are specific file retention guidelines for each document. Employers should make themselves aware of these requirements and find the right storage solutions for employee files.
Options for HR at a Small Business
There are options for the best way to set up HR for small businesses, so it’s important to evaluate what will be the best option for your organization and what will be the best tool to help you reach your goals.
Option 1: HR Software
While HR is all about the humans in your company, the reality is that there are some parts of HR that are very administrative. Some small business owners choose to try and manage these administrative tasks themselves, only to learn that it can be an absolute nightmare. HR software can help track information and automate certain tasks that you would otherwise need to do yourself. It is best to monitor the amount of time that you are spending on administrative tasks, and what types of tasks you are doing, prior to choosing a software. There are a lot of options that vary in terms of what they can help with and how robust they are. A consideration when implementing HR software is the time and resources you’ll need to spend to get your company’s information loaded. Depending on the amount of data and the type of software, this can be a time-consuming process. See how HR software can help small businesses run more smoothly
Option 2: Professional Employer Organization (PEO)
Professional employer organizations are organizations that aim to reduce the administrative burden of small to medium-sized businesses. They typically have HR, benefits and payroll staff and work under a co-employment agreement. Co-employment allows the PEO to be the employer of record for your employees and they then administer certain services such as benefits and payroll. Working with a PEO could limit some of your autonomy as a business owner and in many cases still requires you to work directly with employees regarding certain issues. There are a lot of different PEOs available, so it’s important to do your research to make sure that the one you choose is the best fit for your business.
Option 3: In-House HR
Hiring someone to work full time in house can be more costly than some of the other solutions discussed. In addition, depending on responsibilities and the number of employees, one individual may not be sufficient for business needs, which means this option is frequently a lower-priority investment than something like a PEO or comprehensive Human Resource Information System (HRIS). However, an in-house HR professional provides the business more control over the day-to-day responsibilities and their vision for the future. An in-house HR professional can learn the ins and outs of the business and provide solutions tailored to the company and its workforce.
Option 4: Outsourcing
Another common option is outsourcing. Companies can choose to outsource a single or several HR functions. There are many companies that focus solely on payroll processing, or HR consultants that help with benefits, training and development or employee relations. Some companies, both small and large, work on larger-scale projects like high employee turnover or low morale.
“Be mindful of how long certain elements of the consultancy work is taking you. Too long? Feeling like it's too much? If that's the case and you feel like your time is better spent elsewhere, chances are, it is. At that stage, find your collaborators who can take that workload off you. Scaling requires you to have experts around you, preferably those that complement what you do and can stretch you!” — Sam Eaton
While outsourcing HR functions can work well, it can also come with difficulties.
“Something is better than nothing, but the challenge is that if someone is just devoting a portion of their time then they may only see or hear a portion of the reality. In an ideal situation, I think there could be someone full time and someone additional … but it also depends where the company is. There might just not be a need for a full time person yet.” – Tatiyana Cure
Ultimately, it is most important to pick the option that is best for your small business and that will help make you successful.
How to Set Up an In-House HR Department for Your Small Business
If a business chooses not to outsource their HR or use a PEO, they’ll need to set up HR functions within the organization. Often this means hiring a dedicated HR professional, but if the business is still quite small, the business owner or an office assistant may handle HR tasks. Regardless of who’s responsible for HR, it’s important to have processes in place to ensure that the company stays legally compliant and treats employees fairly. This section won’t go into depth about specific HR functions; for those, see the sections titled “What Every Small Business Owner Needs to Know About HR” and “Additional HR Processes to Consider.” In this section, we’ll simply go over some basic steps to set up HR in a small business.
Step 1: If Needed, Hire the Right HR Professional
There’s no set number of employees that signals that it’s time to hire a dedicated HR professional. That number can vary from industry to industry, and from business to business. If it’s time for your business to hire an HR leader, you’ll probably want to start with an HR generalist. Generalists have experience with all aspects of human resources, so they’ll be able to handle the most critical tasks.
Step 2: Choose an HR Software to Ease the Load
Even if you hire an HR generalist, having good HR software can do a lot to ensure that things run smoothly. There are many all-in-one HR software platforms that handle most functions, including time tracking, document storage, payroll, and more. Do your research to choose a software that you can afford and that meets your company’s needs.
Step 3: Make an HR Budget for the Year
Decide how much you want to spend on HR-related costs. Here are a few expenses you’ll need to include in your budget:
- Salaries of new hires and existing employees
- Costs of recruiting (including turnover costs)
- Benefits costs
- Payroll costs
- Bonuses
- HR software
- Training costs
Step 4: Determine Compensation and Benefits
To ensure that your company pay structure is fair and aligned with the current market, do your research to see what other companies in your industry are paying their employees. If the salary your company is offering is way below the standard, not many people will want to work for you. While pay is important, benefits can also be a great incentive for people to accept jobs. Some benefits, like workers’ compensation, are legally required depending on the state you’re in. Others, like health insurance, vision insurance, dental insurance, 401(k) plans, and more, are not required but are a good way to attract and retain talent. Take some time to choose which benefits you’ll offer to your employees.
Step 5: Develop HR Policies and Procedures
This is one step where having an HR professional will help. Basically, anything in your company that has to do with people will have an HR policy or procedure associated with it. The following list includes areas that you’ll want to focus on. HR procedures:
- Recruiting
- Onboarding
- Payroll
- Training and development
- Disciplinary action
HR policies:
- Paid time off (PTO)
- Time tracking
- Attendance
- Meals and breaks
- Leave
- Anti-harassment and non-discrimination
- Workplace safety
Step 6: Create an Employee Handbook
Once you’ve created your HR policies, include the policies that are relevant to employees in the employee handbook. You can also include information about your company history, mission and values, and anything else employees should know. Distribute the handbook to employees so they can sign it, stating that they agree to follow all policies.
Step 7: Decide How to Measure Your HR Department’s Effectiveness
If you don’t measure your HR department’s effectiveness, you’ll never know how you can improve. Choose some metrics, such as employee turnover or offer acceptance rate, to measure consistently over time. As you look for patterns in the numbers, you’ll get a better idea of where to focus your efforts. For example, you might need to do better at hiring. Or, if employees are leaving after only a few months, you can focus on employee retention.Not sure what to measure? Here’s some advice from people analytics expert Richard Rosenow.“There are some early entry points to HR analytics that you see teams taking that have some common threads. Here are a few:
- High volume—you need enough data
- Repeated events—you need to make change
- Clear outcome—you need to know if change worked
- High value—something that matters to the business
- Captured—data exists in a common system
With those in mind, you see a lot of people analytics teams go after some early initiatives like call center support, sales team support, recruiting, and attrition. These are all activities that are well documented, high volume (hopefully not too high for attrition), repeat events, that are largely valuable to the company.”
What Every Small Business Owner Needs to Know About HR
If you’re running a small business, there is no shortage of responsibilities that you attend to. You have to be on top of everything—operations, finances, accounting, strategy, and so much more. Of course, a huge part of your job is also spent managing the people who work for you and setting them up for success. And if you choose not to use a PEO, outsource your HR, or hire an HR person, your company's administrative HR tasks will most likely fall on your plate. In this section, we’ll discuss how small business owners can get started with the key tasks and responsibilities of effective people management. Though this article has already touched on several of these areas, this section will go into a bit more depth.
You Need to Collect Essential Information From Employees
Regardless of company size or stature, if you’re running a small business in the United States there are a few documents that you absolutely must keep track of.
- I-9 Form. The US government requires that every employee complete an I-9 form to prove that they’re legally eligible to work in the United States. This document must be collected for each one of your employees. You, as the business owner, are also required to maintain a copy of this document throughout the duration of each employee’s employment tenure and continue to store the document for three years after the employee’s hire date, or one year after the date of termination, whichever is later.
- W-4 Form. The next document you’ll need to issue to your employees is their tax document. For most employees, this will be the W-4 form. A W-4 form should be issued to each employee at the company so that the proper amount of tax withholdings is deducted from their paychecks throughout the year.
- Direct deposit form. A third document you’ll want employees to complete is a direct deposit form. Unless you’re paying people with written checks, your employees will expect their compensation to be deposited directly into their bank accounts after each pay period. A direct deposit form allows employees to specify which bank to route their money to, and how much money should be deposited in each account.
- Employee information. This is not so much a document as it is a compilation of important information you should collect for each employee. Things like their legal name, their date of birth, their phone number, social security number, email address, home address, emergency contact information, and more. This information is obviously sensitive and needs to be securely and privately stored.
An Employee Handbook Helps Set Expectations
Every company would be smart to have at least a basic version of an employee handbook that all their employees agree to. The employee handbook lists out your expectations, values, and protocols for your company. Here are some bullet points that you’ll want to make sure you cover:
- Company values, mission statement, vision statement, etc.
- Employment information and employment agreements
- Company code of conduct
- Company policies
- Compensation and benefits
- Discipline and termination
- Safety protocols and procedures
It's Important to Stay on Top of Basic Regulatory Compliance
The last thing you want is for your company to get in trouble with the law! State and federal laws regulate certain aspects of the workforce. Review the following ones, then do more research into laws specific to your state or industry.
- Safety practices: Depending on your industry and the state in which your business operates, you’ll likely have to practice certain safety procedures to comply with mandatory regulations. The most common of these is governed by OSHA, which stands for the Occupational Safety and Health Administration. You can visit OSHA’s website to learn more about regulatory safety standards in the workplace.
- Anti-discrimination practices: Title VII of the Civil Rights Act of 1964 makes it illegal to discriminate against an employee or potential employee on the basis of the individual’s race, religion, sex, national origin, or color. In 2020, this law was supplemented to add that employers cannot discriminate based on sexual orientation or gender identity.
- Family and Medical Leave Act: In 1993, President Bill Clinton signed FMLA into law. This gives certain employees up to 12 weeks of job-protected, unpaid leave. For many small businesses, they won’t immediately have to worry about FMLA as it currently applies to companies with 50 employees or more. But as your business grows and you reach the 50 employee threshold, you’ll have to be aware of this law.
- Mandatory workplace posters: It may seem silly, but the Department of Labor requires that specific information be posted and made visible in your workplace. Unfortunately, the DOL doesn’t make it super easy to figure out which posters are required for your business. You can visit this site and walk through a series of questions to determine what you’ll need.
People Need to Get Paid (and Receive Their Benefits)
If people are running into issues every payday (with incorrect amounts, late checks, etc.) they're not going to be happy. Here are some terms to help you understand more about paying employees.
- Compensation. To understand how to pay employees properly, you need to understand what your competition and the broader market are paying for similar work. Services like PayScale, Glassdoor, and Indeed can help you understand what fair compensation looks like for each employee you hire.
- Payroll system. One of the fundamental responsibilities of a business owner is to pay your employees. Every pay period you must pay them what they earned, and pay them on time. Payroll can be incredibly complicated because of all the laws, regulations, taxes, and compliance issues that are involved. If you’re not a payroll expert, get some help! You can hire someone to process your payroll (this is often referred to as “outsourced payroll”) or you can use software that makes it easy to do it yourself.
- Payroll withholdings. Part of the payroll system is understanding the different withholdings that are deducted from each paycheck. You have to consider the various taxes such as social security, income, medicare, unemployment, and more. These taxes must then be sent to the IRS on a regular basis. Failure to pay these taxes can result in a significant penalty. Again, great payroll software or an outsourced payroll consultant can help you with all of this if you’re not comfortable with it yourself.
- End-of-year tax forms. When you hire an employee, you have them complete a W-4 form. At the end of each year, you’ll work with your payroll provider to supply every employee with a W-2 form. The W-2 form is what helps employees file their tax returns.
- Workers’ compensation. This is a kind of insurance that helps protect both businesses and employees from financial loss if an employee is injured on the job. Almost every state in the nation has some form of mandated workers’ compensation insurance to cover injured employees.
- Employee benefits. Most small businesses are not required to provide additional compensation for employees in the form of benefits, but offering benefits is a good idea if you can afford it. Offering benefits to employees, such as health and dental insurance, can save them both money and stress. There are also many fringe benefits that you may choose to offer that can help make your business more appealing to would-be employees. Recruiting great talent is a challenge, and offering amazing benefits definitely eases the burden.
Additional HR Processes to Consider
The previous section covers the basic “must-haves” for any small business. If your company is missing any of the things mentioned, stop reading and go take care of it! This next section is all about improving upon the firm foundation you’ve already built. With that said, here are a few HR-related tasks and processes that aren’t “required” but will help you build a better business.
Hiring
Great businesses are built by great people. Hiring talented individuals to help you grow your company will be critical to your success. Here are some tips and trips that will help you consistently hire top candidates.
- Forecast growth. The first step to hiring is understanding when you need to hire. A common mistake in startups and in small businesses is that a company hires too soon and ultimately is not making enough money to maintain their employees. The first thing you need to ask yourself when deciding whether or not to hire someone is, “can I financially afford this person?” The next question to ask yourself is, “do I absolutely need this person?” If you can afford someone and you’re in desperate need of their skills/services, then you know it is time to hire.
- Create an accurate job description. Before making a hire, it’s important that you understand the job you’re hiring for. If you’re unable to articulate what you need an employee to do, then you’ll be disappointed when they show up and fail to meet your expectations. Writing a clear job description will help you understand what role you’re hiring for, and it will help job seekers understand if they have the skills and qualifications necessary to perform the job.
- Distribute your job post. Once you know you need to hire and you’ve created a job description, it’s time to get the word out. You’ll want to distribute your job post broadly so as to attract a wide pool of qualified candidates. Consider posting on job boards such as Indeed or Glassdoor, as well as sharing your job post on social media sites like Facebook and LinkedIn.
- Manage the application process. This step can be particularly tricky, especially if you receive a lot of applications. It can be hard to remember which candidates you’ve already looked at, who you’ve responded to, who you’ve scheduled an interview with, and which candidates simply don’t meet your qualifications. Managing all of this from an email inbox is particularly stressful. An applicant tracking system (ATS) can help you with the process.
- Communicate with applicants quickly and often. When an applicant submits a resume to your company, it’s highly likely that they’re also submitting resumes to dozens of other companies. Because of this, your business is now competing with all those other businesses to hire this candidate. So, what do you need to do? Communicate quickly. Whether you want to move forward with a candidate or not, try to get back to all your candidates within 24 hours of their application submission. Throughout the hiring process, be open about when candidates will hear back from you. Stick to the deadlines you give them and communicate as promised.
- Extend an offer. After going through the interview process with your most qualified candidates, you’ll want to extend an official job offer. This is typically done through an offer letter. An offer letter will typically include information about the job, the salary, and benefits being offered to the candidate, the preferred start date, information about preliminary background checks, and more.
Onboarding
After a job candidate accepts an offer to work at your company, you’ll begin the onboarding process. Much of the onboarding process involves completing the required paperwork covered previously. Beyond that, there are things you can and should do to create a great experience for your employees. The onboarding process is a critical part of long-term employee retention, especially in a small business setting.
- Have the new hire complete the required paperwork. Before starting the job, your newly hired employee needs to complete all the paperwork to ensure that they’re legally eligible to work for your business. This includes the I-9 and W-4 forms, as well as the other documents outlined earlier.
- Background check. A background check isn’t required for every business or industry (although it is for some), but it’s something you might consider doing. Having new employees submit to a background check allows you to understand if your new hire has a criminal record or has been involved in fraudulent activity in the past.
- Prep the workspace. Before your new employee arrives, make sure that you’ve prepped their workspace and prepared all the tools, technology, or materials they’ll need to start their job. There is nothing more discouraging for a new employee than to walk into work on the first day of a new job and see that the company hasn’t prepared for them to be there. This immediately makes the employee feel unvalued and unwanted.
- New employee orientation. On your new hire’s first day of work, walk them through an employee orientation program. Help them to learn more about your company by explaining why your business exists, the goals you’re trying to achieve, the values you attempt to uphold, and the vision you have for the future.
- Assign an onboarding buddy: It can be scary to join a company where you don’t know anyone. To combat this fear, assign an employee to be a designated onboarding buddy for your new hire. This person should be able to answer the new hire’s questions, help them with their responsibilities, and train them on how to do their job.
- Job training. You cannot expect a new hire, even someone with vast experience, to come in and know what to do right away. They’ll need to be trained and given performance expectations. Job training is so critical for the success of an employee. It should be an ongoing activity over the first week or even the first month of the job.
- Check in often. Good business owners will check in with their new employees regularly in one-on-one meetings to see how they’re doing. This gives the business owner an opportunity to evaluate their hire, and it gives the employee the chance to ask questions.
Training Employees
For an employee to succeed, they need to be trained. Even if they have previous experience working in a position with a similar job title, there will be things that are unique to your company that they don’t know. Because every position in every company is so different, it’s hard to make generalizations about what your training should look like and what it should include. However, the following principles apply to almost any job in any industry:
- Don’t rush the process. Don’t try to complete all the training in a day or two. Give employees weeks to train.
- Revisit training after 60 or 90 days of employment. It’s likely your new hires have forgotten something since their first few weeks, so give them opportunities to brush up on training.
- Ask for feedback after the initial training period. Ask employees to rate their training experience. Find out if it actually prepared them well for the work they’re doing. Ask them for suggestions on how to improve or change.
- Structure and standardize your training process. The training process should be the same for everyone who’s hired with a certain job title. This way you won’t have to reinvent the wheel for every hire.
- Provide resources. Record videos or create documents that capture your training materials. Give employees continual access to this information so they can go back and learn on their own.
Engagement
After successfully hiring and onboarding new employees, your ongoing tasks will be to continue to engage and develop them. The cost of employee turnover can be crippling for a small business, so it’s important to create an environment that encourages employees to stay. Here are some suggestions for how to do this right.
- Surveys. Once a month, consider surveying your employees and asking them how they’re feeling. Get an idea of how engaged they are, how excited they are to be working for your business, and also ask them for ideas on how to improve the company. Making the surveys anonymous will encourage employees to share their thoughts and feelings freely.
- Ongoing training. To help employees stay engaged, it is important to continue to invest in their progress and development. It’s human nature to want to learn new skills and participate in new challenges. Train your employees so that they can level up and do more for the business. This is much more affordable than hiring additional employees to augment the talent gaps in your company.
- One-on-one performance reviews. Employees want to feel valued at work, and the best way to help them feel this way is by consistently giving them feedback. When an employee is given feedback on their work, they understand that you care about what they’re doing. They understand that you’ll help them find ways to improve. Regular and consistent feedback done through one-on-one performance reviews will strengthen your bond with employees while also enhancing their on-the-job performance.
- Facilitate communication. This has become more important than ever as many businesses are shifting to some form of remote work. As remote work becomes more and more mainstream, businesses will need to find easy ways to stay in contact with their employees. As a small business owner, consider investing in communication software that helps you easily chat and connect with your workforce. Here are some free options to consider:
Discipline and Termination
One of the more challenging aspects of HR is the disciplinary actions you’ll be forced to take with certain employees. These conversations are never fun, but there are things you can do to ensure that things go smoothly. Here are a few ideas.
- Set clear expectations. The employee handbook is crucial here. Your employee can and should contain a list of policies and behaviors your company promotes, as well as the punishment or disciplinary actions that will be taken if those policies are not followed. If you have these things in writing, it’s easy to point to them when an employee makes a mistake. Your employee will understand that they broke the rules and that there are consequences to their actions. However, you don’t have anything written down, it’ll be hard to hold employees accountable.
- Write things down. If an employee breaks a rule or deviates from expected behavior, write this down. If you have conversations with an employee about poor performance, extensive tardiness, unexcused absences, or other related issues, then write these down.
- Document everything. This way, if you ultimately need to fire an employee because of these issues, you’ll have evidence to defend your decision. If an employee tries to sue you for wrongful termination, you’ll be able to point to the documents you’ve kept that detail the process and explain why you fired them.
- Be proactive with your feedback. If you’re firing an employee because of performance, there is a way to handle the situation that will make things easier for you and the employee. First, be proactive in telling the employee that you’re beginning to see a slip in performance. Be upfront and direct. Let them know that you need them to pick things up. If the employee does not respond to this encouragement after a week or two, tell them again. Warn them that their job is in jeopardy if they can’t turn things around. Wait another week or two to see how they respond. If they still haven’t picked things up, it will not be a surprise to them when you tell them you’re terminating their employment. They’ll expect it. The worst thing you can do is sit back and let an employee fail and not say anything.
- Have a witness. When you terminate someone, don’t do it alone. Always have another person in the room with you to act as a witness to the conversation. This way, if the employee ends up suing you and says you told them something when terminating them that was discriminatory or otherwise unlawful, your witness will be able to testify on your behalf. Your witness may also take notes during the termination meeting so as to record the events accurately.
How Eddy Can Simplify Your HR Processes
Eddy is an all-in-one HR software designed to help small business owners handle their HR processes. Its three main products are Eddy People, Eddy Hire, and Eddy Payroll.Eddy People is a core HR and people management platform that includes employee profiles, new hire onboarding tasks, document and e-signature management, time and PTO tracking, and more. Eddy Hire is an applicant tracking system (ATS) that lets you post for free to top job boards like Indeed, ZipRecruiter, and more, helping you cast a wider net to get your job posting in front of more candidates. It also takes the load off the hiring team by automating candidate communication and using a customized hiring pipeline to track candidates. Eddy Payroll is a full-service payroll solution that removes the burden of running payroll from your team. Our payroll experts make sure that employees are paid accurately and on time, and that your company remains compliant with laws and deadlines. Eddy Payroll also automates quarterly and annual tax filings and distributions. Find out more about how Eddy can help your small business thrive
Growing Your Small Business With Effective HR Practices
This article wasn’t short. There’s certainly a long list of HR tasks and responsibilities to think about, and it’s hard to take it all in as a small business owner. Remember, start with the things that are absolutely critical. Get your paperwork right, get your people paid correctly, and make sure you’re staying compliant with state and federal laws and regulations. That’s step one.Once you feel like you’ve got the basics down, you can begin to think about things like improving your hiring process, creating a memorable onboarding experience, and keeping your employees engaged. All of these things will help your business grow.HR for small businesses is hard work. But it’s important work. You’ve got this!
Topics
Colleen E. Frislid, SPHR, SHRM-SCP
Colleen manages a team of HR consultants that work with a variety of industries, specializing in the fields of human resources, strategic planning, and human capital management. Colleen applies expert knowledge, industry experience, and relentless energy to solving companies’ issues. She is a member of the Society for Human Resource Management as well as women in leadership groups. She is PHR, SPHR, and SHRM-SCP certified. She has an awesome pet cat, Attila and, when she's not working she loves to travel, enjoy the great outdoors, and volunteer with different local charities.
Frequently asked questions
Other Related Terms
Eddy’s HR Mavericks Encyclopedia
HR for Small Businesses
HR has a lot of responsibilities, from recruiting and training to employee relations and administration. In a small business, these tasks often fall to one person, which means the responsibility can be overwhelming! Small companies may not see the full value of HR or understand the breadth of skills it requires to be successful. Similarly, how one person sees the role of HR doesn’t necessarily align with how another person views the role. This speaks to the versatility of a small business HR professional. Read on for a summary of important topics for small businesses to consider and the impact that HR can have.
What Does HR at a Small Business Look Like?
HR in a small business is responsible for a wide variety of things. The primary functions include:
- Recruiting and hiring
- Training and development
- Total rewards (compensation and benefits)
- Regulatory compliance
- Tracking time worked and paid time off (PTO)
- Collecting and storing employee documents
- Employee engagement and experience
- Employee relations
- Upholding company culture and policies
- Balancing company needs with employee needs
HR in small companies differs from HR at larger companies for a few different reasons. Small businesses have fewer HR professionals. Whereas HR departments are structured differently the larger they become, small business HR professionals need to have functional knowledge about a wide range of topics (like those listed above) to be successful. Similarly, HR professionals in small businesses have a lot of interaction with the individual workers and are intimately familiar with how each department functions and the personnel behind it.
Why Small Businesses Need Great HR
There are some common issues or wrong turns that small businesses can take in the path to navigate employee relations issues or compliance requirements. HR takes point on these and a variety of other tasks to support company objectives that allows small business owners or primary decision-makers to focus on growing their business.
Compliance
FLSA, ADEA, ADA, ADAA, Title VII, ERISA, FMLA I9s, file retention, state and local laws—the regulations could fill up this entire page. Small businesses have a unique challenge of needing to navigate these laws while growing their company with minimal resources. An HR professional can help you avoid common pitfalls with these laws, keeping your business safe from unnecessary risks and costly penalties.
Safe Employment Practices
HR professionals can help identify potential safety risks in the workplace and identify opportunities or solutions to mitigate or avoid those risks. They can also educate employees on safety and ergonomics.
Managing Company Policy
Creating handbooks and policy development help define company practices formally. They are then easier to enforce and maintain and easier to monitor employee activity. Not only does policy development help to protect the company from risk, it also sets clear expectations for employees.
Business Continuity Planning
HR is in a unique position to be able to understand impacts to personnel or employees in the event of a disaster, shut down, logistical interruption, staffing shortage due to illness or technological issues. They know the skills, knowledge and abilities of the workforce, can help perform risk assessments, look at potential staffing shortages, what needs to be replaced or who needs to be trained, and they can use this knowledge to help a company build a comprehensive plan for business continuity.
Employee Relations
Not only is HR responsible for recruiting and onboarding, they are also key to effective employee discipline. Termination requires taking action to resolve concerns in a way that will protect the company as well achieve the desired result (improved performance) without damaging employee morale. A lack of consistency, avoidance of these issues or managers that are undertrained or overwhelmed can lead to more issues or put the company at greater risk. HR can help to ensure that employees get the support they need by training managers on best practices, reviewing for potential compliance risks, developing employees for success and establishing effective employee relations processes.
Compensation and Benefits Planning
The employee landscape can be volatile and changes quickly. Small businesses don’t always have the capital to match what larger organizations do, but there are a lot of ways they can stay competitive. HR can help businesses develop total rewards programs that incentivize employees and that increase overall engagement. Employers should consider health equity compensation, insurance, commuter programs, paid time off, flexible work arrangements, retirement plans, discount programs, non-monetary incentives and other wellness benefits. When created strategically, these programs can drive retention and lower overall costs to employers. For example, smoking cessation programs can positively impact health care costs.
HR Small Business Mistakes to Avoid
There are some common pitfalls that small businesses are more vulnerable to due to having less resources, training or time. Other priorities become the center focus, so it’s important that small businesses carve out time and are purposeful when developing HR practices.
Ineffective Hiring
Start with job descriptions, which need to be accurate, detailed and provide a realistic preview of the job. Determine what the “perfect” candidate’s profile would be, what your priorities are and work from there. Use the right recruiting platform for the role you are hiring for–different job boards cater to different workers, consider direct hire placement or other targeted recruiting efforts. Ask questions that are appropriate and can be benchmarked. Avoid interview questions that stray from job-related topics. Determine a way to fairly rank and compare candidates. During onboarding, consider the employee experience. Map what you want their experience to be, including to whom and how they will be introduced. Create a training schedule and culture overview and consider whether there are additional costs that may be incurred to the employee–would relocation services help attract the right talent?
Employee Misclassification
There are different types of employee classification, and it can be confusing when trying to determine the correct classifications for each employee in your workforce. Consider:
- The type of employment: regular, temporary or seasonal
- Full time or part time
- Exempt or non-exempt
Exempt or non-exempt tends to be the most challenging area, so be sure to review the classification rules of the Department of Labor and potentially consult with legal counsel prior to classifying a role as exempt. Many organizations make this error, and unchecked, it can be costly.
Compliance
Managers need to have an understanding and be aware of employment regulations. They also need to know what resources are available to them to stay up to date on state and local laws or where they can go if they have questions. Misunderstanding of required documents like the I-9, insufficient handing of potential discrimination or misclassifying an employee (exempt, 1099, etc.) could be costly to the organization. Compliance is especially important as businesses begin to expand.
“When smaller businesses start hiring people in different states without researching the relevant labor and HR laws of those states, that can put them at risk of not being compliant and then they can run into lawsuits.” – Chris Ruddy
Inconsistent Policies or Practices
Every business, despite its size, would benefit from having formally outlined expectations and procedures. With the ever-changing legal landscape, employment regulations also need to be updated. A best practice would be to review handbooks or documented policies annually. Policies should be complete and answer questions that may not be immediately pressing but will serve as a guide in the future. For example, a non-solicitation policy would be something an employee can reference in the future when they find themselves in that situation. It’s also important to ensure that managers are trained and understand those policies so they are able to hold employees accountable or guide them through complex issues.
Lack of Documentation
Documentation serves multiple purposes. First, it demonstrates to employees that performance is taken seriously. Second, it creates an affirmative defense for the employer. This can seem like a low priority or too time consuming at the moment. It is important in these times to remember that employee development and performance management is a long game. Few situations are so urgent that there isn’t time to document, but when those moments do occur, make time afterwards to record the situation. Lastly, when a business has inconsistent practices related to documentation it can inadvertently lead to discrimination or disparate impacts.
Insufficient Training
Training should begin at onboarding and continue through the entire employee lifecycle. Training can cover a wide range of topics, from company culture, practices and policies to development for future roles. Ongoing learning and development opportunities motivate employees and lead to lower morale over time. Training plans can also come from performance gaps and provide a clear path forward for employees to learn and grow.
Poor Employee File Maintenance
There are specific file retention guidelines for each document. Employers should make themselves aware of these requirements and find the right storage solutions for employee files.
Options for HR at a Small Business
There are options for the best way to set up HR for small businesses, so it’s important to evaluate what will be the best option for your organization and what will be the best tool to help you reach your goals.
Option 1: HR Software
While HR is all about the humans in your company, the reality is that there are some parts of HR that are very administrative. Some small business owners choose to try and manage these administrative tasks themselves, only to learn that it can be an absolute nightmare. HR software can help track information and automate certain tasks that you would otherwise need to do yourself. It is best to monitor the amount of time that you are spending on administrative tasks, and what types of tasks you are doing, prior to choosing a software. There are a lot of options that vary in terms of what they can help with and how robust they are. A consideration when implementing HR software is the time and resources you’ll need to spend to get your company’s information loaded. Depending on the amount of data and the type of software, this can be a time-consuming process. See how HR software can help small businesses run more smoothly
Option 2: Professional Employer Organization (PEO)
Professional employer organizations are organizations that aim to reduce the administrative burden of small to medium-sized businesses. They typically have HR, benefits and payroll staff and work under a co-employment agreement. Co-employment allows the PEO to be the employer of record for your employees and they then administer certain services such as benefits and payroll. Working with a PEO could limit some of your autonomy as a business owner and in many cases still requires you to work directly with employees regarding certain issues. There are a lot of different PEOs available, so it’s important to do your research to make sure that the one you choose is the best fit for your business.
Option 3: In-House HR
Hiring someone to work full time in house can be more costly than some of the other solutions discussed. In addition, depending on responsibilities and the number of employees, one individual may not be sufficient for business needs, which means this option is frequently a lower-priority investment than something like a PEO or comprehensive Human Resource Information System (HRIS). However, an in-house HR professional provides the business more control over the day-to-day responsibilities and their vision for the future. An in-house HR professional can learn the ins and outs of the business and provide solutions tailored to the company and its workforce.
Option 4: Outsourcing
Another common option is outsourcing. Companies can choose to outsource a single or several HR functions. There are many companies that focus solely on payroll processing, or HR consultants that help with benefits, training and development or employee relations. Some companies, both small and large, work on larger-scale projects like high employee turnover or low morale.
“Be mindful of how long certain elements of the consultancy work is taking you. Too long? Feeling like it's too much? If that's the case and you feel like your time is better spent elsewhere, chances are, it is. At that stage, find your collaborators who can take that workload off you. Scaling requires you to have experts around you, preferably those that complement what you do and can stretch you!” — Sam Eaton
While outsourcing HR functions can work well, it can also come with difficulties.
“Something is better than nothing, but the challenge is that if someone is just devoting a portion of their time then they may only see or hear a portion of the reality. In an ideal situation, I think there could be someone full time and someone additional … but it also depends where the company is. There might just not be a need for a full time person yet.” – Tatiyana Cure
Ultimately, it is most important to pick the option that is best for your small business and that will help make you successful.
How to Set Up an In-House HR Department for Your Small Business
If a business chooses not to outsource their HR or use a PEO, they’ll need to set up HR functions within the organization. Often this means hiring a dedicated HR professional, but if the business is still quite small, the business owner or an office assistant may handle HR tasks. Regardless of who’s responsible for HR, it’s important to have processes in place to ensure that the company stays legally compliant and treats employees fairly. This section won’t go into depth about specific HR functions; for those, see the sections titled “What Every Small Business Owner Needs to Know About HR” and “Additional HR Processes to Consider.” In this section, we’ll simply go over some basic steps to set up HR in a small business.
Step 1: If Needed, Hire the Right HR Professional
There’s no set number of employees that signals that it’s time to hire a dedicated HR professional. That number can vary from industry to industry, and from business to business. If it’s time for your business to hire an HR leader, you’ll probably want to start with an HR generalist. Generalists have experience with all aspects of human resources, so they’ll be able to handle the most critical tasks.
Step 2: Choose an HR Software to Ease the Load
Even if you hire an HR generalist, having good HR software can do a lot to ensure that things run smoothly. There are many all-in-one HR software platforms that handle most functions, including time tracking, document storage, payroll, and more. Do your research to choose a software that you can afford and that meets your company’s needs.
Step 3: Make an HR Budget for the Year
Decide how much you want to spend on HR-related costs. Here are a few expenses you’ll need to include in your budget:
- Salaries of new hires and existing employees
- Costs of recruiting (including turnover costs)
- Benefits costs
- Payroll costs
- Bonuses
- HR software
- Training costs
Step 4: Determine Compensation and Benefits
To ensure that your company pay structure is fair and aligned with the current market, do your research to see what other companies in your industry are paying their employees. If the salary your company is offering is way below the standard, not many people will want to work for you. While pay is important, benefits can also be a great incentive for people to accept jobs. Some benefits, like workers’ compensation, are legally required depending on the state you’re in. Others, like health insurance, vision insurance, dental insurance, 401(k) plans, and more, are not required but are a good way to attract and retain talent. Take some time to choose which benefits you’ll offer to your employees.
Step 5: Develop HR Policies and Procedures
This is one step where having an HR professional will help. Basically, anything in your company that has to do with people will have an HR policy or procedure associated with it. The following list includes areas that you’ll want to focus on. HR procedures:
- Recruiting
- Onboarding
- Payroll
- Training and development
- Disciplinary action
HR policies:
- Paid time off (PTO)
- Time tracking
- Attendance
- Meals and breaks
- Leave
- Anti-harassment and non-discrimination
- Workplace safety
Step 6: Create an Employee Handbook
Once you’ve created your HR policies, include the policies that are relevant to employees in the employee handbook. You can also include information about your company history, mission and values, and anything else employees should know. Distribute the handbook to employees so they can sign it, stating that they agree to follow all policies.
Step 7: Decide How to Measure Your HR Department’s Effectiveness
If you don’t measure your HR department’s effectiveness, you’ll never know how you can improve. Choose some metrics, such as employee turnover or offer acceptance rate, to measure consistently over time. As you look for patterns in the numbers, you’ll get a better idea of where to focus your efforts. For example, you might need to do better at hiring. Or, if employees are leaving after only a few months, you can focus on employee retention.Not sure what to measure? Here’s some advice from people analytics expert Richard Rosenow.“There are some early entry points to HR analytics that you see teams taking that have some common threads. Here are a few:
- High volume—you need enough data
- Repeated events—you need to make change
- Clear outcome—you need to know if change worked
- High value—something that matters to the business
- Captured—data exists in a common system
With those in mind, you see a lot of people analytics teams go after some early initiatives like call center support, sales team support, recruiting, and attrition. These are all activities that are well documented, high volume (hopefully not too high for attrition), repeat events, that are largely valuable to the company.”
What Every Small Business Owner Needs to Know About HR
If you’re running a small business, there is no shortage of responsibilities that you attend to. You have to be on top of everything—operations, finances, accounting, strategy, and so much more. Of course, a huge part of your job is also spent managing the people who work for you and setting them up for success. And if you choose not to use a PEO, outsource your HR, or hire an HR person, your company's administrative HR tasks will most likely fall on your plate. In this section, we’ll discuss how small business owners can get started with the key tasks and responsibilities of effective people management. Though this article has already touched on several of these areas, this section will go into a bit more depth.
You Need to Collect Essential Information From Employees
Regardless of company size or stature, if you’re running a small business in the United States there are a few documents that you absolutely must keep track of.
- I-9 Form. The US government requires that every employee complete an I-9 form to prove that they’re legally eligible to work in the United States. This document must be collected for each one of your employees. You, as the business owner, are also required to maintain a copy of this document throughout the duration of each employee’s employment tenure and continue to store the document for three years after the employee’s hire date, or one year after the date of termination, whichever is later.
- W-4 Form. The next document you’ll need to issue to your employees is their tax document. For most employees, this will be the W-4 form. A W-4 form should be issued to each employee at the company so that the proper amount of tax withholdings is deducted from their paychecks throughout the year.
- Direct deposit form. A third document you’ll want employees to complete is a direct deposit form. Unless you’re paying people with written checks, your employees will expect their compensation to be deposited directly into their bank accounts after each pay period. A direct deposit form allows employees to specify which bank to route their money to, and how much money should be deposited in each account.
- Employee information. This is not so much a document as it is a compilation of important information you should collect for each employee. Things like their legal name, their date of birth, their phone number, social security number, email address, home address, emergency contact information, and more. This information is obviously sensitive and needs to be securely and privately stored.
An Employee Handbook Helps Set Expectations
Every company would be smart to have at least a basic version of an employee handbook that all their employees agree to. The employee handbook lists out your expectations, values, and protocols for your company. Here are some bullet points that you’ll want to make sure you cover:
- Company values, mission statement, vision statement, etc.
- Employment information and employment agreements
- Company code of conduct
- Company policies
- Compensation and benefits
- Discipline and termination
- Safety protocols and procedures
It's Important to Stay on Top of Basic Regulatory Compliance
The last thing you want is for your company to get in trouble with the law! State and federal laws regulate certain aspects of the workforce. Review the following ones, then do more research into laws specific to your state or industry.
- Safety practices: Depending on your industry and the state in which your business operates, you’ll likely have to practice certain safety procedures to comply with mandatory regulations. The most common of these is governed by OSHA, which stands for the Occupational Safety and Health Administration. You can visit OSHA’s website to learn more about regulatory safety standards in the workplace.
- Anti-discrimination practices: Title VII of the Civil Rights Act of 1964 makes it illegal to discriminate against an employee or potential employee on the basis of the individual’s race, religion, sex, national origin, or color. In 2020, this law was supplemented to add that employers cannot discriminate based on sexual orientation or gender identity.
- Family and Medical Leave Act: In 1993, President Bill Clinton signed FMLA into law. This gives certain employees up to 12 weeks of job-protected, unpaid leave. For many small businesses, they won’t immediately have to worry about FMLA as it currently applies to companies with 50 employees or more. But as your business grows and you reach the 50 employee threshold, you’ll have to be aware of this law.
- Mandatory workplace posters: It may seem silly, but the Department of Labor requires that specific information be posted and made visible in your workplace. Unfortunately, the DOL doesn’t make it super easy to figure out which posters are required for your business. You can visit this site and walk through a series of questions to determine what you’ll need.
People Need to Get Paid (and Receive Their Benefits)
If people are running into issues every payday (with incorrect amounts, late checks, etc.) they're not going to be happy. Here are some terms to help you understand more about paying employees.
- Compensation. To understand how to pay employees properly, you need to understand what your competition and the broader market are paying for similar work. Services like PayScale, Glassdoor, and Indeed can help you understand what fair compensation looks like for each employee you hire.
- Payroll system. One of the fundamental responsibilities of a business owner is to pay your employees. Every pay period you must pay them what they earned, and pay them on time. Payroll can be incredibly complicated because of all the laws, regulations, taxes, and compliance issues that are involved. If you’re not a payroll expert, get some help! You can hire someone to process your payroll (this is often referred to as “outsourced payroll”) or you can use software that makes it easy to do it yourself.
- Payroll withholdings. Part of the payroll system is understanding the different withholdings that are deducted from each paycheck. You have to consider the various taxes such as social security, income, medicare, unemployment, and more. These taxes must then be sent to the IRS on a regular basis. Failure to pay these taxes can result in a significant penalty. Again, great payroll software or an outsourced payroll consultant can help you with all of this if you’re not comfortable with it yourself.
- End-of-year tax forms. When you hire an employee, you have them complete a W-4 form. At the end of each year, you’ll work with your payroll provider to supply every employee with a W-2 form. The W-2 form is what helps employees file their tax returns.
- Workers’ compensation. This is a kind of insurance that helps protect both businesses and employees from financial loss if an employee is injured on the job. Almost every state in the nation has some form of mandated workers’ compensation insurance to cover injured employees.
- Employee benefits. Most small businesses are not required to provide additional compensation for employees in the form of benefits, but offering benefits is a good idea if you can afford it. Offering benefits to employees, such as health and dental insurance, can save them both money and stress. There are also many fringe benefits that you may choose to offer that can help make your business more appealing to would-be employees. Recruiting great talent is a challenge, and offering amazing benefits definitely eases the burden.
Additional HR Processes to Consider
The previous section covers the basic “must-haves” for any small business. If your company is missing any of the things mentioned, stop reading and go take care of it! This next section is all about improving upon the firm foundation you’ve already built. With that said, here are a few HR-related tasks and processes that aren’t “required” but will help you build a better business.
Hiring
Great businesses are built by great people. Hiring talented individuals to help you grow your company will be critical to your success. Here are some tips and trips that will help you consistently hire top candidates.
- Forecast growth. The first step to hiring is understanding when you need to hire. A common mistake in startups and in small businesses is that a company hires too soon and ultimately is not making enough money to maintain their employees. The first thing you need to ask yourself when deciding whether or not to hire someone is, “can I financially afford this person?” The next question to ask yourself is, “do I absolutely need this person?” If you can afford someone and you’re in desperate need of their skills/services, then you know it is time to hire.
- Create an accurate job description. Before making a hire, it’s important that you understand the job you’re hiring for. If you’re unable to articulate what you need an employee to do, then you’ll be disappointed when they show up and fail to meet your expectations. Writing a clear job description will help you understand what role you’re hiring for, and it will help job seekers understand if they have the skills and qualifications necessary to perform the job.
- Distribute your job post. Once you know you need to hire and you’ve created a job description, it’s time to get the word out. You’ll want to distribute your job post broadly so as to attract a wide pool of qualified candidates. Consider posting on job boards such as Indeed or Glassdoor, as well as sharing your job post on social media sites like Facebook and LinkedIn.
- Manage the application process. This step can be particularly tricky, especially if you receive a lot of applications. It can be hard to remember which candidates you’ve already looked at, who you’ve responded to, who you’ve scheduled an interview with, and which candidates simply don’t meet your qualifications. Managing all of this from an email inbox is particularly stressful. An applicant tracking system (ATS) can help you with the process.
- Communicate with applicants quickly and often. When an applicant submits a resume to your company, it’s highly likely that they’re also submitting resumes to dozens of other companies. Because of this, your business is now competing with all those other businesses to hire this candidate. So, what do you need to do? Communicate quickly. Whether you want to move forward with a candidate or not, try to get back to all your candidates within 24 hours of their application submission. Throughout the hiring process, be open about when candidates will hear back from you. Stick to the deadlines you give them and communicate as promised.
- Extend an offer. After going through the interview process with your most qualified candidates, you’ll want to extend an official job offer. This is typically done through an offer letter. An offer letter will typically include information about the job, the salary, and benefits being offered to the candidate, the preferred start date, information about preliminary background checks, and more.
Onboarding
After a job candidate accepts an offer to work at your company, you’ll begin the onboarding process. Much of the onboarding process involves completing the required paperwork covered previously. Beyond that, there are things you can and should do to create a great experience for your employees. The onboarding process is a critical part of long-term employee retention, especially in a small business setting.
- Have the new hire complete the required paperwork. Before starting the job, your newly hired employee needs to complete all the paperwork to ensure that they’re legally eligible to work for your business. This includes the I-9 and W-4 forms, as well as the other documents outlined earlier.
- Background check. A background check isn’t required for every business or industry (although it is for some), but it’s something you might consider doing. Having new employees submit to a background check allows you to understand if your new hire has a criminal record or has been involved in fraudulent activity in the past.
- Prep the workspace. Before your new employee arrives, make sure that you’ve prepped their workspace and prepared all the tools, technology, or materials they’ll need to start their job. There is nothing more discouraging for a new employee than to walk into work on the first day of a new job and see that the company hasn’t prepared for them to be there. This immediately makes the employee feel unvalued and unwanted.
- New employee orientation. On your new hire’s first day of work, walk them through an employee orientation program. Help them to learn more about your company by explaining why your business exists, the goals you’re trying to achieve, the values you attempt to uphold, and the vision you have for the future.
- Assign an onboarding buddy: It can be scary to join a company where you don’t know anyone. To combat this fear, assign an employee to be a designated onboarding buddy for your new hire. This person should be able to answer the new hire’s questions, help them with their responsibilities, and train them on how to do their job.
- Job training. You cannot expect a new hire, even someone with vast experience, to come in and know what to do right away. They’ll need to be trained and given performance expectations. Job training is so critical for the success of an employee. It should be an ongoing activity over the first week or even the first month of the job.
- Check in often. Good business owners will check in with their new employees regularly in one-on-one meetings to see how they’re doing. This gives the business owner an opportunity to evaluate their hire, and it gives the employee the chance to ask questions.
Training Employees
For an employee to succeed, they need to be trained. Even if they have previous experience working in a position with a similar job title, there will be things that are unique to your company that they don’t know. Because every position in every company is so different, it’s hard to make generalizations about what your training should look like and what it should include. However, the following principles apply to almost any job in any industry:
- Don’t rush the process. Don’t try to complete all the training in a day or two. Give employees weeks to train.
- Revisit training after 60 or 90 days of employment. It’s likely your new hires have forgotten something since their first few weeks, so give them opportunities to brush up on training.
- Ask for feedback after the initial training period. Ask employees to rate their training experience. Find out if it actually prepared them well for the work they’re doing. Ask them for suggestions on how to improve or change.
- Structure and standardize your training process. The training process should be the same for everyone who’s hired with a certain job title. This way you won’t have to reinvent the wheel for every hire.
- Provide resources. Record videos or create documents that capture your training materials. Give employees continual access to this information so they can go back and learn on their own.
Engagement
After successfully hiring and onboarding new employees, your ongoing tasks will be to continue to engage and develop them. The cost of employee turnover can be crippling for a small business, so it’s important to create an environment that encourages employees to stay. Here are some suggestions for how to do this right.
- Surveys. Once a month, consider surveying your employees and asking them how they’re feeling. Get an idea of how engaged they are, how excited they are to be working for your business, and also ask them for ideas on how to improve the company. Making the surveys anonymous will encourage employees to share their thoughts and feelings freely.
- Ongoing training. To help employees stay engaged, it is important to continue to invest in their progress and development. It’s human nature to want to learn new skills and participate in new challenges. Train your employees so that they can level up and do more for the business. This is much more affordable than hiring additional employees to augment the talent gaps in your company.
- One-on-one performance reviews. Employees want to feel valued at work, and the best way to help them feel this way is by consistently giving them feedback. When an employee is given feedback on their work, they understand that you care about what they’re doing. They understand that you’ll help them find ways to improve. Regular and consistent feedback done through one-on-one performance reviews will strengthen your bond with employees while also enhancing their on-the-job performance.
- Facilitate communication. This has become more important than ever as many businesses are shifting to some form of remote work. As remote work becomes more and more mainstream, businesses will need to find easy ways to stay in contact with their employees. As a small business owner, consider investing in communication software that helps you easily chat and connect with your workforce. Here are some free options to consider:
Discipline and Termination
One of the more challenging aspects of HR is the disciplinary actions you’ll be forced to take with certain employees. These conversations are never fun, but there are things you can do to ensure that things go smoothly. Here are a few ideas.
- Set clear expectations. The employee handbook is crucial here. Your employee can and should contain a list of policies and behaviors your company promotes, as well as the punishment or disciplinary actions that will be taken if those policies are not followed. If you have these things in writing, it’s easy to point to them when an employee makes a mistake. Your employee will understand that they broke the rules and that there are consequences to their actions. However, you don’t have anything written down, it’ll be hard to hold employees accountable.
- Write things down. If an employee breaks a rule or deviates from expected behavior, write this down. If you have conversations with an employee about poor performance, extensive tardiness, unexcused absences, or other related issues, then write these down.
- Document everything. This way, if you ultimately need to fire an employee because of these issues, you’ll have evidence to defend your decision. If an employee tries to sue you for wrongful termination, you’ll be able to point to the documents you’ve kept that detail the process and explain why you fired them.
- Be proactive with your feedback. If you’re firing an employee because of performance, there is a way to handle the situation that will make things easier for you and the employee. First, be proactive in telling the employee that you’re beginning to see a slip in performance. Be upfront and direct. Let them know that you need them to pick things up. If the employee does not respond to this encouragement after a week or two, tell them again. Warn them that their job is in jeopardy if they can’t turn things around. Wait another week or two to see how they respond. If they still haven’t picked things up, it will not be a surprise to them when you tell them you’re terminating their employment. They’ll expect it. The worst thing you can do is sit back and let an employee fail and not say anything.
- Have a witness. When you terminate someone, don’t do it alone. Always have another person in the room with you to act as a witness to the conversation. This way, if the employee ends up suing you and says you told them something when terminating them that was discriminatory or otherwise unlawful, your witness will be able to testify on your behalf. Your witness may also take notes during the termination meeting so as to record the events accurately.
How Eddy Can Simplify Your HR Processes
Eddy is an all-in-one HR software designed to help small business owners handle their HR processes. Its three main products are Eddy People, Eddy Hire, and Eddy Payroll.Eddy People is a core HR and people management platform that includes employee profiles, new hire onboarding tasks, document and e-signature management, time and PTO tracking, and more. Eddy Hire is an applicant tracking system (ATS) that lets you post for free to top job boards like Indeed, ZipRecruiter, and more, helping you cast a wider net to get your job posting in front of more candidates. It also takes the load off the hiring team by automating candidate communication and using a customized hiring pipeline to track candidates. Eddy Payroll is a full-service payroll solution that removes the burden of running payroll from your team. Our payroll experts make sure that employees are paid accurately and on time, and that your company remains compliant with laws and deadlines. Eddy Payroll also automates quarterly and annual tax filings and distributions. Find out more about how Eddy can help your small business thrive
Growing Your Small Business With Effective HR Practices
This article wasn’t short. There’s certainly a long list of HR tasks and responsibilities to think about, and it’s hard to take it all in as a small business owner. Remember, start with the things that are absolutely critical. Get your paperwork right, get your people paid correctly, and make sure you’re staying compliant with state and federal laws and regulations. That’s step one.Once you feel like you’ve got the basics down, you can begin to think about things like improving your hiring process, creating a memorable onboarding experience, and keeping your employees engaged. All of these things will help your business grow.HR for small businesses is hard work. But it’s important work. You’ve got this!
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Colleen E. Frislid, SPHR, SHRM-SCP
Colleen manages a team of HR consultants that work with a variety of industries, specializing in the fields of human resources, strategic planning, and human capital management. Colleen applies expert knowledge, industry experience, and relentless energy to solving companies’ issues. She is a member of the Society for Human Resource Management as well as women in leadership groups. She is PHR, SPHR, and SHRM-SCP certified. She has an awesome pet cat, Attila and, when she's not working she loves to travel, enjoy the great outdoors, and volunteer with different local charities.
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