Top 5 HR mistakes commonly made by startups
In more than 20 years working in human resources, there is one thing I’ve learned above everything else: HR is incredibly complex. For starters, there are dozens of state and federal agencies tasked with enforcing hundreds of employment-related laws that organizations must follow.
Add to this that businesses are also responsible for, at a minimum, the following painstaking HR functions:
- Creating, updating and maintaining organization policies and procedures
- Recruiting, hiring and on-boarding new employees
- Choosing and administering benefits plans
Having to maintain compliance, organization and effectiveness in an intricate regulatory environment, in addition to all the other high-level business responsibilities, is enough to make the average business owner’s head spin. It’s no wonder the U.S. Equal Employment Opportunity Commission (EEOC) receives nearly 100,000 claims of employment discrimination a year, for which businesses have to pay out hundreds of millions of dollars. HR is tough to do alone.
The administrative burden of HR is a lot to grasp, but a good place to start is by recognizing the five most common HR mistakes made by startups:
- Insufficient job descriptions. Effective job descriptions are a key component for recruiting the right employees and starting the employment relationship off on the right foot so that your new top talent thrives in the organization for the long haul.
You can read more about improving your job ads, but all employers can benefit from keeping the following in mind when they create job postings:
- Make your job description into a roadmap of what the successful candidate needs to do on a daily basis. Be very specific with their responsibilities and duties, as well as what results are expected. Far too many entrepreneurs find their new employees are very surprised on their first day of work to learn that the job they accepted is nothing like what they thought it was going to be. A good job description should bridge this gap.
- Make sure your job description does not discriminate against a protected class of individuals. Protected classes include race, gender, age, religion, national origin, marital or family status, or disability.
- Misclassification of employees. Many entrepreneurs expose themselves to potential litigation for violating wage and hour laws set by the Fair Labor Standards Act (FLSA). The most common classification mistakes startups make include:
- Classifying employees as exempt (from overtime pay)
- Inaccurate payment of wages due to incorrect employee classification
- Misclassifying employees as independent contractors
- Not being aware of all federal and state laws. All employers should be aware of labor and employment laws at the federal, state and local levels. These include:
- FLSA — Establishes minimum wage, overtime pay, record-keeping and youth employment standards
- Family Medical Leave Act (FMLA) — provides job protection during unpaid family-related medical leave
- Americans with Disabilities Act (ADA) — allows for reasonable accommodations for disabled employees
- Final pay rules — these vary per state and dictate how employers can pay out vacation and sick time
- Various state reporting requirements
A professional employer organization (PEO) that provides HR risk management services can be very helpful in navigating the various employment laws affecting employers and keeping your organization compliant.
- Failure to provide performance assessments. If you want to make your hiring practices scalable for the anticipated growth of your business, performance management should begin as soon as you hire your first employee.
Performance management differs from the more commonly known performance review in that performance management is an ongoing process, whereas a performance review is a one-time event that is usually completed annually.
Performance management can be as simple as having frequent and regular one-on-one meetings with each employee to discuss workflow, give feedback and nip any performance issues in the bud before they become major problems. The performance management approach to developing your employees allows you to keep employees on track toward business goals and can be a great motivator for your team.
- Improper documentation. If I could get every small business owner to get into the habit of doing one thing, it would be to document all conversations involving employee performance. Many of the lawsuits that business owners lose are due to improper documentation. This is true especially of terminated employees.
For this reason, be sure to document all performance issues, including every communication with the employee regarding his or her performance and all steps taken to rectify unsatisfactory performance. I recommend using a “record of counseling” or “corrective action notice” form to document any potential issues as they arise.