Top 5 HR Mistakes New Businesses Make
Written by Emma Weeks, HR Advisor at Melbourne HR
Starting up a business can be an exciting yet laborious and overwhelming experience. In the formative stages, it’s common to find yourself wearing all the professional hats at once - finance, operations, marketing…the list goes on. But one hat that often gets forgotten is HR. And the ramifications of leaving this function unattended can be very costly, with the potential to run you out of business.
So, to help steer you in the right direction and build your business for success, here’s five of the most common HR mistakes we see start-ups make, and most importantly, how to avoid them.
Top 5 HR Mistakes:
Mistake #1: Recruiting the wrong people
Mistake #2: Dismissing the need for an employee handbook
Mistake #3: Employee performance issues aren’t documented and managed correctly
Mistake #4: Misclassifying employees
Mistake #5: Inadequate training
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Mistake #1: Recruiting the wrong people
Hiring the wrong person is one of those errors we see time and time again. And the consequences can be huge, particularly when the business attempts to expand and grow.
Beneath poor hiring decisions, two key mistakes are often found:
The interview process is rushed, and due diligence is not completed. This leads to critical components/attributes of a candidate’s application being missed.
There is a heavy reliance on ‘gut instinct’ or guessing, rather than opting for a standardised recruitment process. This runs the risk of making an uninformed decision, with an increased likelihood for bias to sneak in.
So how do you avoid this mistake and recruit the right hire for your business?
The key is in your recruitment process. Ensure you have a uniform process in place, that allocates the time and resources it needs to complete adequate due diligence and verification checks. Whilst this process might take longer, this ensures you have all the information you need to make an informed decision.
Keep in mind that the extra time you take to hire the right person, is far less time than it will take to terminate and replace a poor hiring decision.
Mistake #2: Dismissing the need for an Employee Handbook
To some, an employee handbook may seem trivial. However, they are an essential tool that can prevent employee related issues from occurring within your business.
Without an employee handbook, you open your business to a range of lawsuits and claims, including wrongful termination, harassment and discrimination. Start-ups who ignore this risk are setting themselves up for failure.
So how do you avoid this mistake and protect your business?
In a nutshell, an employee handbook is an opportunity to communicate expectations, provide direction and define employee rights and legal requirements. HR policies should address areas of possible confusion, acting as a valuable resource that can be drawn upon to provide tangible guidelines to all those working within your business.
Take the time to build an employee handbook and take your employees through it to ensure understanding. This is the first step towards achieving compliance and sets your business up for success.
“Without an employee handbook, you open your business to a range of lawsuits and claims, including wrongful termination, harassment and discrimination.”
Mistake #3: Employee performance issues aren’t documented and managed correctly
An under-performing employee can cause all sorts of headaches for a new business, and needs to be managed in a way that is fair and lawful.
When it comes to performance management, the biggest mistakes we see employers make is:
Failing to document and proactively manage underperformance
Ignoring the problem altogether and hoping the issue naturally resolves itself
Unfortunately, both mistakes can result in some pretty negative outcomes, including damaging business productivity, staff morale and reputation, just to name a few. In the worst-case scenario, you can also open yourself up to a wrongful termination case.
So how do you avoid this mistake and manage under-performance?
It is critical that you document under-performance as it occurs – don’t wait until it is time for your formal performance reviews. It is equally important that any feedback is communicated with the employee, and they are given the opportunity to respond and improve.
This can be a dauting process for those who are inexperienced in this area. However, the consequences can be dire for your business if ignored.
Mistake #4: Misclassifying employees
Are your workers full-time employees or independent contractors? Shift-workers or casual? It is critical that you classify each of your employees correctly and accurately – however we’ve found this is an area that not a lot of business owners get right.
In fact, a common mistake we see is new business owners falling into the trap of classifying their employees as ‘independent contractors’, just so they are responsible for their own taxes and benefits.
What’s important to know is that misclassifying employees can cost your business hundreds, if not thousands, of dollars back in taxes, employee benefits and penalties.
So how do you avoid this mistake and classify your employees correctly?
Before hiring an employee, ensure you are crystal clear on their classification. Use the FairWork Australia website to understand the different types of employees, and make a note of their entitlements, tax obligations and super guarantees.
Furthermore, if you are paying your employee on Award rate, you must ensure you are operating under the correct Award and ensure they are classified in the appropriate pay grade.
It’s far better to set your employee up correctly now, rather than face the harsh (and costly!) penalties of incorrect classification later.
Mistake #5: Inadequate training
Setting your employees up for success extends far beyond understanding their classification. One element of onboarding that often gets forgotten is proper and thorough training of new recruits.
Ensuring new employees are well-trained for their role and have a comprehensive understanding of policies/procedures is critical for the functioning of any business. Without it, you can face negative impacts on staff retention and satisfaction, leading to more work in the future when it comes to re-hiring.
So how do you avoid this mistake and ensure your employees are adequately trained?
Hiring someone new is only half the battle. To ensure new recruits are able to hit the ground running, build a standard training and induction process that gives them the foundational knowledge they need to perform their role.
This could include an overview of the employee handbook and related policies/procedures, an introduction meeting with key stakeholders, and technical training for any specific duties required.
The key is in ensuring your new hire feels confident and prepared for the role they are about to commence.
Building your own business is an exciting venture - don’t risk the foundations you have built over something predictable or preventable. While your to-do list may feel overwhelming, the key to avoiding these costly mistakes is taking the time to set your human resources up properly.
Whether its slowing down your recruitment process, or being more proactive in attending to performance/training matters, the additional resources you spend now will ensure your business is compliant and built on solid foundations for future success.
Take care to avoid these 5 common mistakes and protect your business in the long-run.
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Emma Weeks is a HR Advisor with Melbourne HR
Edited by Nicole Torrington, Marketing Manager at Melbourne HR.