3 Small Business HR Pitfalls and How to Avoid Them

3 Small Business HR Pitfalls and How to Avoid Them

Small business owners often must do it all—from keeping track of financials to general operations duties—such as paying bills to keep the lights on and even tackling most (if not all) HR tasks.

Maybe you’ve got a few employees pitching in to help you here and there with essential HR tasks, such as payroll, but have you thought about who in your business will be responsible for keeping track of HR compliance issues and hiring and retaining talent?

Even if you’re not able to have a designated HR team, you could save yourself time and money down the road by avoiding these three small business HR pitfalls.

Not Treating Compliance as King

Did you know that being compliant with employment law means your small business has to be aware of three different layers of regulations—federal, state, and local? Not to mention, as soon as you hire your first employee, you are likely subject to the requirements of the Fair Labor Standards Act, which establishes rules surrounding minimum wage, overtime pay, record keeping, and more.

Not complying with employment law can open your business up to fines and even lawsuits, both of which aren’t cheap to deal with. While HR tasks aren’t usually the ones bringing in sales, paying attention to HR compliance from the start is really a valuable investment—especially if you think about how being vigilant now can save you from hefty fines and attorney fees down the road.

Even a small shop can likely afford to assign someone internally to keep tabs on new or updated employment law on the side, but another option is to hire an outside expert or firm to manage HR compliance matters on behalf of your business.

Not Hiring the Right People

When the time comes to hire, there’s a lot to think about—from writing the job description, attracting top talent, and managing the recruitment process. The last thing you want to do is settle for a candidate who may seem to have all the qualifications on paper but doesn’t fit your company’s culture. After all, one in five employees leave a job within the first 45 days, and not finding the right person multiple times can really impact your bottom line. Remember, on average, it costs 21 percent of an employee’s annual salary to replace them.

There’s also the paperwork and onboarding that comes along with every new hire. Having a designated person in your business to manage the new hire’s personnel file, including the coordination of benefits enrollment and the necessary payroll adjustments that go along with it, will help keep your business compliant and decrease your risk of making what could be costly errors.

Know Before You Grow

Below are just a few of the regulations you’ll have to keep in mind as your employee head count grows.

  • If you’re a growing small business, once you hire your 15th employee, discrimination laws come into play. You can read about Title VII here.
  • You’ll also be required to offer health insurance to all employees once you reach 50 full-time employees. You can learn more about the Affordable Care Act (ACA) in this resource.
  • FMLA also kicks in once you hire your 50th employee, which means you’ll be required to offer 12 workweeks of unpaid leave each year with no threat of job loss for each one of your employees. Check out the FMLA link above to get more details about how employee count figures into the different worksites you may have within 75 miles.
  • Once you hit 100 employees, your business will need to fill out an EEO-1 report, which is due each year on March 31, 2018. The EEO-1 survey requires employers to report employment data to the federal government to enforce federal prohibitions against employment discrimination. Check out our EEO-1 FAQs.
  • While it’s already noted above that this blog post is not meant to be all encompassing for everything you’ll need to consider as your employee headcount increases, we’d be remiss for not mentioning paid sick leave, which has requirements that vary by location. We created a Guide for Payroll Professionals that can help you navigate various payroll and tax legislation.


The Sentric Team

The Sentric Team

At Sentric, we help businesses make people management easier with industry-leading technology and standout support.

Sentric HR & Payroll Insights

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