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Top HR Mistakes Entrepreneurs Make
By VICKY BROWN
Being, or becoming an employer can be exhilarating, stimulating and downright fun. It’s great to have a team to support you and your future vision for success. But with all that, it can also be confusing, and complicated.
In an earlier episode we talked about the top wage and hour mistakes employers can make. But there are other areas to keep an eye on. So in this episode, I’m going to take you through the top HR mistakes that Entrepreneurs make – in no particular order (because they’re all planet killers).
First up – not getting workers compensation insurance coverage. Oh sure, I know, you just think ‘nothing’s ever going to happen to one of my employees – and if it does I’ll just send them to my doctor.’
Well, what can I say – wrong! Unfortunately, when there is an accident or illness, it very well might not be one visit and done – in fact, it rarely is. Someone can twist their arm today, and 6 months from now it’s a major shoulder injury and they can’t work at all because of the pain. So now, its not just that they have medical bills – and I’m sure you know how expensive those can be – but they have lost work time. What about their salary – are you planning on covering that out of pocket too?
Taking all that on your own can end up be VERY expensive, and maybe even a long lived expense.
But aside from all that – in most states you have to have workers’ compensation insurance. And if you don’t – some states, like California, consider it a criminal offense. That means fines and possibly even jail time folks. So really, don’t mess around – get workers comp insurance as soon as you hire workers.
Next – failing to get and complete the Authorization to work in the US – otherwise known as the I-9 form. This document is required to be properly completed for every person who works in any capacity in the US. And there are very strict timelines on what needs to happen when. For instance, the employee has to provide their completed portion of the form, along with their authorization documents, no later than their first day of work.
“.. Let’s talk a second about dealing with performance issues…. pay now, or pay later. And if it’s later – you’ll pay much more.
The employer portion of the form has to be completed no later than 3 days after the start date. The other part that trips people up is how to complete the forms, what documents are OK to accept, how do you list them on the form, what goes where.
Well, never fear – the US Immigration Service has created a handy Handbook for Employers – I’ll put a link in the show notes. And it tells you everything you ever wanted to know about completing an I-9.
OK onward. Misclassifying employees is a huge issue. I covered this in the earlier episode, but it’s such a common mistake that I thought it was a good idea to mention it again. No matter if you designate a job as exempt from overtime – when it doesn’t meet the qualification; or if you are dealing with someone as an independent contractor, when they should be classified as an employee. All those misclassifications are guaranteed to give you trouble.
The next one I tend to see a lot. Giving an employee benefits, or money for benefits, outside an approved company plan. For instance, let’s say you haven’t gotten around to offering medical insurance to your employees. So, when someone new comes on, you think – I’ll just give them an allowance to buy their own insurance.
Well, of course you can give them money – but the issue is taxes. You see, outside an IRS approved plan (like a formal medical plan offered by the company), the feds consider that extra money just that…extra money, as in extra salary. And they expect taxes to be paid on that extra amount. So, if you aren’t coding it as regular salary, and making sure it gets all the payroll taxes taken out – then you are setting yourself and your team member, up for problems.
If you want to do something along those lines, I strongly urge you to talk to your benefits insurance broker first – they can tell you what options you have available.
So, one of your employees just told you that she’s pregnant. Feeling overwhelmed, with no idea where to start? After all, HR just got dumped on your plate. It’s not your zone of genius, and you don’t want it to be.
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So, do you have an employee handbook? No? Are you thinking – it’s too corporate and we’re much more casual. Well then, make sure it’s not too corporate-y. But I think it’s a good idea for you to have a handbook. It lays out the guidelines around how the company and the team member will interact; provides valuable information on company policies; and gives your team information on how to approach any concerns they may have. And last, but certainly not least, it will probably be the first document your attorney will ask for if you ever find yourself in a position where you need them to defend you.
So, handbook – good idea. Oh, and make sure you take a look at it (or have your HR rep or employment attorney take a look at it) each year. You need to be sure it’s kept up to date.
Let’s talk a second about dealing with performance issues. This is a really big one. It’s so easy to try to overlook poor performance – either because the person is good at other parts of their job, or you just don’t want to deal with the confrontation and conflict.
Well, I’ll tell you – pay now, or pay later. And if it’s later – you’ll pay much more.
When you let poor performance drag on without addressing it, in addition to a whole host of other things, you are sending a message to the team – and it’s the wrong message. You’re telling them you aren’t going to hold people accountable, or to the standards of the company. That’s a really bad message.
And besides, eventually things are bound to get so bad, and you become so frustrated, that you have to deal with things. And by that time, you just want to start firing people. So take my advice, don’t let these things sit and fester. Be proactive, deal with poor performance as soon as you see a pattern emerging. Be fair, but firm.
OK, those are some (but not all) of the HR mistakes we Entrepreneurs can make. It may sound like a maze of challenges, but you don’t have to figure this stuff out all by yourself. Reach out to an HR professional or an employment attorney – they’ll be happy to help. And they’ll help prevent problems down the road.
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