Running a business can be as exhilarating as it is tiring, but don’t let your guard down—one thing that can make or break you is your Human Resources practices.

From the art of recruiting the right talent to the science of managing a productive workforce, HR occupies a pivotal role in steering business success and expansion. Tragically, many small businesses make the same common HR mistakes that can lead to significant issues down the road. But how dire can these missteps truly be?

The keyword is dire.

The price tag of a bad hire averages $15,000, while non-compliance penalties with employment laws weigh in at around $75,000, and employee turnover incurs costs reaching 1.5 times an employee's annual salary. These numbers are nothing to joke about, prompting one question—how can these costly pitfalls be avoided?

Let's delve into the matter by examining the 6 most prevalent HR missteps that small businesses make, along with their solutions.

1. No Hiring/Recruitment Strategy
   One of the most significant HR mistakes businesses make is not having a well-defined hiring and recruitment strategy. Without a clear plan, they may end up hiring the wrong people or struggle to find suitable candidates. As a result, this can lead to high turnover rates, low employee morale, and increased recruitment costs.
   Solution: Create a comprehensive hiring and recruitment strategy that outlines the roles and responsibilities for each position, defines the desired candidate qualifications, and establishes a structured interview process. Collaborate with hiring managers to identify the key skills and traits required for each role to ensure you attract the right talent to your organization.

2. Misclassified Employees
   Another mistake often made is misclassifying employees as independent contractors or vice versa. This error can have severe legal and financial consequences, as misclassification can lead to wage and hour violations, unpaid benefits, and potential tax liabilities.
   Solution: Familiarize yourself with labor laws and regulations pertaining to employee classification in your jurisdiction. Consult legal experts or HR professionals to ensure all workers are correctly classified from the start.

3. Poor/Missing Documentation
   Inadequate or missing documentation is another significant HR blunder made by small businesses. Failing to keep proper records, such as employment contracts, performance evaluations, and disciplinary actions, can create difficulties when dealing with disputes or legal issues in the future.
   Solution: Implement a robust HR information system to maintain accurate and up-to-date employee records. Regularly update and store essential documents, including employment contracts, policies, and training materials, in a secure and organized manner.

4. Outdated/No Employee Handbook
   Perhaps the most common mistake of them all is not having an employee handbook or having an outdated one that doesn't reflect the current policies and practices of the organization. An employee handbook serves as a valuable resource that outlines company policies, expectations, and benefits. Without it, employees may lack clarity on what is expected of them, leading to confusion and potential HR disputes.
   Solution: Develop a comprehensive employee handbook that clearly communicates company policies, procedures, and benefits. Ensure all employees receive a copy and acknowledge receipt to demonstrate their understanding of the information.

5. Not Reviewing Terminations with an HR Pro
   Terminating employees is never an easy task, but not involving an HR professional in the process can be a significant mistake. Mishandling terminations may lead to wrongful termination claims or negative impact on company culture and employee morale.
   Solution: Always involve HR professionals in the termination process. They can guide you through the proper procedures, ensuring that terminations are conducted legally and respectfully.

6. Not Training Managers Regularly
   Businesses, large and small alike, often neglect regular training for their managers, assuming they will learn on the job. However, untrained managers may make costly mistakes, mishandle employee issues, and create a toxic work environment.
   Solution: Offer continuous training and development opportunities for managers, focusing on crucial HR skills like communication, conflict resolution, performance management, and legal compliance. Investing in manager training will enhance leadership quality and employee satisfaction.

Avoiding these common HR errors is essential for small businesses to maintain a solid foundation for their growth and success. By implementing effective hiring strategies, maintaining accurate documentation, updating policies, and involving HR professionals in critical decisions, businesses can create a positive and compliant work environment that nurtures employee productivity and satisfaction. Keep in mind, well-managed HR practices play a significant role in a company's long-term success and if you’ve found yourself struggling with any of these concerns and more, never fear. There’s always a solution.

At Grey Owl HR, our mission is to empower you for success while alleviating the weight of overseeing your Human Resources operations. Partnering with us grants you access to a team of seasoned professionals dedicated to enhancing every facet of your enterprise for maximum productivity, streamlined efficiency, and unwavering compliance. Unlock the full potential of your business and give us a call today!