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HR Best Practices For Small Business

Whether you’re starting a new enterprise or taking over the family company, the challenges that face small business owners are the same: increase market share, diminish costs and risk, and fulfill your mission or vision. To achieve all these, micro business owners must wear many hats. Whether you planned to be an HR manager or not, you hold the HR responsibility. Entrepreneurs are learning they can not only manage these obligations, but use them to help grow their company.

You may be a stand-alone, but you’re hardly alone: 99.9% of all firms in the USA are small businesses: 75% of those self-employed. 28 million small businesses account for 55% of all American workers. Non-profits alone account for more than 10% of the country's private-sector workforce.

And the trend to self-ownership has no end in sight. Sixty-seven percent of millennials hope to start their own business: they’re poised to change the workscape. By 2025, they’ll make up 75% of the American workforce: today, one of every three employees a millennial.

HR and Small Business
There are some best practices small business owners can follow to navigate the maze of HR responsibility while still keeping company business the first priority. The HR function is twofold: compliance and development. Compliance may seem like a maze of laws and regulations, but some basic tenets can guide you through. Development focuses on bringing in the best talent you can afford and utilizing them to their fullest.

Compliance
If you’re the sole employee of your company, you needn’t worry about discrimination or harassment. But as soon as you add a staff member, you must comply with applicable laws.

To avoid these laws, some turn to a freelancer/independent contractor. The shift toward freelance employees is growing since they are not subject to payroll taxes or unemployment insurance and they rarely have access to workers’ compensation benefits or the right to sue for harassment or discrimination. Many companies utilize them, even at a higher hourly rate, to save 20 to 30% of annual salary on benefits, payroll taxes, and employer contributions. But beware, the type of work dictates whether an IC is allowed under IRS regulations, not the type of paycheck you wish to provide.

Independent Contractor Versus Employee
The IRS stipulates the amount of “control” you hold over the employee dictates whether you can categorize them as an IC or a payroll employee.

Employees are:
- Given specific duties
- Given locations, work hours, and supervision
- Given tools or equipment
- Necessary for daily operations

Independent contractors:
- Work on their schedule
- Work without oversight
- Choose the work location
- Can have multiple clients

Still in doubt? The IRS has a checklist to determine the appropriate classification. Misclassification can be costly, so verify before you enter into an Independent Contractor agreement.

Interviewing Well
Whether it’s an in-house or virtual staffer, a good fit in a small company is crucial. Working in close quarters with someone demands a good relationship. While countless websites offer interview guidelines and trick questions that “reveal all,” interviewing isn’t that complicated. Follow the 20/80 rule. Talk 20% of the time, listen 80%. Ask open-ended questions that require an “essay” answer, not yes/no responses. Ask candidates to tell you about their past jobs: what they liked/disliked, and why they left. Ask about any tasks applicable to the work you need performed. If you hear something that sounds like a red flag – follow up. If you don’t get a satisfactory answer, listen to your gut and be ready to move to the next candidate. The more you listen, the more information you’ll get that can help you find the right fit. And always check references – remember the old adage: trust but verify.

Outsourcing HR
As your business grows HR becomes more complex. Small businesses can spend up to 40% of their day on HR – time away from growing your firm. Consider outsourcing some or all of the HR function: vendors are available for almost every aspect you might need – from recruiting to payroll, and more. In addition to getting back to business, there are a lot of good reasons to consider outsourcing.

Why Outsource HR
55% - control legal risk/improve compliance
44% - offer services the organization could not otherwise provide
42% - allow the company to focus on core business

Remember to verify references before you contract with any vendor.

The Benefits Challenge
When benefits become an issue, many small businesses hit a brick wall. Finding coverage for a small group can be cost-prohibitive. But not offering benefits may be keeping you from attracting the talent you need. Under the ACA, you might be mandated to offer coverage. Many small businesses look to PEOs for a solution.

PEOs and Your Business
PEOs, or Professional Employer Organizations are often called co-employers. You pay a PEO to put your staff on their payroll to absorb your employees into a larger group for health and other benefits. PEOs manage tax payments, assure you hire legally, offer access to HR experts, and more. Fee structures vary, so shop around for the best pricing/benefits package you can find – and ask for references and certifications.

Development and HR
While you’re vying for success, trying to wear the hat of mentor and boss can be challenging. But developing staff is critical to your growth. Some HR 101 basics:

Job Descriptions
A current job description for each position takes you through every aspect of employment. Knowing exactly what work must be performed is essential to choose the best candidate. As you manage, evaluate, promote, or discipline, you can easily do so against the duties and expectations outlined on the job description.
A job description is about the work, not the worker: as you write it, outline only duties to be performed, along with any necessary skills, experience and/or educational requirements. An individual’s traits or any information that suggests or excludes any type of person, like religion or gender, should never be part of the job description, nor part of any employment decision you make.

Tackling Trouble Spots
Deal with problem areas quickly and professionally. Ignoring problems is tacit approval: telling a staffer about an issue quickly, before it becomes grounds for dismissal, is not only fair, it’s an opportunity to save an otherwise good employee. Don’t want to be the “bad guy?” Most employees prefer to be warned, rather than lose their job over something that may have been easily corrected.

Create the Culture You Want
Lead by example. If you’re motivated, professional, and courteous it’s easy to require the same from staff: if you routinely loose your temper, it can be difficult to require others keep theirs. As the leader, you create the corporate culture and set the stage for the workplace you want.

Managing Millennials
The chances are you’ve got a millennial in your workforce today – and if not, you will soon. Capitalize on their talent and enthusiasm: millennials want their work integrated into their personal life. That desire can translate to higher engagement and higher productivity: great news for small business. When millennials were asked what they want:
- 79% want that boss to serve more as a coach or mentor
- 88% want work-life integration: a blending of their personal and professional life together

Millennials may ask for flexible hours or remote work, but there’s value in considering their request: flexibility means that millennials are “always on the job.” A survey found of 80% of millennials with a smartphone:
- 89% regularly check work email outside normal hours
- 37% always check work email outside normal hours

Having employees who are available to pitch when needed in is a big plus for a small business owner.

Being Social
Social media is quickly being integrated into HR. Many companies check out a candidate’s profile before hiring – but beware: this practice could lead you to information you shouldn’t have. You can unwittingly find a candidate has health issues, or information about their personal life that could lead to a charge of discrimination. If you must look, advise the candidate before you look at their public profile and never demand access to anything private.

If you’re looking at how to utilize a millennial, their social media savvy could be a significant strength to capitalize on. Social media may even be the new marketing department for many small businesses, as user statistics detail:
- 53% of users recommend companies and products on Twitter
- 64% of Twitter users and 51% of Facebook users are more likely to buy products of brands they follow online
- 50% of users made a purchase based on a social media recommendation

Human Resources and Your Small Business
While Human Resource responsibilities are rarely a part of the small business owner’s plan, they do go hand in hand. Finding, developing, and capitalizing on staff can help grow your small business and assure your success, as well as theirs.