The average small business owner spends more than 25 percent of his or her time handling employee-related paperwork, according to the Small Business Association. Add in recruitment, hiring, and training of new employees, and this accounts for 35 to 45 percent of the business owner’s workday.
Most entrepreneurs don’t start a business with the desire to become experts on payroll, benefits, hiring and firing, or the litany of federal and state regulations regarding everything from workmen’s compensation to workplace health and safety.
Luckily, there are plenty of resources to help protect business owners from getting buried in paperwork.
We recently caught up with TriNet, a California-based company that provides human resources services to businesses. Several of the company’s human capital consultants and researchers offered their expert advice on running a human resources department.
Here’s what they had to say about …
According to Jason Freeman, the founder of tech startup 42Floors, the biggest mistake companies make is turning to default hiring practices — using job applications and interviews. Hiring this way will only land you foot soldiers, when what you really want is superstars. Despite the fact that unemployment remains high in the country, small businesses are still having trouble finding and retaining skilled employees. In the tech industry especially, competition for the top talent is fierce and expensive (can you afford to give someone a six-figure salary and multimillion dollar stock options? Not to mention a free sushi bar where they can eat lunch?) When trying to attract your next superstar, you need to think outside the cubicle. Jason Baptiste, CEO of Onswipe advises that you avoid hiring from traditional talent centers like New York or San Francisco. Sell your potential hires on your mission, rather than a big salary, and look for raw talent to mold. Other experts advise offering equity to new hires and to move quickly when hiring.
Nobody wants the unhappy job of laying off an underperforming employee, but there are ways to make it less painful, according to David Edelson, a human capital consultant with TriNet. First, gather all the documentation to support your decision, including time sheets, written warnings, etc. so that you are able to explain to the person why they are being let go and show them the supporting evidence. Handle with care, Edelson says. When news has to be delivered, get to the point quickly, concisely and calmly, and treat the employee fairly and professionally. If the person is being laid off for financial reasons, offer career placement services including resume assistance and interview tips. Make sure there’s a witness present to document the conversation. Be sure to read up on federal and state guidelines on how to handle the final paycheck. Finally, make sure to notify the employee’s colleagues that they are no longer with the organization, but don’t provide details about their departure.
For most employees, their current rate of pay and raises are a mystery, said Debra Squyres, a senior human capital consultant with TriNet. Rather then having employees talk to their peers about compensation — which can lead to unnecessary tension and bad blood in the workplace — educate them about the company’s compensation philosophy and structure. This allows the employee to make educated decisions about his or her career — like deciding whether she wants to apply for a higher level position or seek additional training for a new career path within the company once she reaches the maximum salary in a given position. Beyond that, it is important that employees understand the overall impact of employment with company — how wages, benefits, 401Ks, overtime and absences fit in to the financial performance of company. Companies that take the time to educate employees on its financial performance and how employees fit in with the company’s objectives have employees who feel more empowered and better aligned with the company, Squyres said.
… Administrating benefits
Offering a benefits package can help a small business attract and retain employees, provide a benchmark in their industry, improve morale, and provide a way to reward employees as they advance through the organization. By spotlighting these benefits in a total compensation statement, companies can help new hires and job candidates better understand their value to the company, says Bernie Enos, a TriNet human capital consultant. Such statements include the employees compensation and cash value of their benefits and tax advantages. Revealing the “hidden paycheck” to your employees is a way to demonstrate that their value goes beyond just an annual salary or hourly wage. Workers with a solid benefits package and a good understanding of their total value are more likely to be more satisfied, engaged and productive, which will have a direct impact on your company’s bottom line, Enos said.
In a recent White Paper, TriNet listed the top 5 HR compliance concerns for small businesses. They include:
- Exposure to workplace litigation: Race and sexual discrimination are the first and second most common forms of workplace discrimination, but few businesses offer training in these areas, opening themselves up to wrongful termination suits when employees leave their jobs.
- Benefit laws and regulations not being followed: For small businesses that offer retirements and health and welfare benefits, keeping up with changing laws and new regulations can be challenging, and studies show that small businesses spend up to 80 percent more per employee on federal regulatory compliance then large companies.
- HR professional doesn’t have thorough understanding of all the regulations: In a small business, the typical HR person wears many hats — they’re in charge of everything from staffing and training to payroll and labor relations. While this person might know a little about a lot of different topics, chances are they don’t have enough expertise to survive potential IRS audits or investigations from government agencies. Access to HR guidance is critical.
- Paperwork errors: With each new hire comes mountains of paperwork and the opportunity for errors to be made — especially when the company has all that paperwork in hard copy versus using an online service. And the opportunities for errors only multiplies as employees undergo life changes that result in changes to their benefits and payroll. This becomes especially problematic when each of these HR administrative duties “live” in different parts of the organization.
- HR functions not being coordinated: In order for employees to receive the appropriate compensation and have the right deductions taken from their paycheck, the payroll department must be in communication with the benefits department. Mistakes in one department can result in dissatisfied employees and time wasted on correcting incorrect deductions.
Typically, people don’t go into business in order to haggle with healthcare providers over rate hikes or deal with the headaches associated with learning how to use HR software, yet the average small business owner spends up to 25 percent of her time handling employee-related paperwork. Since most HR tasks have nothing to do with the core objectives of a business, outsourcing mundane and labor-intensive HR allows business owners to devote more time to their bottom line, while staying in control of their business.