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9 HR Basics for Any Small Business

Vanessa Johnson

To most entrepreneurs and small business owners, nothing can be more headache-inducing than human resources issues.  However, a lot of personnel issues can be avoided if time is invested up front establishing policies and practices that will prevent claims from arising.  It can be very difficult to find the time to develop these policies but you will be able to sleep better at night knowing you are protecting your business.

1.  First things first, you have to know your federal and state labor laws concerning wages, hours worked, overtime, record keeping and required postings (you know, those fun posters you hang in the employee break room).  You can find your state's labor regulations here.

2. Payroll- I am always a fan of outsourcing payroll processing.  There are far too many complicated tax deductions and withholdings that have to be executed precisely each time you process payroll.  Save yourself a few grey hairs by leaving payroll processing to experts.

3. Draft a Proprietary Inventions Agreement where employees and contractors must agree that anything they create or enhance on your behalf is owned by your company.  Do you want your employees to walk out of the door with the work you paid them to create?  Or worse, claim ownership over the work or product?  The investment in this document will be worth its weight in gold.

4. Employee Handbook-I know, drafting an Employee Handbook sounds awful.  Fortunately there are tons of online resources, like SHRM, which allow you to download a sample handbook that can serve as the template to build your companies handbook.  A well-written employee handbook is an important tool in preventing employee disputes or claims before they start.  This is also where you can clearly communicate the at-will employment relationship, discrimination policies, harassment policies, equal opportunity policy, leave of absence policies and any information surrounding your specific environment such as health benefits and paid time off. It is always recommended to have a legal advisor review your handbook prior to publishing for employees. Remember to obtain a signed acknowledgement form from employees after they are given a period of time to review the document.

5. Workers Compensation Insurance- It's mandatory to provide this workplace insurance for every employee.  The insurance rate is based on the occupation and pay rate of each individual employee.  Trust me: the first time someone gets injured on the job, you will be so elated that you took the time to set up this policy that you won't even mind the paperwork you will likely have to fill out.

6.   Recruiting can be a full time job in itself.  Your best bet at keeping a constant stream of qualified candidates in the pipeline is through networking and involving yourself in your industry's local community.  You can also set up an employee referral program and reward employees for any candidate that is hired.  BtoB social media sites like LinkedIn are also valuable tools to help recruit candidates in multiple industries.  (Tip: Do yourself a favor and set up a filter in your email so resumes automatically get filed until you are ready to look at them.)  Finally, because you follow equal employment opportunity practices, don't ask the candidate if they are married, have children, what their ethnicity is etc... That information is completely irrelevant to the position and a candidate could claim an adverse employment action based on their response and if they are not hired.

7.  Employee Benefits are a great recruiting and retention tool. With Americans facing steep tax fines for not carrying health insurance, this benefit will increasingly become a top priority for employees and potential candidates.  Going forward, employers, regardless of their size, will have to offer health insurance to help attract and retain top talent.

You will also more than likely want to offer your employees paid time off as well.  Remember that dreaded handbook we just discussed?  That is the perfect place to communicate your PTO policy.  While there is no legal mandate to provide paid time off to your employees, there are some regulations around policies if you do provide the benefit.  Because PTO is considered earned wages, be sure to familiarize yourself with your states PTO regulations.

8. Terminations are never a fun part of any employment relationship, however they are inevitable.   Whether the termination is a voluntary resignation or with cause, there are some steps you need to take to CYA.  In most states there are regulations on how soon you must pay a terminated employee their final wages.  In the state of California, you have 72 hours to pay an employee when no prior notice is given.  However, a best practice is to provide an employee with a final check in their hand on their last day of work.  This final check should include any unused and accrued PTO.  Remember, you cannot deduct a negative vacation balance or refuse to deliver final pay until the employee returns company equipment, for example.

You should also provide the employee with a "Notice of Change in Relationship" as well as a "Final Pay Acknowledgement" and seek a signature on the form at the time of termination.  If you offer health insurance, you will also need to make sure COBRA (health insurance continuation) notices are sent to the employee within 14 days of termination.

9.  Practice consistency.  In HR you will hear a word used over and over and that is CONSISTENCY.  An employee handbook will help you maintain your consistent practice and prevent employees from claiming preferential treatment or favoritism.  When an employee inevitably asks you to make an exception to a policy or if there is a gray area, ask yourself, "Would I allow this for every employee?"  If the answer is yes, you need to update your policy, if the answer is no, be firm and explain to the employee why that is not allowed.

Remember, the time you invest in these HR basics will pay dividends for years to come.  Today, you may not be required to comply with laws that larger employers are subject to; however, it is a best practice to embed these HR basics into your culture from the start.  As your company grows and you take on more employees, you will rest easy knowing that you have set up fair, consistent and legal employment practices that ultimately protect you and your business!

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Vanessa Johnson Staff
Vanessa joined in 2012 as the Human Resources Manager of Talent & Culture. In this role, Vanessa has led a number of initiatives including the development and implementation of Employee Engagement Surveys, Quarterly Employee Performance Ratings, Non-Harassment Training, and an Employee Handbook to name a few. Vanessa currently manages an HR Department of "1" and balances the day to day management of's HR function with strategic initiatives that are aligned with business goals to drive our company forward. Vanessa has been in HR for over 8 years, specializing in digital media companies unique cultural environments and hiring needs. In her spare time, Vanessa enjoys getting outside and enjoying San Diego's coastal region and beautiful climate with her friends, family and pup!