In today’s world it is easy for small companies to slip up when it comes to human resources, and managing their teams.  Below are the top 5 HR mistakes, made by small businesses, which you need to look out for!

Top 5 HR Mistakes Small Businesses Make

1. No Employment Contracts in Place

Employers are legally required to provide new employees with a written statement containing the main terms and conditions of employment within two months of starting work.  

These terms include:

    • name of the employer and employee;
    • date of commencement of employment and the date when continuous employment began;
    • job title;
    • place of work;
    • rate of pay;
      • hours of work; and
    • holiday.

The Employment Rights Regulations 2018 are looking to ensure that access to a written statement will become a right from day one of employment and this is expected to come into force from 6th April 2020. Employers will also have to provide additional information as mandatory content for a written statement.

Having a written statement or employment contract in place will ensure that the terms of this arrangement a clearly defined for both parties in a legally compliant and fair way.  In addition, the small business owner may include clauses to safeguard their business relating to confidentiality, intellectual property and restricted covenants.

In the event of a dispute, a court or tribunal would review these terms.  However, if a court or tribunal was required to determine the contractual terms between parties where there is no written agreement, it may imply a term based on the conduct of the parties, a custom in the workplace, or its belief that the parties would have agreed the term had it been put to them. Reliance on implied terms results in uncertainty, so it is advisable to put all the terms of the contract in writing.

2. No Employment Policies or Handbook in Place

Well-structured and legally compliant employment policies demonstrate to an employment tribunal that fair processes and rules have been put in place and, if correctly followed, would place the small business owner in a far stronger position to defend any potential disputes or claims from an employee. 

In addition, it ensures that the business has clear expectations and understanding of how important issues are managed to minimise any risk of confusion or claims of inconsistencies.  This applies to, for example, sickness absence, holiday, disciplinary and grievance procedures and other important policies such as maternity, paternity and parental leave.

Ultimately, it is the responsibility of the small business owner to ensure that their employment policies are regularly reviewed and updated to reflect any changes as the business evolves/grows and/or to reflect any changes in employment legislation.  The employer should also communicate any changes to its employees, detail the reasons for the change and ensure that they have read and agree to the proposed changes.

3. Failing to Tackle Poor Performance

Many small business owners feel that they do not have the time or expertise to manage those employees who are under-performing.  As a result, they may face an expensive and time-consuming lawsuit if they decide to dismiss an employee (with two or more years’ service) and do not follow a fair and legally compliant procedure.

In addition, doing nothing can also be costly in terms of output and morale.  Colleagues may feel that they are carrying under-performing colleagues which may lead to feelings of resentment and seeking alternative employment elsewhere.

This is the reason why small business owners should invest time in assessing an employee’s performance and conduct during the probationary period.  A probation period is an extremely useful management tool to assess an employee’s suitability to the role that they were employed to undertake and, if followed correctly, will ensure that under performance does not become an issue later down the line.

Where dismissal does occur during or at the end of the employee’s probationary period, it is unlikely that the issue of unfair dismissal will arise, as an employee on probation will generally not have gained the usual required minimum qualifying service.

4. No HR Consultant or HR Manager in Place

Many small business owners are primarily focused on delivering their Company’s core products and services.  Understandably, they find that HR related issues are an unwelcome distraction to their goal of growing/maintaining a profitable business.

In addition, HR issues are time-consuming and complex and if handling wrongly can have serious and potentially costly implications on the business.  This is why investing in a qualified HR professional can mitigate these risks and provide a value-added benefit to the business by improving levels of engagement and retention and reducing levels of absenteeism.

As a result of this, increasing numbers of small business owners are making the commercial decision to outsource part or all of their HR services to an HR Consultant as the benefits are significant and include:

    • Peace of mind –   Having an HR professional who can advise and deal with all matters relating to HR to ensure legal compliance and minimise the risk of an expensive tribunal claim arising.
      • Business focus – The management team can re-focus on growing and developing their business without being distracted by numerous and time-consuming HR related matters.
    • Financial – The cost savings associated with HR outsourcing and consulting can be significant in terms of saving management time, reducing the risk of costly employee disputes and increasing levels of productivity. 

5. Failing to Embrace HR Technology to Eliminate HR Administration

HR transactional processes such as managing holiday and sickness and updating employee records and performance scores can be extremely time-consuming and costly to administer.  This is why there has been a dramatic increase in the number of cloud-based employment management software solutions designed specifically for the needs of small businesses. Large businesses have benefited from such software for decades, so why shouldn’t small businesses benefit too?

In short, this software is simple to install and cost effective to run and means that the days of wading through spreadsheets for holidays and filing cabinets for employee records are over for many small businesses.  

Instead, employees can simply update their own record if they, for example, move to a new house and are able to submit electronic requests for holiday to their manager which can be approved or rejected at the push of a button.  In addition, small business owners can produce a range of reports from the system on HR metrics such as staff turnover, training and sickness absence.

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