4 Common HR Mistakes That Can Cost Your Business

Running a small business means juggling multiple responsibilities. Sometimes, you may even have to take the role of human resources. While you focus on growing your company, these four common HR mistakes can cost your business and damage your reputation. Thankfully, this helpful guide is here to teach you exactly what to avoid.

Skipping Proper Documentation

You might think verbal agreements save time, but they can actually create massive liabilities. Courts favor businesses with clear paper trails when disputes arise, so always document performance reviews, disciplinary actions, and policy changes in writing.

Also, create standardized forms for common HR processes and store everything securely. By following proper procedures, HR can help grow your business.

Inadequate Background Checks

Making missteps in employment eligibility verification can expose your business to serious risks. Most importantly, you must verify every employee’s legal right to work in the United States using Form I-9.

Beyond basic eligibility, conduct appropriate background screenings for all positions, especially those involving financial responsibilities or customer interaction. However, when using third-party screening services, remember to follow Fair Credit Reporting Act requirements and apply your screening policies consistently across all candidates.

Misclassifying Workers

Incorrectly labeling employees as independent contractors can cost businesses thousands in back taxes and penalties. Remember, the IRS examines three factors: behavioral control, financial control, and relationship type.

If you control how, when, and where someone works, they’re likely an employee. Aside from business issues, misclassification also affects workers’ compensation coverage and unemployment benefits eligibility.

Ignoring Workplace Safety Requirements

OSHA violations can result in hefty fines and work stoppages, so you need to provide a safe working environment and proper safety training for all employees.

Create written safety policies, conduct regular inspections, and address hazards immediately. Even office environments need ergonomic assessments and emergency procedures. Additionally, take the time to document all safety training and incident reports.

Protect Your Business Today

These four common HR mistakes can cost your business through legal fees, penalties, and damaged employee relationships. To avoid potentially expensive issues, start by auditing your current practices against these four areas and consider investing in HR software or consulting with employment law experts to ensure compliance.

Small businesses succeed when they balance growth with proper risk management. If you address these HR fundamentals now, you’ll build a stronger foundation for future expansion.