How small businesses manage human resources

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When you’re a solopreneur, being in charge of “human resources” is pretty easy. As a party of one, you can confidently take a vacation to Fort Lauderdale when you feel like it, choose your own employee benefits and all the other freedoms that come with just watching out for yourself in the employee relations department.

But, add a full-time new hire or two and the whole game changes. And, then, as your business keeps growing, you likely realize you may need a full-time HR manager and/or even an HR department.

As an owner, it can be crucial to know how to handle HR functions yourself if the company is still small enough, but even if you have advanced enough to need a director of human resources, it’s critical to understand exactly what human resource management entails if you are overseeing an entire human resources department.

Consider this your crash course in human resources management for small- and medium-sized businesses.


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What does HR do?

First, let’s cover what HR does because if you’ve only worked in a large company, you may see them solely as the folks who sign paychecks and enforce rules. But, the HR department is in charge of every aspect of employee relations. Their functions are wide-ranging and include:

  • Talent acquisition and onboarding
  • Managing performance and career development
  • Determining salaries and benefits (and comparing them to market norms)
  • Developing and nurturing a safe and positive work environment
  • Keeping your company compliant by following applicable laws

The following is an overview of these various functions:

HR oversees talent management

This broad category of the human resources function encompasses all aspects from hiring to firing, and the entire life cycle in between.

When you realize it’s time to add a new employee, you’ll need to write an appealing job description that’s designed to attract top candidates, and then start collecting resumes. You also might choose to work with a recruiter who can handle many of the initial tasks for you, including background checks, credential checks (like verifying a bachelor’s degree) and reference checks.

Once you (or the HR manager) choose the ideal employee, you’ll also need to complete the corresponding paperwork to make the relationship legal. (See below for some tips on finding out what you need to be compliant.) And, this is the time to clarify their job title and responsibilities to make sure that everyone is on the same page.

The first few days and weeks can be crucial to get a new hire up to speed on the company’s goals and their specific place within your organization. If there are several new hires starting at once, you might want to consider a formal new employee orientation; otherwise, a more casual onboarding session will work. Just don’t overlook the importance of having them feel part of the team from the start.

Once employees are up and running, the HR team will focus on creating an enriching work environment that continues to keep them motivated and challenged—using functions like career development and performance management. HR specialists should be up-to-date on the skills that today’s workers want to hone, based on studying your industry and related fields, and help connect them with professional development opportunities.

Finally, you’ll need to track their performance and make sure that you have a “paper trail” of any infractions and disciplinary procedures. That’s important because in the eventuality that they need to be terminated, you will have the correct back-up that proves just cause to avoid a lawsuit.

HR facilitates payroll and employee benefits administration

In today’s tight labor environment, offering a compelling salary and benefits package is important to attract and retain top talent. You’ll want to start with salaries that are commensurate with what’s typical in both your field and regional market.

In addition to a competitive salary, you’ll want to consider offering top-tier benefits that include:

  • Medical
  • Dental
  • Vision
  • Long- and short-term disability
  • 401 (k) savings or other retirement savings
  • Life insurance
  • Paid time off, including vacation, sick leave, holidays or a combination

Besides these basics, there are a number of other perks and benefits that are often offered today. Some increasingly popular ones include:

  • Bus or parking passes for commuters
  • Pet insurance
  • Student loan repayment
  • Wellness options
  • Free snacks and/or meals

The list of potential perks is virtually endless; however, remember it can be easy to get carried away so it might be wise to start small and make additions as more new hires come on board. As your company grows, it offers a timely opportunity to survey them and see what benefits are most valued, so you are putting your investment where it will matter most.

HR creates an engaging work environment

Today’s employees are more interested in a positive work environment than ever before. That manifests itself in the factors already mentioned, such as strong professional development opportunities and competitive benefits and salary, but also can be carried through in all aspects of your culture.

Many employees today crave work/life balance, so see if you can offer flexible work options when at all possible. Most also appreciate transparency, so work to create an open-door policy where employees can interact with management, and a robust employee communications policy where you freely share the company’s mission and progress and provide accessibility to management at all levels.

Other aspects that contribute to a positive work environment include:

  • Team-building events and activities
  • Wellness initiatives
  • Employee recognition programs
  • Performance feedback
  • Town halls, surveys and other tools to solicit suggestions
  • Ongoing two-way communication

You’ll also want to make sure that the workplace stays safe and positive—making sure to

resolve disputes or issues immediately.

Many employees actively seek a small- or medium-sized company specifically to have that feeling of belonging, so fostering a positive work environment is crucial.

HR adheres to applicable laws

The HR function is far more than just planning activities and keeping employees engaged. As the acting HR specialist, you need to be familiar with a wide variety of laws. These include:

  • Labor relations and wage laws: Consult the Fair Labor Standards Act (FLSA) to make sure you are in compliance with issues such as minimum wage, overtime, employee classification and more.
  • Applicable insurance/benefits laws: Find out what insurance is mandated, including workers’ compensation insurance and other potential coverage. And, make sure you’re legal with provisions, as called for in the Affordable Care Act and the Family and Medical Leave Act.

HR should create an employee handbook

Whether you have one employee or just hired team member No. 1,000, creating a comprehensive employee handbook is an excellent tool that can not only clarify expectations for new hires, but also help protect you should something go wrong.

Your handbook should include job descriptions and summaries of policies for areas that include expected work hours and absences, vacation policy, salary and commission structure, benefits, dress code, information technology, and repercussions for employee infractions.

Think of the handbook as serving as a “back-up” HR department. By asking your employees to read the handbook and sign a statement to that effect, you are protecting yourself against the potential for a new hire to say they didn’t know something. It also can be used to clarify policies so that employees aren’t always asking or making up their own.

Formalize your HR function

Your HR department is liable to evolve along with your company. When talent management becomes too much for the owner to handle, that’s the time to add an HR assistant. As the business grows, so should the HR department to ensure that employees’ needs are being met and all laws are being followed. Whether you choose to hire an HR specialist who handles the function in-house or you outsource it to a reputable company, a robust HR function is essential for your company as it expands.

This article was produced by the Quickbooks Resource Center and syndicated by

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