5 HR Mistakes Small Businesses Make (and How to Avoid Them)

Running a small business means wearing many hats, and HR is often one of the most challenging areas to manage. Unfortunately, HR mistakes can expose your business to legal risks, reduce employee morale, and hurt your bottom line. Here are five of the most common HR mistakes small business owners make, along with tips on how to avoid them.

No Employee Handbook or Incomplete Policies

Without clear, written policies, your employees may not know what’s expected, and inconsistent practices can lead to misunderstandings or even lawsuits.

Solution: Develop an employee handbook that outlines policies on attendance, conduct, anti-harassment, leave, and other relevant matters.

Misclassifying Employees and Contractors

Many small businesses mistakenly classify workers as independent contractors when they should be employees. This can result in tax penalties and legal claims.

Solution: Review classifications carefully and consult an HR professional if unsure.

Weak or No Documentation

Failing to document employee performance, issues, or key conversations can leave you vulnerable if disputes arise.

Solution: Maintain proper records of disciplinary actions, performance reviews, and employee communications.

Ignoring HR Compliance

Labor laws change, and what was acceptable last year may no longer be so. Wage and hour errors, poster violations, or I-9 issues are common.

Solution: Schedule regular HR compliance reviews.

No Formal Onboarding

A disorganized onboarding process leads to confusion and poor retention.

Solution: Create checklists and training plans to set new hires up for success.

ADB HR Consulting helps small businesses build compliant, efficient HR systems. Book your free 15-minute consultation today.