Handling Human Resources in a Small Business

Growth is great, but every yin has a yang. When your small business reaches the point where it’s no longer a one-person show, it’s time to do some hiring. That can be very exciting. But putting together, and keeping, an effective team requires careful thinking, planning and execution. You’re about to add some of your most important assets, human resources, and there are some key issues to cover to avoid turning it into an inhuman mess.

Be precise with payroll

Let your payroll system get out of hand, and you’re going to hear from at least two powerful places: your employees themselves, and the taxman. Organization is a must, and there are many tools at hand to help take control of the task.

You can create timesheets by making templates in spreadsheet programs like Microsoft Excel, which can also keep track of vacation and sick time and be entered into a payroll system for payment and precise recordkeeping. Or you can outsource through businesses like paychex.com, which frees up a little of your time and money. Or mix it up a little – do the time-tracking yourself and outsource only the payment.

Direct deposit is also something you can do through a safe payroll system. Your employees just fill out a form.

Taxes and withholding vary geographically, so if your payroll is DIY, be sure to keep up with the rules. If you outsource, that will be part of the service. Because outsourcing costs vary, figure out what you can afford and make it work.

Create benefits and retirement plans

This is essential to attracting and keeping quality people. As a small business with a few employees, it can be hard to get good rates on such things as health insurance. If your employees are to feel like they have some say and stake in the business and its future, they’re going to need a good benefits package. But, says Dennis Barba, who teaches entrepreneurship to MBA students at Case Western Reserve University, “You shouldn’t have those things until you know you can afford them.” You should, however, make every effort to offer at least a minimum of these benefits.

Check out your local chamber of commerce or the US Chamber of Commerce to find out how they can help you get insurance at lower rates. You can research some methods that the government has set up for small business owners to create their own retirement packages for employees. And visit the IRS to find more about plans like the Simplified Employee Pension (SEP), the Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA, and payroll deduction IRA accounts.

Using insurance brokers to set up a plan for your new employees is helpful, especially if you need coverage for people of different ages and in varying geographic locations.

Write a policy handbook for your small business

Creating a handbook that outlines your company policies and procedures is one of the best ways to ensure order as you hire new people.

“As you grow and have more employees, you lose the luxury of having your policies understood on a verbal level,” says David Lewis of OperationsInc, a human resources consulting firm in Connecticut. It’s important to have things like “holidays” outlined and clearly defined, so as you grow you don’t have to worry about misunderstandings and potential lawsuits by your employees.

Write out your policies on hiring, firing, vacation, employee review and pay scheduling. It’s very important that the employer and employee are both on the same page, and that there’s signed documentation proving it.

Stay on top of legal requirements

There is a bewildering set of laws covering employment discrimination and other matters that pertain to you from the first day you have an employee. So get up to speed on this before you sign your first paycheck.

Your local Secretary of State will have information about many of these requirements. Such software programs as Intuit QuickBooks and Microsoft Small Business Accounting also have information and guidelines built into templates that help you identify what you need to address as you deal with legal situations like termination and payroll.

Still, it’s easy to miss details in this process, so also seek advice from a good mentor or attorney.

Our Bottom Line

You must have a human resources (HR) infrastructure in place from the first day you add employees to your small business to ensure that you really do expand – rather than interrupt - the success of your startup business.

Kaitlyn Buss is a freelance writer for StartupNation.

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