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Human Resources Basics for Small Businesses

Human resources can be one of the toughest roles a small business owner handles. Here are the basics to get started.

human resources

Human resources management is one of the most important components of running a small business. Your employees are one of the greatest assets for any small business, as well as the key to keeping a successful business running well. But HR can be complicated. There are legal issues relating to pay, employment opportunities, insurance, and more. Plus, it can just be tough to find the right people for the job or to empower your employees to do their best work.

Here are a few tips for strengthening your HR department (even if it’s just you!).

What are Human Resources?

Human resources means anything that deals with your employees, including recruiting, management, or other forms of direction and assistance. Human resources directly impacts your business since your employees have a huge effect on the culture and your business environment.

Human resources departments are in charge of the following:

  • Hiring and firing employees
  • Employee training and team development
  • Managing compensation and benefits
  • Managing retirement plans
  • Handling workplace disputes and complaints
  • Maintaining a safe, healthy workplace for all
  • Communicating with staff

Large companies generally have large human resource departments to handle these needs. For smaller companies, the owner or manager of the company will often handle human resources tasks. Here are some of the duties that handling human resources for your small business entails.

How to Recruit Talent

The benefit of working for a small company is that small companies tend to allow their employees to have a broader scope and take on more responsibilities than those employees at larger companies. Small companies also allow candidates greater business growth, flexibility, and more job diversity.

Because each employee needs to pull their own weight (and then some), it’s vital that you find and recruit top talent. When you’re hiring for your small business, it’s important to convey to each potential candidate what your company can offer them.

Share with each employee what they would gain if they worked for your company. For new workers, you could highlight the potential growth responsibilities and room for promotions. For higher-ups, it may make sense to consider an equity package to entice them to a small company.

One of the best ways to find top employment candidates for your small business is through networking. Networking can ensure that you have more background on potential candidates than a cold call would offer. Lectures, continuing education, and industry conferences are excellent ways to find and hire new talent.

You may also want to consider reaching out to local universities about listing jobs with them. New grads won’t have a ton of experience, but they’ll have new ideas and the flexibility to take on a job that will change quickly as the company grows.

What Human Resources Records to Keep

Human resources deals with complex laws and regulations. It can be hard to decipher what’s important. For small businesses (those with fewer than fifty employees), the rules are simpler than for larger businesses, but it still merits a visit with an attorney to make sure you’re in order. Make sure to ask about your state’s minimum wage and overtime laws, health care requirements, unemployment and workers’ compensation requirements, plus any unusual state employment laws.

Once you know what you need to do, the key to staying out of trouble is keeping great human resources records. At a minimum, you’ll want to keep the following files on each employee:

Employee File (General): Your employee general file will contain all documents pertaining to each employee. You’ll want to include all documents related to hiring, performance reviews, and payroll details. If the employee has had any disciplinary issues, you’ll also want to document these issues and include them in the file. Update the file periodically to keep it up to date on each employee.

Employee File (Medical): Your employee medical file will document any medical issues each employee has had. This file will contain any medical and/or disability documents on each employee. This medical information should be kept confidential and secure, so make sure to keep this information locked and password protected. This is important for cases related to discrimination—you need to make sure you’re providing reasonable accommodation for employees with disabilities or you may face a serious lawsuit.

I-9 File: This is the federal government form that identifies and verifies all employees. The 1-9 indicates that the employees are eligible to work in the U.S. In other words, this is proof that all of your employees are working above the table.

The Importance of the Employee Handbook

A comprehensive employee handbook is a must for any small business. Your employee handbook is the guide for protecting yourself from liability and letting your employees know how you expect your business to be run.

Your employee handbook should include the following topics:

  • Employee Safety issues
  • Workplace and computer security issues
  • Anti-discrimination policies
  • Non-disclosure rules
  • Employee code of conduct
  • Compensation and pay structure; including bonuses and overtime policies
  • Employee performance review policies
  • Leave policies, including medical leave, family leave, and vacation
  • Other relevant information

Part of having an effective employee handbook is making sure each employee is privy to the information inside. In order to make sure your handbook will do what you need it to, each employee needs to receive a copy, read it, and sign it. That statement will go into their employee file to indicate that they are apprised of and agree to abide by company policy.

Learn more about employee handbooks in our free interactive course on Hiring and Employee Relations 

Summary: Great Team, Great Business

Hiring and retaining the best talent can make sure your company is successful. It’s also important to know the relevant human resource laws which may impact your small business. Check your local trade journals and keep in regular touch with your attorney to make sure you’re on top of the latest HR rules and regulations. And check in with your employees regularly to make sure you’re all on the same page and have what you need to do great work.

At Accion Opportunity Fund (AOF), we offer support, advice and coaching to small businesses looking to improve and expand. Discover AOF and learn about what we do.

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