5 Common HR Snafus That Can Sink Your Business

Posted by Connor Wilson on Nov 20, 2019 8:30:00 AM

For many small business owners, HR is a complicated web of internal and external policy, law, regulation, and documentation. Neatly packed into the HR box is an array of considerations and tasks that govern the relationships between your business and those you hire (or fire) as well as your collective business and the organizations that govern labor and industry (federal, state, and local).

For small business owners, failure to properly manage human resource tasks can quickly lead to substantial and detrimental personnel and legal problems. And while there are plenty of factors that must be considered to meet all HR responsibilities and factors, here are 5 common HR snafus that can sink your business:


1. Ignoring the value of an employee handbook and established workplace policies


Writing an employee handbook and a few workplace policies may sound like an exercise in rigidity, but for businesses of all sizes, this type of documentation is invaluable when it comes to onboarding employees, maintaining organization, and protecting your business should legal issues arise.

A comprehensive employee handbook should include information about the expectations and rights of both the employee and the employer. Typically, a standard handbook includes a code of conduct, an equal employment opportunity statement, benefit information; pay, sick leave, vacation, timekeeping, breaks, etc. policies and general employment information.

Once you’ve created an employee handbook or other policies, be sure to review yearly (or more frequently) to ensure that the information is accurate. If changes are made, notify employees as necessary.


2. Poor employee record keeping


Proper human resource management requires a lot of paperwork, and when it comes to avoiding costly, or even detrimental, legal issues, small business owners need to make it a point to keep proper records.


Generally speaking, you should create an employee file for each member of your staff, and those files should include payroll and time cards, performance evaluations, commendations, complaints/disciplinary actions, a job description, the original application/resume, W-4, and any agreements (e.g., non-competes, non-disclosure, etc.). If the employee is leaving, it’s also best to include any documentation that relates to the termination or resignation. How long should you keep these records? The Equal Employment Opportunity Commission (EEOC) requires that employers keep records for at least one year after termination; however, requirements vary by state and record type, with some, like benefits information and drug tests carrying a recommended shelf life of at least five or six years.


3. Not recognizing or understanding employment laws


Labor laws, individual and collective, are designed to protect the rights and expectations of both the employer and the employee, as well as any union entity, if applicable. Failure to understand (or ignore) these laws can lead to big legal trouble.

There is a host of labor laws that small business owners should be aware of, and it’s important to recognize the presence of both federal and state requirements. However, it’s recommended that employers become familiar with the following, at a minimum:

  • Fair Labor Standards Act (FLSA)
  • Occupational Safety & Health Act (OSHA)
  • Immigration and Nationality Act (INA)
  • Title VII of the Civil Rights Act (
  • American with Disabilities Act (ADA)


If you’re unsure of what labor laws apply to your company, contact your state’s labor department or office.


4. Picking favorites or foregoing equal treatment


It’s natural to form a kinship with some people while remaining distant with others – it’s how we choose our friends and partners; however, when those proclivities work their way into your business, issues can quickly arise.


Showing preferential treatment to one or more employee opens the door to a host of HR and organizational issues. Valuable employees may quickly seek alternative employment, productivity can take a dive as workers begin to catch on to the lack of equality, and in some cases, employers may face costly lawsuits, tarnishing their bank account and their brand.


The best thing to do? Focus on equality and consistency. If your “favorite” employee is taking two-hour lunches while you’re disciplining other employees for being two minutes late, it won’t go unnoticed. Similarly, promotions and raises should be based on policy and merit, not a shared interest in football or fine dining.


Creating that handbook mentioned above can help you avoid awkward situations – if the policy is in writing, then it’s easy to refer to it as being the standard. Additionally, adherence to federal and state employment laws can help guide your decisions and avoid finding yourself in hot HR waters.


5. Ignoring the onboarding process


The best relationships start from a solid beginning, and that’s particularly true with regard to those between employer and employee. Sometimes, it’s easy to overlook typical onboarding activities. Perhaps the new employee is a friend or family member, or maybe you’ve worked with them in the past and don’t find merit in the onboarding frivolities. However, all new or returning employees should be welcomed into your business with traditional formalities and red tape.


That means every employee that joins your organization should fill out the proper paperwork, read and sign the employee handbook, and go through any other required (by internal or external entities) training, including industry-specific items (e.g., food safety) and human resource standard practices (e.g. sexual harassment in the workplace training).


Additionally, each employee should have access to a full job description at the time of employment. This document helps set the expectations and requirements of their position from the get-go and provides a concrete list of tasks that can be used for evaluations and any legal claims should the relationship end on an undesirable note.


Managing human resource tasks can be complicated and confusing, but there are a few practices you can implement to mitigate future risk to your business and create a healthy and productive work environment. Fortunately, diligent documentation and record-keeping, adherence to labor and industry laws, and a common-sense approach to onboarding and ongoing employee relations can save your business from those snafus that could lead to a shutdown.


Connor Wilson is Nav's Content Manager. With experience in loan underwriting and credit review, he brings a strong desire to help business owners make the best financial decisions possible to every piece he writes and edits.


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