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HR for SMEs: 5 Mistakes to Avoid

One of the overwhelming reasons given when a small business owner is asked why they decided to strike out on their own is the desire to be their own boss. However, the flip side of owning your own business is that you become someone’s boss. The responsibilities that come with moving from employee to employer can prove to be difficult, especially as your business grows. Being the boss can also lead to problems that can prove costly to your business if not handled properly.

Fortunately, following a few simple rules can help you avoid some of the typical HR mistakes.

Even if your first hires consist of friends and family members, these simple HR rules will most likely save you time and money.

Classify Employees Correctly

Be sure to study the rules that apply to how employees are classified and paid. Christine Pahl, a human resources consultant, notes that “Often small and mid-sized business owners and managers don’t really know what they don’t know – and may unwittingly make mistakes in overtime, wage and hour regulations, discipline and discriminatory practices.”   

Many employers make the mistake of thinking that someone who receives a salary instead of being paid an hourly wage is exempt from the rules covering overtime and other benefits.

If such a wage dispute ends up in court at a later date, failure to understand the rules is not a valid defence.

Hire the Right People

While you may need staff immediately, take the time necessary to interview prospective candidates carefully. Make sure they have the qualifications you need them to have and that they fit in with your business culture. “Bad hires” cost companies thousands of pounds a year in everything from lost productivity to legal fees.

One of the keys to hiring the right person is to thoroughly prepare for the interview process. Know which qualifications the applicant should have. Understand their role and the work environment and communicate both to your prospective hire.

Keep the interview process the same for each candidate.

Write a Thorough Job Description and Company Employee Manual

When you are first starting out and have only a couple of employees a written job description may seem unnecessary as employees of new businesses typically do whatever is necessary. An employee manual likewise may seem like a waste of time. However it is unlikely you are starting your business with the intention of staying small.

Envision the roles and responsibilities of your staff and draft job descriptions as part of your business plan. Not only will this help you focus when it comes to hiring it will aid immensely in managing the growth of your company.  

An employee manual should also be part of your business plan. The simple task of putting your day-to-day principles, practices and expectations in writing helps you focus on the regular operation of your company.

Both are also valuable HR tools.

It is important to realise that both are constantly evolving documents. Ask for constructive feedback and suggestions for both documents from staff. Keep them up-to-date as your company grows or to address market changes.


One of the more common complaints from workers is that their supervisors do not communicate. Do not make the mistake of thinking that because you are a small company that “everyone” knows what is going on. Whether you have a staff of 5 or 500, clear and concise communication is essential. There is no such thing as “over-communicating.”

Keep Accurate Records

At some point you will have to discipline an employee. Regardless of the nature of the problem, keep detailed notes that contain the date and details of the situation and your actions. If problems continue and your only resort is to terminate the staffer’s employment, complete records that show the history and your actions can prevent an HR nightmare.

The role of a business owner can be rewarding on a number of levels. It can also be challenging. HR issues can be trying and can take you away from the important task of managing and growing the company. Liberally borrow from prior supervisors you enjoyed working with and be sure to discard all of the bad practices that always frustrated you as an employee.


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