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Five Common HR and Benefits Policy Mistakes



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Not paying attention to human resources for small businesses and startups is all too common, which is why HR managers face certain key challenges when helping entrepreneurs see how HR management can help take their businesses to new heights.

Here are five common HR and benefits policy mistakes often made by startup companies and how a professional employer organization (PEO) can help offer solutions.

1. Not Having an Employee Handbook

Employers should have an up-to-date employee handbook to properly communicate work-related policies and reduce employee misunderstandings. When a company does not have policies in writing, issues will surely arise. In addition, all employees should sign a form acknowledging that they have read and understand the contents of the handbook and agree to abide by the policies outlined in the handbook. A PEO can help startups create an employee handbook, as well as keep it up-to-date. Read our blog with tips on planning your employee handbook.

2. Ignoring Employee Development

An investment in the professional development of employees is an investment in the strength of the whole company. Every employer, including startups, should offer training opportunities for employees. This training should begin with a strong orientation process for new hires and continue with professional development programs throughout the year. PEOs can offer a wide array of professional training opportunities that most startups cannot provide on their own. This allows startups to remain competitive with larger companies at retaining the highest quality of talent. Learn more about growing your business through your employees.

3. Managing Payroll and Compliance

Payroll is hard enough to manage on its own, especially with potential IRS penalties for any payroll mistakes, including the management of complex tax withholdings at the local, state, and federal levels. This is a common reason why businesses will enlist a payroll service. But startups still need assistance with other compliance matters (worker’s compensation, EPLI, unemployment insurance, etc.). Compliance overhead in even the smallest of startups can escalate quickly. A safe and easy solution for startups is enlisting a PEO that can properly manage payroll services while also ensuring compliance with HR laws and regulations. Learn more about outsourcing payroll in 2017.

4. Paying Too Much for Healthcare and Benefits

Startups that desire to attract and retain top talent can’t afford not to offer top-quality benefits, especially with healthcare. But, for small businesses, the costs of providing healthcare benefits can be crippling. Once again, a PEO may be the best solution for startups and smaller companies who want to offer healthcare and benefits packages typically available only to larger companies. PEOs even handle the laborious task of filing regulatory paperwork and handling plan administration. Read more about how to combat rising healthcare costs.

5. Misclassification of Employees

The improper classification of employees can be a very costly mistake for startups, leading to numerous penalties. It is critical that employees be correctly documented as either regular employees of the company or independent contractors. If the responsibilities of the job don’t appropriately change when a contractor becomes an employee, the IRS will consider a worker as having been an employee all along and can fine an employer for misclassification. A PEO can help a startup navigate the process of employee classification, avoiding possible fines or penalties that can damage or cause a setback for a small business. Clear up the confusion of misclassifying workers. Learn more about correctly classifying your employees.

Still want more information about PEOs? Read our blog on PEO Benefits for Small Companies or download our PEO guide.

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Tagged with: Employee Handbook, Training