Running a business is hard and it often feels like there aren’t enough hours in the day to get everything done that you want to, or should, do. By the time you pay your bills, invoice customers, return calls, put the final touches on that big proposal and get the stock order out, the day is over and it’s time to pick up the kids. Boring and seemingly non-urgent tasks, such as HR related activities, quickly drop to the bottom of your to-do list and you figure you’ll get to them “tomorrow.” But “tomorrow” never seems to come and that’s when business owners like yourself get into real trouble and make the following mistakes. Don’t put yourself or your business at risk; prioritise your to-do’s for this week and fix these 7 common HR mistakes before it’s too late.
7 common HR mistakes
You see, it doesn’t matter if you have a staff of nine people, or 99, there are essential human resource requirements every business needs to get right. Yet employment laws are complex and so easy to get wrong. Here, we look at seven common HR mistakes businesses make, and how to avoid them.
1. No written employment contracts
While an employment contract can be verbal, it’s important to record the exact terms and conditions of employment when you hire someone. Failing to set out the job requirements in writing makes it difficult to manage your employees, particularly when there’s a problem. In addition, without a written contract, you’re probably not protecting your business assets like your IP and other competitive information from falling into the wrong hands. However, it’s important to remember that written employment contracts are only useful if they’re up-to-date with current laws. Simply reusing an old template can land you in all sorts of trouble because Australian employment laws are complex and tend to change frequently. Sometimes an out-of-date template can cause more harm than good. Especially where you rely on it and simply don’t check whether new legal requirements and entitlements apply to your new employee. Action Item: Make sure your employment contracts are written and set a reminder to update them frequently. Or subscribe to a service that offers you templates that are kept compliant with the current regulations.
2. Underpaying employees
Failing to apply correct Award conditions to your employees can lead to underpaying your staff. Left unchecked, these underpayments can amount to significant back pay claims from staff, along with a fair degree of reputational damage to your business. Even George Calombaris of MasterChef fame was not immune from this mistake Modern Awards set out the minimum wages and conditions for employees depending on the:
- industry in which you operate
- nature of the duties performed by the employee
- seniority of the employee.
So, it’s critical for you to identify the correct Award for your employees. Even if you’re paying above Award rates, you still have to meet other provisions of the Award including providing the correct entitlements for leave, penalty rates and hours of work. It’s not uncommon to have an employee make a back pay claim for entitlements they did not receive despite being paid in excess of the Award requirements. Action Item: Audit your employee classifications and award payments and entitlements.
3. Employing workers as contractors when they should be employees
Figuring out whether a new worker is an employee or contractor isn’t as easy as it sounds. In fact, it’s one of the most common HR mistakes businesses make because it’s really rather complicated (and costly too). You can’t simply classify a worker as a contractor because they have an ABN or they offer specialist skills. And you can’t classify them as a contractor because the work is short-term or irregular. It’s the working arrangement that matters, not the amount of time they work for you. Penalties for getting the whole employee/contractor arrangement wrong can be stiff. For example, say you employ ten independent contractors who should be employees, this can amount to $54,000 in penalties for the breach, multiplied by the ten independent contractors you’ve hired. And that’s before any additional back pay entitlements they may have! Action Item: Have an attorney review your contractor agreements to ensure they are classified properly.
4. Firing someone on the spot
Whether it’s for poor performance or serious misconduct, you can’t fire anyone on the spot without serious legal consequences. You must investigate the matter thoroughly and adhere to due process. This includes following any procedures set out in the applicable Award, as well as your own internal processes. Detailed records are also essential. Where the matter is related to underperformance, it’s really important to give the employee the chance to improve. This involves developing a detailed performance improvement plan. For more on this subject, and to minimise exposure to unfair dismissal claims, read our blog: 4 legal minefields to avoid when firing employees. Action Item: Set up a performance management plan to document performance issues.
5. Having poor onboarding practices
As another of the most common HR mistakes small business owners make, poor onboarding and induction processes can lead to rapid-fire turnover. In fact, as many as 4% of new employees simply don’t come back after their first day. How frustrating, especially after you’ve just spent so much time hiring and recruiting the employee! To ensure your business avoids this mistake, make sure the introduction you give to new hires leaves them with an overwhelmingly positive impression. But, don’t leave everything until their first day. Prepare new employee paperwork and send this to them in advance. Make sure to include the Fair Work Information Statement, the Superannuation Choice form, Tax File Number Declaration form, and the Employee Personal Details form, along with their offer letter. Of course, using an HR platform like Employment Hero, you can cut through time-consuming new hire paperwork with paperless onboarding, and ensure new hires complete and hand in all needed documents, well ahead of their start date. Likewise, organise their work area and equip it with supplies. Order technology or equipment, along with business cards, and access keys before their first day of work so they can hit the ground running. And remember, it pays to make a really big deal of your new hire’s first day. Making your employees feel welcome from the get-go is a big part of getting them to stick around for the long term. For more on onboarding, read our blog on why you need to embed culture into your onboarding process. Action Item: Create a checklist and onboarding process if you don’t already have one.
6. Failing to keep adequate records
As an employer, there are many employment-related records that you are required to keep. Without good records, you expose your business to all kinds of non-compliance risk. And there’s next to no chance of being able to defend an unfair dismissal claim or other employment-related issue without solid documentary support to show you followed due process. To avoid making this HR mistake, you must have an organised system for managing records on time and attendance, payroll, wages, WHS, and more. Action Item: Create a filing system with files for each of your current and past employees. If your documents are currently scattered, make sure to move them into your new filing system right away.
7. Not enforcing workplace policies
It’s one thing to have solid, well written workplace policies. It’s quite another for them to protect your business. All too often, business owners go to the trouble of drafting robust workplace policies without enforcing them. For a workplace policy to be effective, it’s critical to ensure your employees understand how to comply with the policy and the consequences if they breach it. You should also make sure employees sign off on a document acknowledging that they are aware of the policy and understand it completely. In the event that you wish to terminate employment for breach of a workplace policy, it’s essential that you can show that the employee was aware of the policy and that it was both lawful and reasonable. Action Item: Compile your workplace policies, gather signatures from all employees for the policies, and make sure policies are posted when required.
Need more help?
If you think you may be at risk of making these (or other) common HR mistakes, download our Essential Guide to HR Compliance and gain some peace of mind. It will help you cut through and get straight to the essentials so you don’t waste your precious time.
Employment Hero is Australia’s first all-in-one cloud HRIS offering a comprehensive HR software, payroll system, and employee benefits platform in one easy solution. Trusted by Australian businesses, Employment Hero is about making rostering, onboarding, performance management, time tracking, payroll, and award interpretation a snap. Employment Hero’s HRIS also integrates with Xero, MYOB, KeyPay, and Accountright Live. Stop wasting time with spreadsheets, and request a demo today.