The world of HR can be a minefield, you have lots of tasks to juggle from recruitment, employee retention, payroll, office management and administrative tasks. Luckily for you, we’ve created this ultimate guide of all the HR problems we’ve witnessed over the years, so you don’t have to encounter them yourself. Here are our eight top HR problems you should avoid at all cost.
1. No written employment contracts
Kicking us off on this journey through some of the biggest HR problems businesses face, is having no employment contracts. Having no written employment contracts is a big no-no within employment compliance. 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 Sometimes an out-of-date template can cause more harm than good.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.
2. BIG HR problems caused by underpaying employees
Next up, one of the most infamous HR problems in the media at the moment. If this has ever happened to you as an employee you know how disheartening it can be opening a payslip and seeing a much smaller figure than expected. Underpaying employees has been in the spotlight a lot in recent Australian news, and is seemingly a major issue. 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
- the 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. We looked into why payroll errors keep happening in Australia earlier on in the year – from the 7/11 debacle to Lush cosmetics underpaying staff by $2 million over an 8 year period. Don’t make the same mistakes as these guys.
3. Employing workers as contractors when they should be employees
Next 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!
4. Firing someone on the spot is one of many HUGE HR problems
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.
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.
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.
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.
8. Manual HR processes
If you are still using MASSIVE spreadsheets, and transferring data across multiple systems. If you are facing new employees with a mountain of paperwork on their first day… STOP RIGHT THERE! Manual HR processes are just a one-way ticket to errors and mistakes. Causing huge HR problems in the future. If you think HR problems are bad… check out these payroll scandals happening across Australia! Another thing to avoid at all costs. The benefits of HR Software are endless. It will not only save you time and money – but also lower the risks of any manual HR problems. However, if an HR software is implemented badly this can also lead to multiple errors as well! So make sure you get a proper implementation team onboard if you are going down the HRIS route.
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