Employment Hero

11 Top HR Fails That Put Your Business At Risk

HR compliance is so much more than just filling out paperwork. It’s important to take the time to ensure your business is compliant with Fair Work legislation so you can avoid these 11 top HR fails and the hefty fines that go with them.

11 HR fails that will put your business at risk

1. Hiring employees without employment contacts

While employment contracts can be verbal, you’ll get into all sorts of trouble if you don’t record an employee’s terms and conditions when you hire them. Employment contracts written in plain English help you minimise costly and time consuming disputes by providing certainty about the legal rights and obligations of both you and your staff.

2. Not applying correct Award conditions to your employees

Modern Awards provide minimum wages and conditions for employees so it is critical for you to identify which particular Award applies to your employees. Even if you are paying above Award rates, you also need to meet other provisions of the Award including providing the correct entitlements in relation to leave, penalty rates and hours of work.

Underpaying employees (even inadvertently) attracts big fines and back pay claims.

3. Not enforcing workplace policies

While creating clear workplace policies is considered HR best practice, it’s essential that you enforce them. A policy is only effective if adequately communicated to employees.

This means you need to explain the policy to staff so that they understand how to comply with it and the consequences if they breach it. Making sure employees sign off on a document acknowledging that they are aware of the policy and understand it completely helps protect you if you need to use a policy for disciplinary purposes.

4. Failing to take Work Health & Safety seriously

Even if you operate in a low risk industry, as an employer, you are responsible for maintaining a safe and healthy workplace. It’s equally important that your workforce is adequately trained and understands how you manage workplace safety, and can use the systems you have put in place.

If you fail to provide a safe working environment for your workers, you can expect to face hefty fines and significant reputation damage.

5. Employing workers as contractors when they should be employees

In simple terms, employees work in your business and are part of your business, while contractors run their own business and provide services to your business. Yet you can’t classify a worker as a contractor simply because they have an ABN and they offer specialist skills.

Courts look at the totality of the relationship between the parties when determining the status of a person’s employment. And as penalties for getting this wrong can amount to $54,000, it’s critical that you consider the whole working arrangement. Try the Australian Taxation Office’s Employee/Contractor decision tool to help you get it right.

6. Failing to keep adequate records

As we mentioned above, always recording an employee’s terms and conditions when you hire them can save yourself a lot of pain later on and minimise the potential for disputes.

That said, there are other records that you are required to keep and you must have an organised system in place for managing them. This includes records on time and attendance, payroll, wages, WHS and more. Without good records you expose your business to risk.

7. Having poor onboarding and induction practices

While it’s important to put time and energy into finding the right people for your business, it’s equally important to help settle in new hires.

Many businesses fail miserably at doing this which can have disastrous consequences, most common of which is the new hires don’t stick around. To retain new hires, make sure their introduction into your company connects them to your brand, ethos and philosophy, and leaves them with a good impression.

8. Not giving an underperforming employee the chance to improve

Performance management needs to be genuinely focused on lifting performance standards. To minimise your exposure to claims for unfair dismissal due to procedural deficiencies you need to have a well-defined framework for addressing underperformance.

It’s important that you identify the areas of underperformance and discuss them with your employee in specific terms. You also need to give them enough time to improve their performance. Any employee not given a chance to improve before being dismissed is likely to lodge an unfair dismissal claim.

9. Contravening the 10 National Employment Standards (NES)

All employees are covered by the NES which sets out minimum entitlements on annual leave, medical leave, public holidays, ordinary hours of work and more for employees in Australia. This is regardless of the award, agreement or employment contract that is in place.

Contravening a provision of the NES can result in penalties of up to $10,800 for an individual and $54,000 for a corporation, so it’s important that you understand the NES and apply the provisions diligently.

10. Relying on individuals rather than an HR system to manage your HR

If you rely on an individual to process your payroll and manage HR tasks, how easy is it for you to take over if they’re out on medical leave or away for any length of time? Remember, Fair Work Inspectors also have the power to enter your workplace to investigate compliance with Australian employment laws.

Without an HR system in place, how easy is it for you to put your hands on the right files and continue operations as normal?

11. Failing to check your employees can legally work in Australia

When employing workers from overseas (who are already in Australia such as international students, back packers on working holidays or skilled migrants), it’s your responsibility to ensure the workers can legally work in Australia. This means checking the conditions of your employees’ visas. Hiring workers who are not permitted to legally work in the country, is an offence under the Migration Act.  If you’re found to be in breach of the Act, there are costly penalties.

For more ways to help you keep your HR practices compliant, read The Essential Guide to HR Compliance.

Know the HR compliance essentials and avoid a costly mistake. Get your free guide here.

Employment Hero is an all-in-one HR and payroll system, built to facilitate compliance with Australian employment law and company policies for small to medium sized businesses. Our team of lawyers make sure that any new changes to Australian employment law are applied in the system. Additionally, Employment Hero allows employees to upload their certifications and licenses, and alerts both of you when they are expiring. Stop wasting time with spreadsheets, and request a demo today.

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