When does your business need to address human resources? As soon as you’re ready to hire your first employee, says human resource management consultant Cindy Henry. When that employee comes on board, fundamental employment processes and documents need to be in place. You’ll also need employment practices liability insurance and worker’s compensation coverage.
An expert can guide you safely through uncharted territory, says Henry, president of Integrated Resource Network.
Small businesses don’t have as many requirements as larger companies. But there are also a lot of land mines, Henry warns. Don’t rely on your accountant to guide you. “Employment regulations are too complex for someone other than an expert in HR to advise on them,” she says. In particular, California — Henry’s home base –“is an expert at dreaming up how many people have to work at a company before something affects them.” A recent example took effect January 2012. According to Henry, if you have 15 employees and one of them donates an organ, you now have to provide a paid leave of absence.
Some entrepreneurs are too focused on their business, and neglect their responsibilities as employers. Henry recalls one client, a successful restaurateur with more than a dozen employees. “He knows how to run a restaurant,” she says. But he made mistakes when it came to his role as an employer of people. “When I was recommended to him, he had nothing in place, and the exposure from a legal perspective was huge.” Among the problems: His W-4 forms weren’t completed properly or completely.
A couple of other red flags:
- Don’tcopy or use another company’s employee handbook. Your handbook needs to be customized based on the number of employees and the type of business.
- Make sure you classify workers correctly. “The laws are very specific on who’s an employee and who’s a contractor,” she says. “The penalties can be severe, and the tax consequences for the worker can be serious.” She explains, “If I only work for one place, that’s a red flag. If I work in your building on your computers, and if you supervise me, then I’m likely an employee, not a contractor.”
Next, how to choose an HR advisor.