Beat-up notebooks, coffee dates, and Venn diagrams that look like spirographs. Your new venture is finally gaining steam, and you're feeling pretty good about where you've taken things so far. As you build your team, two words can dispel that groovy feeling: human resources. But take some comfort: You're not the only one in this boat.
If you’re a new entrepreneur, it’s hard to know what you’re supposed to be doing, HR-wise. Well, consider this your lifeboat. Keep reading to learn about the top HR tasks you should study up on right from the very start.
Building the right team is the primary concern for founders, according to a study from the First Round Review. But once you have that team, how do you set the right culture? Odds are, you’ve spent a good amount of time focused on what you’re creating. Now, it’s time to funnel that same energy into how you want your team (or future team) to bring that vision to life.
Having an employee handbook is an HR must-have since it consolidates all your policies and procedures in one place, enabling everyone to stay on the same page. Not to mention, there are a whirlwind of state and federal employment rules floating around that you need to follow. By writing a handbook and getting it reviewed by an expert, you’ll be able to protect both you and your team.
Despite all these reasons, nearly three out of four small businesses with 1-9 employees still don’t have one. But you should break the mold. Focus on creating a handbook that’s first and foremost legal, but also, friendly and understandable enough that your team will actually enjoy reading it. From dress codes to vacation policies, the goal is to encapsulate all the rules that will help your team be better at what they do. Plus, once you tap into the right resources, it won’t be as intimidating as you think.
2. Bone up on worker classifications
Before you start sketching out who you want to hire, it’s important to understand the types of workers that are actually out there. This is key because depending on your worker’s categorization, there are different tax, benefits, and liability issues that come into play. And as an owner, the responsibility ultimately falls into your lap.
To stay in the safe lane, here are two things you should have down pat:
- The difference between employees and contractors
- The difference between exempt and nonexempt employees
Ready to dive in? Here’s the high-level difference: Employees are people who work for one employer, have a defined time and place to do that work, use company equipment, and are generally paid either an hourly wage or a salary. On the other hand, contractors can work for more than one company at once, are usually paid per project, and generally have more freedom over their work schedules.
Now, on to exempt vs. nonexempt employees. Folks who are exempt are not held to certain rules laid out in the Fair Labor Standards Act, or FLSA. Nonexempt employees aren’t excused, so it means the FLSA protections for overtime, minimum wage, and a variety of other topics apply to them.
3. Spend some serious time on hiring
In the early days, you may fall pretty hard once you find a candidate you’re enamored with. But pump the brakes, Romeo. Like in the rest of your life, the best relationships take time and energy to develop.
Hiring the wrong candidate can be expensive. According to the Department of Labor, the cost of a bad hire could equal up to 30 percent of that person’s pay in the first year. That’s a lot of money for something that can easily be prevented. That’s why it’s key to take your time with the hiring process.
First, make sure you begin your search with a succinct job description that captures your expectations for the role. Then, outline an interview process that will effectively test all the areas you want your new hire to bring to the table, along with a plan for how the rest of the team should be involved in the interview process (if you’re not riding solo, that is). Finding the right alignment is another important aspect that some overly eager owners might forget about at first. These 13 interview questions will give you some inspiration for what you can ask folks during your initial conversations.
4. Stash the right files away
File away your filing fears. Sure, having a full-blown filing emporium doesn’t sound ultra-glamorous, but it’s necessary (and only takes a little upfront work in the beginning). If you’re hiring employees and not contractors, below are the big forms to keep an eye on. Keep in mind that you’ll need a few other documents on hand if you’re hiring independent contractors.
- The I-9: This document verifies whether your employee can legally work in this country. Store the form for at least three years after your new hire starts or a year after they leave, whatever period of time is longer.
- The W-4: This form helps your employee figure out their tax withholding amount. You don’t have to send this off anywhere, but hold on to it for at least four years.
- Payroll information: This includes routing numbers for direct deposit, wage information, and other details that allow people to get paid nice and swiftly.
- General file: This includes items like emergency contact details, a person’s home address, an employment contract, the offer letter, and other bits of information about your awesome new hire.
- Performance reviews: Collect a catalogue of past performance reviews so you can track your team’s trajectory and contributions over time. This is both helpful for you and future managers, as well as a critical record if you ever need to let someone go for performance reasons.
See how doable each of these tasks is? The best part is that once you hone in on each one, it will help your business run a lot smoother down the line. And maybe, just maybe, you’ll be able to officially add “HR extraordinaire” to your ever-growing list of accomplishments.