What Every Small Business Owner Needs to Know About Human Resources




Owners and senior executives often find themselves having to justify the spending of revenue on areas of their business that do not have a clear return on the investment.

Human resources fall into that “area of their business.” In most cases, there is not a true understanding of what is included in the essential and functional area of human resources for small to mid-size business owners.

Human resources covers several functional areas of the employer-employee relationship, and some of those functional areas identified below can have a major impact on the organization if not addressed.

Here are some of the more critical aspects of human resources your small business should be aware of and managing correctly.


Immigration Compliance

Every company in the United States has a responsibility to make sure each employee hired into the business meets the eligibility requirements to work in the country, and that eligibility is confirmed by completing the USCIS Form I-9.

The Form I-9 is required of every new employee, and portions of the form must be completed on or before the first day of work for the new employee.

Each employee must present the appropriate document(s) to the employer from a list of acceptable documents which provide the company with the employee’s identity and employment authorization to work in the United States.

Without these acceptable documents, employees are not eligible to work in the country.


Employee Classification

The area of employee classification can be confusing to many small business owners.

Exempt, Non-Exempt, and Independent Contractors are classifications most frequently used in the workplace. It is the employer’s responsibility to classify each employee correctly.

However, many businesses misclassify their employees because the owner is not sure of the regulation for some of the different classifications. The misclassification of employees can be costly and detrimental to the company.

The non-exempt classification is the easiest to implement because the company is paying for the actual hours that an employee works. Exempt and independent contractors can be more complicated to implement.

Employees classified exempt must fit into a specific category and then meet the different rules for each of the categories. Each exempt category must also meet the basis test associated with that exemption.

It becomes a bit more complicated when certifying independent contractors. The State of Colorado has specific guidelines that each independent contractor must meet, and without meeting those requirements, the person should not be classified as an independent contractor.


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Employee Personnel Files

Employee personnel files encompass required documents that the employer must keep on the employee ranging from health benefits, compensation, retirement, and immigration.

The employer is required to keep this information on each employee; however, the organization and housing of these documents vary.

By housing these essential documents together in the employee’s personnel file, the company could be exposed to unnecessary and expensive fines and penalties.


Employee Relations

Employee relations is one area of human resources that business owners and executives give a lot of lip service.

“Our employees are our most valuable company asset” is a common declaration spoken in many company mission statements. However, when you look deeper into what is being done with their most valued company asset, very few organizations are true to their word.

Because there are numerous areas of the company that owners or leadership evaluate, the human capital side is normally taken for granted.

Generally, there is not a qualified person within the company that handles employee questions and/or concerns. That communication responsibility typically falls on the shoulders of the supervisor, who most often have not been properly trained to deal with these situations.

On the other hand, this situation is a routine responsibility for a human resource professional to handle properly and efficiently.


Company Handbook and Manuals

It is imperative that your company, regardless of size, provide each employee with a handbook or manual that outlines the company rules and regulations.

Besides explaining employee expectations, the handbook highlights the company’s mission, vision, values, and goals along with explanations of the necessary steps to take when certain situations arise like vacation requests, holidays, bereavement, and jury duty.

The bottom line is that even small companies need a human resource presence. When it comes to human resources, it’s not if you will have a problem, it’s WHEN!

Human resources will address most of the human capital issues that arise between staff and management, and when these issues are proactively and correctly addressed, it most often eliminates the need for employees to seek outside remedies from a third party.

This proactive action saves companies the time and expense of having to address employee claims from the Equal Employment Opportunity Commission. Don’t wait to implement and manage the human resources for your company.

Getting outside assistance with your HR needs is easier now than ever. So if you need the help, don’t be afraid to ask.

About Our Guest Author

Wes Garnett


Wes Garnett

Wes Garnett is the President/CEO of W. Garnett & Associates, a human resources consulting firm specializing in human capital management assessment (HCMA). If your company has employees, Wes can help. He began his career in 1979 in the hospitality industry with Steak & Ale Restaurant Corporation. Wes has held Human Resources positions with such prominent companies as Burger King Corporation, Dell Computer Corporation, Black-Eyed Pea, Taco John's, and Buca De Bepo.


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About the author, Tim Fitzpatrick

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