Success Means Growth
Startup companies are legitimately focused on the immediate needs of developing their brand and expanding a client base. As revenues increase, company founders and leadership can become time-starved and overwhelmed with managing their new business. That's when they realize they need more help. They have now reached the exciting milestone where they must begin hiring employees, thereby becoming an employer.
Hiring employees can bring a company to new levels of growth, but also raises the risk of potential liability. The level of potential liability increases with each new employee. When a company becomes an employer, they become subject to a host of different and quite complex laws and regulations to include: wage and hour laws, sick leave, employment verification requirements, worker's compensation insurance, OSHA regulations, federal, state & local taxes, and many more. And to make things even more complicated, the laws vary based on the number of employees a company has and their location. Oftentimes, cities and towns in the same state will have different HR requirements!Manage the Growth - Think about HR from the Beginning
Typically, company founders and leaders may think they don't need to worry about HR functions until they get bigger. They often think that if they can just figure out how to pay someone, then they're good for now. The reality is that businesses need to think about HR from the first employee they hire and thereafter. In fact, many startups spend more time on HR issues than they thought they would and end up wasting precious time struggling to manage employee-related paperwork and compliance issues. That is time that could be better spent growing their companies! Even worse, many startups make costly HR mistakes that subject their companies to needless risk and liability.
In addition, all employers (even small ones!) have a proactive responsibility to create a workplace that is free from harassment and discrimination, and a business interest in fostering good morale. A positive work environment can increase productivity, enhance the company's reputation with current and future employees and customers, and reduce the likelihood of employee lawsuits, which can be very costly. However, it takes management skill, effort, and time to develop a positive workplace. But it is critical to do because the consequences can be the flip-side: decreased productivity, negative reputation and an increase in the risk of lawsuits.Manage the Risks – Learn as You Grow
The stark reality is that there are many complexities and an ever-changing landscape when it comes to employment laws and trends. Given the impact employees can have on the company, it is disturbing that startups spend so few resources on developing their HR muscle.
Understandably, startups may not be able to afford hiring an experienced HR Director or VP with an associated six-figure price tag; however, costly mistakes can be made when they have employees with no HR experience handling increasingly complex HR functions. It is equally risky for them to resort to using software and/or the internet for information and "canned" forms and materials. While this may seem like a good idea in the short run, in time it may be a costly direction in which to take the company.
Consider payroll for instance. Many new employers think that because they only have two or three employees, paying them is a simple matter of writing them a check or making a direct deposit into their bank accounts. They may be unaware of the numerous federal, state and local laws that go along with having a payroll, including withholdings, deductions, record keeping and reporting requirements, overtime pay, leave time, paid time off and so many others. So instead of dealing with the complexities of properly paying their employees, many new employers wrongly decide that everyone who works for them is an independent contractor, which opens a whole new legal can of worms for them.
Another avenue that new employers often go down to deal with complex HR issues is using "canned" forms and materials from various sources. Startups that obtain an inexpensive employee handbook template from the internet are risking liability exposure to their companies because the handbook may not be an accurate representation of the policies and procedures that the company has in place. A company with policies that it does not understand and follow may very well violate their own policies and subject the company to a lawsuit as a result.
Furthermore, an employee handbook template may only take into account federal employment laws and not state and local laws that often are much broader in scope and more burdensome with which to comply. The same is true with "canned" employment applications. State and local restrictions on the questions that can be asked on employment applications and during the hiring process provide many traps for the unwary. Startups that don't learn how to manage HR risks may soon experience the "pain" that comes with growing into an employer.Manage the "Pain" - HR Strategies for Successful Growth
As a company grows, it needs to dedicate time to focus on HR functions, which is difficult to do, particularly if key players are focused on developing other areas of the business. There is no question that the following HR functions are all extremely important and time consuming:
Employers have several options they can consider to support their HR needs: