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Top Mistakes Startups Make When it Comes to HR and Payroll

“Building anything great is messy,” especially when it comes to startups. Too often, startups overlook the importance of HR when they first starting out. This is a dangerous road to travel down. Did you know that in the last 5 years, 60% of companies have faced a lawsuit involving an employee? Or that the EEOC (Equal Employment Opportunity Commission) take over $404 million from employers each year?

Most companies need a dedicated HR professional when they get to upwards of 75 employees, but how do you handle HR before then? Partnering with an outside HR firm is the best bet. An HR firm can ensure you are compliant, put policies in place to make the growing process smoother, and reduce your liability. With that said, here are the top mistakes startups makes when it comes to HR and payroll.

Being Too Casual.

Having a casual workplace is great, but when the line between work and personal life gets blurred, it can quickly become an HR nightmare. Sending late night texts to employees or circulating jokes via email can be a liability. This is why it is so important to have an employee handbook and proper HR policies in place to protect the company in the event of an employee feeling harassed.

In a recent study, 81% of females ages 24-31 reported incidents of harassment in the workplace. Over 71% did not report it. So the moral of the story is, be careful what you joke about and get an employee handbook.

Misclassifying Employees.

A lot of startups make the mistake of misclassifying employees. It is extremely important to understand the difference between an independent contractor and an employee.  Likewise, it is just important to properly classify an employee as exempt or non-exempt.

Payroll Compliance.

Payroll is a very complex business function. The top payroll mistakes startups make are not tracking hours properly and not paying within the legal time frame. Additionally, if your employees receive overtime, commission, or have any levies such as child support, things get even more complicated. The fines associated with missing a tax payment or paying an employee incorrectly often exceed the cost of outsourcing your payroll, it’s just not worth the risk.

Bad Hiring Mistakes.

Bad hires are expensive and they can put a lot of stress on a company just starting out. Too often, you hear of startups frustrated when a new employee isn’t working out. The termination process can be very tricky and very dangerous for employers that are not well-versed in employment law. Situations like this occur because the job description was not well written or they did not take enough time vetting the candidate. An HR professional can properly screen the applicant, write a job description, and make sure all the necessary paperwork is in place.

Overpaying Benefits.

When you are a startup, you want to hire top quality candidates and therefore, you want to offer a great benefits package. Partnering with a PEO, like Focus HR, can help you to be able to offer a Fortune 500 Benefits package a price you and your employees can afford.