Grow Your Small Business Through HR

Grow Your Small Business Through HR

Christian Cummings

Little HR, Inc.

Go Beyond Compliance

Bring Structure To Your HR

Maximize Your HR

© 2016 Little HR, Inc. All Rights Reserved.

For permission to reproduce any part of the book, contact: christian@littlehr.com.

Visit the author’s website at littleHR.com.

First Edition.

Little HR, Inc. provides an HR self-service tool for small businesses. We are not a consulting firm, nor are we lawyers. This book and the content provided herein are simply for educational purposes, and do not take the place of legal advice from your attorney. The topics covered here are a combination of one’s professional experience and an examination of material from best practices HR. This book should be considered as general HR advice & guidance and not as legal advice. No liability is assumed for losses or damages due to the information provided. You are responsible for your own choices, actions, and results. You should consult your attorney and/or human resources specialist for your specific needs.

Cover art credit: Sviatoslav Khlynin/Shutterstock.com.

Preface

littleHR.com is an HR tool developed specifically for small businesses. Built from the ground up, we have been bootstrapping this online tool into something that can help small business owners take control of their human resources and impact their bottom lines. Our professional experience has roots in small business, so we know the environment and we know how it feels when the company struggles to thrive and grow. We want small businesses to succeed, so we have been writing tutorials and HR best practices for years.

It made perfect sense to bind all of this helpful guidance together and make it available to all small business owners. This book is for you: the small business owners who aspire to increase earnings and make more money; the small business owners looking to grow their little businesses; the owner whose company seems to be stuck in a rut, but dreams of making it something great.

Take action, bring it to the next level, break free, and make something of your small business by putting focus on your human resources. This is your largest resource, yet the most misunderstood. This book exists to teach you how to take control of this resource and really start to make things happen. We want you to succeed and your best chance to do so is to conquer your largest and most expensive resource -- your human resources.

Table of Contents

Section 1 - Beyond Compliance

1-1 Properly Classify Employees

1-2 At-Will Employment

1-3 Policies

1-4 Employees Are People Too

1-5 Terminations

1-6 HR Management Tool

Section 2 - Bring Structure To Your HR

2-1 Pay-for-Performance

2-2 Objectives

2-3 Evaluations

2-4 Monthly Surveys and Performance Trends

2-5 Tie Compensation to Performance

2-6 Release Underperformers

2-7 Profit Sharing

2-8 Structure Your HR By Using littleHR.com

Section 3 - Maximize Your HR

3-1 Treat Your Employees Better

3-2 Recognition

3-3 Employee Engagement

3-4 Motivation

3-5 Empowerment

3-6 How to Coach Your Employees

3-7 Career Path

3-8 Training and Cross-Training

3-9 Promote Top Performers

3-10 Company Culture

Take Control of Your HR and Grow Your Small Business

Introduction

Welcome to your HR repository of actionable knowledge for you to use as you develop and reassess your human resources. This book is a powerful culmination of strategic and tactical approaches of HR best practices that allows you to turn your human resources potential into a profitable machine. You will find that you will be able to lower your labor costs while boosting your revenue and reach a sustainable level of organic growth. Let’s face it, you scrutinize over all your other business resources and metrics; now’s the time to take control of your most expensive resource - your human resource.

Many small business owners have a firm grasp on all other resources in their business, but HR remains misunderstood because owners tend to have little or no experience in HR matters and it can be overwhelming. They may know the business needs, how to throw bodies at the problems, and maybe even how to hire and how to fire. Most books on HR do a wonderful job covering compliance issues and risks, but that just scratches the surface. This book may touch on some compliance matters in the beginning, but it goes way beyond. The focus here is how you can restructure your human resources so that you can impact your bottom line and put your company in growth mode. As it is for any resource, it is in your best interest to maximize what you can get out of it. Unlike all those other books, this book will show you how to do it.

Take care of business at home first, and you’ll see these results extend beyond your four walls. You will learn how to align and empower your staff, hold them accountable, and build stronger job satisfaction. At the same time, you can identify your top performers and root out the ones not pulling their own weight. You will be able to scale your business by expanding from a team of qualified individuals to large teams of qualified departments.

When it comes to HR, it seems small businesses are left behind. We are passionate about small businesses and we want to see them succeed. It is time to discuss HR best practices and scale them down to suitable action items. At littleHR.com, we hope you can make use of the material in this book and grow your small business.

Section 1 - Beyond Compliance

Make sure you are in compliance with your human resources, which becomes especially important when you hire and fire employees. We cannot progress into other matters of HR until we have established a solid footing on your responsibilities as a small business owner. This section will go through the classifications of employees, at-will employment, policies you will need, and then introduce the importance of an HR management tool to help bring all this together.

1-1 Properly Classify Employees

How you classify employees can have a big impact on how they report to you, how they complete work and get results, and how they are paid. This is a very important area of compliance, and it is often overlooked. Be sure to visit the U.S. Small Business Administration for greater details on employee and hiring compliance: go to sba.gov and click on Starting & Managing.

Full-time vs Part-time Employment

Do you think you know how many hours an employee has to work to be considered full-time? Are you confident with that answer? This section will take a look at various authoritative organizations to get their take on this question.

What makes an employee a full-time employee?

Generally, it is the number of hours they are expected to work each week. Surprisingly, the U.S. Department of Labor does not define full-time employment or part-time employment with regard to the Fair Labor Standards Act (FLSA)[1]. Most companies will require full-time employees to work somewhere between 32 and 40 hours per week. The Bureau of Labor Statistics sets the benchmark for full-time employees a little higher, at 35 hours a week[2]. However, the FLSA does require nonexempt employees to be paid overtime whenever having worked more than 40 hours per week. This is calculated weekly and cannot be averaged over a payroll cycle.

Additionally, where it does matter is when you are offering benefits. This is because of the restrictions imposed by the health insurance providers. Even the Affordable Care Act has the requirement to identify full-time employees. Full-time employees are usually offered a compensation package, which includes things like: insurance (health, dental, life), paid time off (vacation, sick), retirement (401(k) plan), and other company-specific perks, ranging from reimbursements (child care, fitness, education) to stock options.

Since it is largely left up to the company to ultimately determine what is full-time employment, be sure to include these details in your employee handbook. You will need to specify how many hours per week full-time employees are expected to work to be eligible for benefits.

Why hire full-time employees?

Since the only real distinction for full-time employees is that they are eligible for benefits, the reason to hire them is the same as to why benefits are offered at all. Health benefits are not a requirement for companies with fewer than 50 employees, but it is a characteristic that presumably makes the positions more attractive and easier to fill.

Having full-time employees reporting for work promotes consistency and reliability. Consistency is very important with interactions between employees because expectations are set for availability and scheduling workload. It is also desirable with customer interactions because customers can come to expect uninterrupted engagement. Employees who consistently work the same shifts and are consistently available and ready to work are the most reliable. You can come to count on them to be there when you need them to be.

Loyalty and commitment are other strong attributes tied to a full-time employee. They are more likely to truly represent your company. Full-time employees are what makes and shapes the company. Since they spend so much of their time at your company, they are more likely to make it personal. Contrarily, part-time employees are more likely to walk as soon as the most minor inconvenience is crossed.

Full-time employees are also going to spend more time mastering that learning curve, which makes them more knowledgeable and efficient. Your top performers are more likely going to be full-time employees. More white-collar positions are going to be full-time.

Why hire part-time employees?

It may be cost-effective if you need blue-collar labor to get boots on the ground floor. Under the health-care reform act, companies with at least 50 employees are required to provide medical coverage to full-time workers, but that coverage doesn't extend to employees who work fewer than 30 hours per week. Labor is generally lower anyway because retention tends to be shorter with less expertise. That employee type might fit better for companies in some industries, such as fast food, general labor/general help, and low-skill positions.

Perhaps your industry makes it difficult to hire full-time employees. It could be that you need skilled labor, but individual projects generally last a few hours, such as consulting practices like home decor, computer repair, etc.

Additionally, you may attract talent you would have eliminated by hiring only full-time employees. Some talented people may only be available 20 hours a week or have little desire to be hindered by a full work week in an office.

Required benefits

Required benefits for all employees include Social Security, Medicare, workers’ compensation, unemployment insurance, FMLA and COBRA. Employers and employees each pay their share into the Social Security Administration and Medicare through FICA tax withholding, both paying 7.65% (6.20% Social Security + 1.45% Medicare) of the employee’s earnings.

Worker’s compensation is an employer required insurance in about half of the states. Check with your state to find out if it is required. Workers' compensation is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence[3]. If it is voluntary, it may still be a good idea to have, depending on your industry.

Unemployment insurance is set by the State as it covers unemployment benefits for those laid off or fired. Disputes arise depending on how or why the employee was separated from the company. Former employees with behaviors of misconduct will likely be deemed ineligible from earning unemployment benefits. What qualifies as misconduct? An employee that engages in misconduct by willfully doing something that does harm to the company and/or coworkers. For example, revealing trade secrets or sexually harassing coworkers are the most common situations. Other common types of disqualifying misconduct include chronic tardiness, numerous unexcused absences, extreme insubordination, intoxication on the job, and dishonesty[4]. However, actions that result in firing, but do not indicate misconduct include: poor performance because of lack of skills, good faith errors in judgment, inefficient work habits, an unpleasant personality, poor relations with coworkers, or off-work conduct not aligned with the company’s interests. Employees fired for any of these reasons will usually be allowed to collect unemployment benefits.

The Family Medical Leave Act (FMLA) requires group health benefits to be maintained during the leave as if employees continued to work instead of taking leave. FMLA applies to private employers with 50 or more employees, and to all public employers. The Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit covers group health plans sponsored by an employer that employed at least 20 employees on more than 50% of its typical business days in the previous calendar year. Both full- and part-time employees are counted[5].

Meal time and breaks are not required

Federal Fair Labor Standards Act does not address break and meal time. However, your State may have these requirements. Check with your State’s requirements by going to https://www.dol.gov/whd/state/meal.htm.

Exempt (salary), Non Exempt (hourly), or Hourly Exempt

Make sure you are tracking time and paying your employees appropriately. There could be some confusion on whether or not your employees are eligible for overtime. This section helps explain the differences in pay requirements.

What is an exempt employee exempt from anyway?

Well, those not exempt from FLSA requirements must be paid at least the federal minimum wage for each hour worked and given overtime pay of not less than one-and-a-half times their hourly rate for any hours worked beyond 40 hours each week. Therefore, exempt positions do not follow these pay restrictions.

Some jobs are classified as exempt by definition. For example, outside sales employees are exempt, whereas inside sales employees are nonexempt. For most employees, however, whether they are exempt or nonexempt depends on how much they are paid, how they are paid, and what kinds of work they do. Employees who are paid less than $47,476 per year ($913 per week) are automatically nonexempt. Employees who earn more than $134,004 per year are almost certainly exempt. Common jobs that are exempt: commissioned sales staff, computer professionals, drivers, loaders, mechanics, farm workers, certain seasonal and recreational establishments, and executive, administrative, professional and outside sales employees. For more information on the Federal Labor Standards Act updates, go to https://www.dol.gov/WHD/overtime/final2016/.

What is hourly exempt?

The salary basis pay requirement for exempt status does not apply to some jobs, for example, doctors, lawyers and schoolteachers are exempt even if the employees are paid hourly.[6] Timekeeping may be necessary for billing purposes for executive, administrative, and professional roles. These would all qualify as hourly exempt. They are simply paid on hours worked, which could be less than 40 hours, but they will be exempt for earning overtime pay even if they work over 40 hours in a single week.

Employee vs Contractor

Depending on your needs, it is sometimes better to hire independent contractors instead of direct-hire employees. There is a distinct difference in the relationship between the company and an employee versus a contractor. The IRS is the first to point this out, so you need to be careful. Both should be considered for filling a need and keep in mind that you may land the best candidate from an agency.

A lot of companies find the hiring process to be challenging, so they will outsource to an agency that can supply a number of pre-screened candidates. Using an agency typically does not cost the company anything. You will pay them the flat hourly rate and they will, in turn, pay a share of that to the employee. For paying $20/hour for an Administrative role to an agency, that contractor may only receive $14/hour. The problem is that because the contractor only gets a share, you may be getting applicants that cannot find a job on their own, perhaps due to a lack of qualifications, or that cannot seem to keep a job. On the other hand, you also have those looking to get a foot in the door at a good company. This is a way for