By Bruce Hakutizwi
As a small business owner, you’ve likely handled the tasks of hiring and firing employees on your own. If so, you’re not alone. Many small business owners don’t believe they can afford the “luxury” of a dedicated HR department. While that may be the case for you, the mismanagement of HR tasks can end up costing you in the long run.
The sagest advice is, of course, to appoint a dedicated person to handle your company’s HR tasks. But if you can’t do that, there are some things you need to know to protect yourself when hiring and firing employees. Otherwise, you could be leaving yourself vulnerable to lawsuits or liabilities that could ultimately end up costing you your business.
HR departments dedicate countless hours and resources to developing comprehensive onboarding and training programs for new employees. They devote equal time to outlining specific protocols that must be followed when the time comes to let an employee go. As a business owner, the onus is on you to give these tasks ample weight in your business whether or not you can hire a dedicated HR team.
Tips for Hiring
Getting to a point where you’re ready to hire is definitely a milestone to be celebrated in your small business. It’s also one of the most important tasks you’ll undertake. The team you amass will have a huge impact on your business so it’s critical to temper your excitement for hiring with logic to ensure you do it properly, legally, and don’t overlook any of the important details.
Talent acquisition research shows that the average cost of hiring an employee is $4,000. With that in mind, you’ll benefit greatly by outlining a thorough plan for vetting, hiring, and training new employees to make sure you get it right.
The first step in hiring is to establish an employer identification number. Your EIN is a number assigned to you by the IRS to identify your business. You’ll need it for all of the forms and documents related to paying employees. Depending on the type and amount of hiring you’re doing, you may or may not be required to establish an EIN, so check with the IRS to be sure.
You’ll also need to make sure that you know your business’ tax requirements, which will vary from state to state. This includes understanding federal tax, state tax, and withholding rules, and knowing which forms to use to report wages (W-2 or 1099, for example).
The next step in hiring is creating effective job applications and interview questions. You’ll need to make sure these comply with federal and state anti-discrimination laws, while still properly vetting candidates for the skills, qualities and temperament you’re seeking. If you have legal counsel at your disposal, it’s a good idea to have that counsel review these things to make sure you’re not unwittingly discriminating against any group or person.
Next, you’ll need to write a complete and thorough job description for the position or positions you’re looking to fill. First of all, you’ll need to define the type of employment the position requires. Do you need a full-time, part-time, or contract employee to fill this post?
Job descriptions should be compelling enough to attract top talent, while being clear and straightforward about the tasks, requirements, and expectations necessary to satisfy the role. Indeed outlines some helpful tips for developing a job description here.
You’ve Picked a Candidate — Now What?
You know your business needs better than anyone, so if you think you’ve found the perfect candidate, chances are you’re right. Still, it’s important to cover your bases by conducting a background check. This is within your legal rights, and it’s a step that shouldn’t be overlooked, no matter how well you think you know a potential candidate.
Here are some things to know about performing a background check ethically and legally:
- You must notify the employee in writing, and separately from the job application form, that a background check is being conducted and could impact your hiring decision. If you will conduct ongoing checks throughout the duration of their employment, you must disclose this as well.
- Employees must provide written consent to a background check.
- If any reference checks or personal interviews will be conducted to glean insight into an employee’s reputation, lifestyle or character, the employee must be informed and made aware of the nature and extent of the interviews.
Once you’ve hired an employee, you’ll need to have a specific plan for onboarding and training and who will be involved in that process. Will you be doing the bulk of the training, or will another employee involved? Define a timeline and specifics of what will be included in the training, and what the expectation is for the employee to be carrying out job functions on his or her own.
Lastly, you’ll need to establish a timeline and process for employee reviews and compensation adjustments and make sure employees are clear on how and when this process will occur.
Tips for Firing Employees
In a perfect world, you’d make all the right hiring decisions and your employees would thrive and succeed with your business’ best interests at heart. In the real world, that doesn’t always happen. Things happen and circumstances change. Creative differences, performance issues, revenue declines, selling your business, and a host of other unknowns can prompt the need for layoffs or terminations.
In the event that you need to fire an employee, it’s important to make sure you do so safely and legally.
First and foremost, a firing should never come as a surprise. If there is a performance issue, this should be communicated to the employee during his or her regular review. This is your opportunity to communicate issues and to document that you’ve done so. The bottom line is, an employee can’t be expected to fix a problem they may not know exists.
Many states have what’s called at-will employment, which means workers can be fired at any time for any legal reason, but just because it’s legal, firing at will isn’t necessarily a good business practice.
Next, an employment termination should always be handled in person — not over the phone or in an email, no matter how well-crafted. It’s good advice to have another person in the room, and to include written documentation of the event.
Firing an employee is never pleasant, so here are a few tips to help make this uncomfortable situation go as smoothly as possible:
- Don’t make it personal. Keep personal differences and issues out of the conversation and stick to the facts around why the decision was made to terminate.
- Be clear and specific. Give specific reasons for the decision and provide the necessary documentation, such as performance reports or write-ups. Documentation should also include supplying any applicable forms for unemployment insurance and health insurance and 401(k) options.
- Keep your emotions in check. Even if the person you’re firing gets emotional or elevated, it’s important that you remain calm and focused.
- Handle the details. Once the termination has been completed, you’ll need to make sure you collect any items that could give an employee access to the building, including name tags, security badges, parking permits and keys. You’ll also want to revoke all passwords to software and systems that could leave you vulnerable should an ex-employee decide to retaliate.
Lastly, and most importantly, if an ex-employee is threatening you or you otherwise believe he or she will act out in a violet or damaging way, contact your local authorities.
There’s no question that hiring new employees is among the most enjoyable parts of running a business, and firing an employee is among the most unpleasant aspects. By following the tips in this article, you can feel confident that you’re covering all of the bases in carrying out these tasks as safely and effectively as possible.