11 Common HR Mistakes In Small Businesses Here's how to fix them
HR Insights

Businesses of all sizes face the same HR problems; yours is no exception. Administrative errors in particular are easy to ignore or lose track of, especially for small businesses with few HR resources.

Whether it’s a misplaced document, an outdated process, or a full-blown compliance violation, these HR mistakes can be costly to you, your business, and your employees.

We’ve rounded up some of the most common small business HR mistakes Canadian business owners and managers just keep making. If any of these sound familiar, read up and act fast.

If any of these sound familiar, read up and act fast.

Being proactive will help you stay in compliance and avoid legal, financial, and personal stress down the line.

1. Your onboarding is uninspired…and costing you good employees

If you aren’t engaging your employees from the moment you onboard them, you could be losing up to $2,400 per hire. Employees who don’t go through onboarding are also 42% more likely to resign within three years.

Despite these numbers, many small businesses continue to ignore or improvise their onboarding and training practices. Being small isn’t an excuse to let new hires fend for themselves.

Improper onboarding can lead to feelings of disorientation, confusion, doubt, and disengagement.

Improper onboarding can lead to feelings of disorientation, confusion, doubt, and disengagement. For onboarding with impact, consider the following:

  • Assign a mentor from the new hire’s team to give them a tour and take them out for lunch
  • Ensure that desk supplies are ready in advance
  • Schedule structured training tasks and check-ins from day one to day 90, at least (it typically takes eight months for a new hire to reach full productivity)
  • Go over company mission, values, and culture to ensure new hires feel welcomed and aligned

2. You keep meaning to write an employee handbook, but…

We get it: putting things into writing can be scary.

Performing small business HR can be tricky. It can feel stuffy and impersonal to put things like a code of conduct or communications policy into a document and make employees sign it.

But not having an accurate, up-to-date employee handbook is a serious error of judgment. By clearly communicating your policies, you’re giving both your company and employees a document to refer to in case of legal action. Without one, you could be opening yourself up to unnecessary misunderstandings and claims.

Not having an accurate, up-to-date employee handbook is a serious error of judgment.

Your employee handbook doesn’t have to be an extensive, hard-bound book of legalese. It should be accessible, written in plain English, and easy to update—consider a binder format, or better yet, a live document online.

3. Your employee records are scattered and incomplete

You’re compromising your employees’ safety if you can’t retrieve their emergency contact info within minutes. You’re also compromising your business’ compliance—the Canadian Labour Code requires employers to keep specific payroll and employee data for at least 36 months, and each province has its own legislation on the subject.

Employee records must be accessible, accurate and up-to-date at all times. These include:

  • employees’ personal information
 and start dates
  • banking info and compensation
  • 
working hours
  • 
performance reviews
  • certifications and signed agreements

This is difficult to do if your data is scattered across paper forms, spreadsheets, and nesting folders in your computer. An HR information system (HRIS) or online HR platform is the easiest way to centralize your employee data and keep it organized and within reach.

Bonus: online platforms enable employees to access and update their own info, giving you one less thing to worry about.

4. You think data security is only for tech companies

Apple and Yahoo aren’t the only companies who should be concerned about data security. In fact, small businesses with fewer security resources are often ideal targets for cybercriminals.

Storing information on paper or local servers also exposes you to the risk of losing, damaging, or leaving open employees’ confidential information, including social security numbers, bank accounts, and even health information.

Don’t put your people at risk. Digital, cloud-based HR software not only centralizes employee data, it protects sensitive information against loss, theft, or damage.

At Collage, we use industry-best practices to protect your employee data, including secure data centres, automatic backups and bank-level encryption.

5. You’re not up to date on local labour laws

In Ontario alone, the Ministry of Labour prosecutes hundreds of employers every year for violating the ESA. Some fines reach tens of thousands of dollars or more.

In Ontario alone, hundreds employers are prosecuted for violating employment standards every year.

Businesses in Canada are legally required to comply with federal and provincial employment and labour laws—which happen to be complex and frequently changing. Employment standards can also differ based on industry, employee classification, and even company size.

Designate a person with your company to review and thoroughly understand applicable employment and labour laws. Understanding employer responsibilities will reduce legal and financial risks from being audited by the government or prosecuted by an employee.

6. You’re not properly tracking time off balances

Between receiving employee requests, calculating balances and accruals, and ensuring that PTO policies are both compliant and competitive, time off management is one of the most complex and time-consuming HR responsibilities of all.

Not properly tracking time off, however, can lead to payroll errors and illegal deductions.

Not properly tracking time off can lead to payroll errors and illegal deductions.

Simplify your time off management with automated time off software. Good platforms will automatically calculate balances and accruals, enable communication between managers and employees, and even generate custom time off reports.

7. You’re not documenting feedback and performance reviews

If an employee is reprimanded or terminated for unsatisfactory job performance, it is your duty to provide thorough and time-stamped documentation that supports the decision. While that may sound uncomfortable, these notes can be as valuable to you as to the employee.

Whether positive or constructive, frequent, ongoing performance reviews are proven to increase employee engagement, satisfaction, and development.

The bottom line: make sure you and your managers are frequently checking-in with employees and documenting feedback for future reference.

8. You’re making business decisions without reviewing HR data

Data-driven decision making is the hallmark of top performing companies, but most businesses lack the tools to extract insights from their HR data.

Whether you use HR reporting software (generally tied to your HRIS) or are manually tracking company data in Excel, you can, and should, gather these HR analytics:

  • compensation
  • talent acquisition
  • cost per hire
  • training and development
  • employee churn
  • time off
  • benefits and wellness programs

…to name just a few. From finances to marketing to software development, we rely on data for decision-making at every level of business. Why should HR be any different?

We rely on data for decision-making at every level of business. Why should HR be any different?

9 and 10. You improvise hiring and firing processes

It’s an unfortunate stereotype that HR is just about ‘hiring and firing.’ Yet improper recruitment and termination processes are so common and damaging to small businesses, they deserve a two-part section.

Both processes require structured plans to ensure minimal costs, productivity loss, and liability risks.

For hiring, resist the urge to fill open positions ASAP. Taking the time to craft a solid job description and structured interview process will eliminate both the high cost of a bad hire, and the cost of re-recruiting, hiring, and onboarding a candidate the second time around.

When it comes to firing, managers have the opposite tendency: dragging out the process as long as possible, either to avoid hurt feelings or being understaffed. To ease the process, create a structured, repeatable termination plan that includes:

  • Exploring alternatives such as coaching and training programs
  • Consulting with an HR professional (if you aren’t certified)
  • Documenting the reason for termination
  • Complying with pay requirements (including unused vacation)
  • Selecting an appropriate place and time to inform the employee

11. You still think HR is an administrative job

The final most common HR mistake (in this list, at least) is potentially the most dangerous for small businesses. HR is not just about hiring and firing. It’s not just about documents and paperwork. In fact, administrative tasks only scratch the surface of truly great HR.

Great HR is about so much more than administration.

It’s a well-worn refrain, but people truly are your most important asset. They’re the ones building your product and engaging new customers. They may even become close friends or advisors over time.

Instead of spending time building the perfect spreadsheet (if such a thing exists), invest that energy into building a strong company culture, initiating meaningful wellness and benefits plans, and fostering a safe, productive environment where managers and employees can do their best work.

Instead of wasting time building the perfect HR spreadsheet (if such a thing exists), invest that energy into building a strong company culture.

So, there it is. The most common small business HR mistakes that Canadian founders and businesses owners just keep making. Of course, this list is far from exhaustive. Keeping a business compliant and running smoothly is fraught with peril and problems that often can’t be avoided. With the right knowledge, they can be prepared for and handled with care.