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5 Common HR & Benefits Policy Mistakes Made by Startups

03/19/2019

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Many startups work to break with tradition and disrupt industries. But, no matter how unconventional your startup’s vision may be, your human resources department should always play by the rules. Getting a business up and running requires so much time and effort that many startup entrepreneurs don’t have time to focus on human resources, and that can be detrimental to the business.

While there are a number of unique HR challenges in startup companies, here are five common HR and benefits policy mistakes often made by startup companies and how a professional employer organization (PEO) can help offer solutions.

1. Forgoing an Employee Handbook

A clear and up-to-date employee handbook is the backbone of any good HR department. Having company policies in writing is critical for reducing employee misunderstandings and communicating proper work behavior. Whenever a new employee starts, he or she should be required to read the employee handbook and sign a form agreeing to the policies it outlines. For a startup, creating an employee handbook can be time-consuming, but hiring a PEO to create the handbook and keep it up-to-date can save valuable hours. Here’s some valuable information about how you can work with a PEO to create a great employee handbook.

2. Overlooking Employee Development

A startup is only as good as its talent, which makes investing in the professional development of employees a key ingredient for any company’s success. Every startup should offer training opportunities for employees to keep them on their toes and make them feel valued. Training should begin on an employee’s first day with a robust orientation program and then continue throughout the year. By using a PEO, startups can offer training opportunities that they wouldn’t be able to provide on their own. These programs allow even small, startup companies to offer competitive benefits and retain the highest quality of talent. Learn more about how professional development can help grow your business.

3. Trying to Manage Both Payroll and Compliance

Managing payroll is a huge challenge for any startup. Not only is payroll time-consuming, but any mistakes in managing tax withholdings can carry hefty IRS penalties. To avoid these complications, startups will often contract a payroll outsourcing partner, but these services don’t manage other complicated HR tasks that all businesses need to maintain compliance with related to federal and state laws. The cost of managing these compliance matters—such as worker’s compensation, EPLI, and unemployment insurance—can add up quickly, even for even small startups. However, a PEO can manage both payroll and compliance services for one easy cost. Here are some valuable tips on efficient payroll management.

4. Paying Too Much for Healthcare and Benefits

Startups need to attract top talent, and, in today’s competitive job market, that means offering high-quality benefits. But, small companies often have to pay more for less coverage, and for new startups, those costs can be crippling. Because PEOs work with a number of different companies, they have the leverage to offer startups healthcare and benefits packages that are usually only available to big companies. On top of that, a PEO can manage the burdensome paperwork for benefits packages. Check out these low-cost ways to keep employees happy.

5. Misclassifying Employees

For an emerging startup looking to save money, hiring independent contractors instead of employees seems like an attractive loophole. With contractors, employers don’t have to pay taxes, overtime, or offer benefits, but when a contractor’s duties don’t differ from those of an employee, then cost-cutting startups can run into trouble. Both the IRS and individual states can fine businesses for misclassifying their employees. Hiring a PEO is the easiest way to avoid fines that could damage or setback a new startup. Here’s some key information about correctly classifying your employees.

Still want more information about PEOs? Read our blog on PEO Benefits for Small Companies or download our PEO guide.

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Tagged with: Employee Handbook, Training