Common HR Audit Fails

One of the pleasures of my job is conducting HR audits for small and mid-sized companies. No, I don't derive pleasure from saying, gotcha. I derive pleasure from helping small and mid-sized business owners have a realistic assessment of any employment risks they are facing and how their management practices stack up against best practices.

Most small business owners want to do things correctly. But it's difficult to create momentum for their business through sales and marketing, manage operations so they deliver on their promises, and keep track of things like labor laws, tax laws, and other government rules and regulations. The smart owners surround themselves with specialists who can help keep an eye on those things so that they can keep their eyes on their customers.

So, in doing these audits, I find many organizations make the same errors.  Here's a few:

1.  Exempt/Non-exempt - in the second half of last year everyone was scrambling to make sure they had a plan for the new overtime rules. Unfortunately for many, the procrastinators were the winners as a judge put a halt on the rules at the 11th hour. Furthermore, the election results cast doubt on the rules' future. However, the audits I performed during that time revealed that many employers were misclassifying employees based on the duties test (not the salary test) and many remain misclassified today. The courts put the new salary test on hold, but the duties tests still apply. Just because you're paying that employee more than $24k doesn't mean he or she is legally exempt.

2. Use of 1099 Contractor Status - I have many clients and receive 1099s from quite a few of them. I invoice those clients through a corporate entity that maintains its own insurance. No auditor from the departments of labor or revenue is going to question the legitimacy of those 1099s - I meet the standard. But that guy you have working for you 40 hours per week, driving your truck, wearing your uniform, using your tools and working when you tell him to...not so much. That same agency representative is going to have heartburn over that guy and it could turn out to be very expensive for you. And you're probably shifting a lot less risk than you think you are. 

3. Forms I-9 and e-verify - I'm still surprised at how many small companies are not using e-verify.  The penalties for hiring unauthorized workers or failing to properly document work authorization through an I-9 are significant (see here). E-verify is required for all employers in NC with 25+ employees (see FAQ here), and is required for all employers in SC, but is only required for certain government agencies and contractors in VA. However, even though it is not always required in VA, the system is free and is a useful supplement to form I-9 - I recommend that my VA clients use it voluntarily.

If you haven't had a fresh set of eyes on your HR compliance platform recently, contact The Davidson Group for a free consultation.

On-boarding - The Secret Sauce

Buyer's remorse is real. Think back to your last major purchase. If, after you got the new "thing" home, you had little pangs of doubt as to whether you made the right choice, you're not alone - many people experience this. And many people feel the same emotion a few days (or even hours) into a new job. That new employee who just quit a job to come work for you or took themselves off the job market to accept a position with your organization may be wondering if they might have been better off staying where they were or waiting on the next offer instead of taking yours.

The primary, number one purpose of an on-boarding program is to combat buyer's remorse. Once a new hire starts to regret their decision to join your team, it's easy to lose them. A 2014 study by a division of Equifax found that 40% of employees who voluntarily leave a job do so in the first six months. Another 16% quit before their one-year anniversary. So more than half of all voluntary terminations occur during the first year.

Here are some tips to make your new hires' experience one that resists buyer's remorse:

1. Realistic Job Preview - if your description of the job duties and the job environment is all rainbows and unicorns during the interview phase, but the reality of the day-to-day is much different, your candidate is likely to experience buyer's remorse. Show the candidate the actual office they'll be in or the actual vehicle they'll be driving, not your best-in-show office or van. If they're gonna be on-call - tell them. If they're gonna get dirty - tell them. If they're gonna frequently talk with disgruntled customers - tell them. If the sales department and the operations department are often in conflict - tell them. You will be much better off if you sound almost like you're trying to talk them out of taking the job rather then into it. 

2. Deliver on Your Promises - the most common complaint I hear in this area is frustration over training. One guy I know loves to tell the story of how the President of a company he worked for told him all about the great training program his company has. He took the job and was basically shown an office and told to get to work - sink or swim. He's still waiting on that training. If you say you're going to train them, then train them - it's the best investment you'll make. If you say they'll get a review in 90 days or 6 months and their compensation will be reviewed at that time, make sure you do it. No bait and switch maneuvers!

3. Have a Plan and Execute - for many organizations, on-boarding is a two hour administrative process - fill out all the HR forms, issue an employee handbook and a badge, and watch a safety video. You're likely to have better success if you think of on-boarding as a much longer management process - 90 to 180 days for most jobs and as much as a year for higher level positions. Script out what is going to happen on day 1, day 2, etc., then week 3, 4, 5 and 6. Be sure the on-boarding plan accounts for:
- learning the technical skills needed to be successful
- learning the written rules/policies
- learning the unwritten rules, those non-policy things that will get the new employee crossways with the bosses or co-workers (such as: we don't have assigned parking, but Jane always parks in that spot and she's been here 27 years).
- learning what gets you recognized and rewarded and what will get you in the doghouse
- getting socialized - meeting people, making friends
And don't make these mistakes:
- waiting till the employee's first day to order uniforms or business cards. Have their business cards ready on day 1.
- making a new hire spend their first day cleaning up the last person's mess. Issue them an office, cube, workspace or vehicle that is clean, neat and ready to go.

In short - want to improve your employee retention rate?  Improve your on-boarding process.