What Does a Small Business Need for HR?

Contrary to popular belief, small businesses don’t need a full-fledged internal HR department to be successful. However, someone still needs to make sure all of your essential functions get done. That’s what outsourced HR for startups is for. These services can check all of your HR boxes at a fraction of the cost of an internal department. In this blog, we cover the details of what these services offer for small businesses.

What Does HR Do in a Small Business?

What is the role of HR in a startup company? The fundamental role of HR in small business or startups is much like that of any business: to ensure that back-office functions run smoothly so that the rest of the team can shine. What do we mean when we say back office functions? Anything that falls under this list of HR for small businesses essentials:

• Onboarding and off-boarding employees
• Fostering a positive and productive work culture and employee/employer relations
• Conducting hiring and exit interviews
• Creating and distributing an employee handbook, including conduct and safety policies
• Maintaining compliance with local, state, and federal regulations
• Managing benefits, COBRA, 401k, leave, and unemployment claim administration
• Administrating payroll

Your business can’t function properly (or legally) without checking all of these boxes. Without an HR team, these tasks often fall on leadership members or other team members who specialize in something else. Fortunately, outsourced HR services make creating or growing your HR team accessible, even with limited resources. Find out more about HR checklist for startups.

Why HR Is Important Even in a Small Business

HR is important even in small businesses because your people are your most valuable resource, and it takes proper management of that resource to see the greatest benefits. Just like you need an accountant to help optimize your financial management, HR professionals enable your employees to succeed. Here’s how:

• Gathering the Right Team: HR is responsible for helping determine which roles you need filled and then taking action to recruit top talent for those roles. This includes creating job postings, communicating with candidates, performing interviews, filing contracts, and overseeing onboarding.
• Optimizing Productivity: A big piece of HR’s job is enabling your current employees to succeed. One way of doing this is through ongoing training and learning. By providing professional development opportunities, your employees can stay current with industry trends, which ultimately makes your business more competitive.
• Incentivizing High Effort: HR also motivates your employees to perform their best, often through professional development tracks and fine-tuning compensation and benefits packages.
• Taking Care of “Background Noise”: Your business needs to follow the most current laws and regulations to stay in operation, but doing so takes away focus from your employees’ specialties. Fortunately, HR professionals specialize in compliance, so the rest of your team can focus on what they do best, and your business can stay in good standing with the law.

If you’ve left HR on the back burner for too long, it’s time for a change. Reach out to our team to get started.

What Small Businesses Need To Know About HR

The most important thing for small businesses to know about HR is that these responsibilities have to be done in order for your business to operate, even if you don’t have team members dedicated to completing them. You can’t operate without remaining compliant with regulations, without filling vacant roles with qualified team members, and without incentivizing top talent to stay with your organization. All of these essential tasks are part of HR and should be handled by specialists.

However, the solution doesn’t have to be building out an in-house HR department. For small businesses and lean startups, outsourced HR services are available for a fraction of the price. The best part is that these services are highly impactful, and you only have to pay for exactly what you need.

What HR Policies Should a Small Business Have?

The essential HR policies for small businesses cover:

• Employee classifications (exempt, non-exempt, etc.)
• Equal opportunity employment guidelines
• Workdays and holidays
• Paydays and pay period dates
• Paycheck advances
• Overtime pay
• Break and meal periods
• Payroll deductions
• Employee conduct
• Safety procedures

If you’re missing any of these HR basics for small businesses, give us a call. Our team is ready to get yours on the right track. 

What are the important HR requirements for small business?

While HR can improve your business strategy through recruiting and retention, you’re also obligated to meet legal business requirements to prevent costly fines or lawsuits. By setting the tone and adhering to internal and external HR processes, you send a clear message to employees (and customers) that they can expect similar attention to detail in other processes. Correctly documenting your legal compliance can make lawsuits, investigations, and inquiries cheaper and easier to manage.

For example, your small business should have a clear plan for the following HR requirements:

Payroll: Payroll should be consistent, clear, and reliable. Getting paid is a basic function of HR, but with benefits often stretching far beyond just monetary compensation, payroll has become more and more complicated to manage. Payroll also needs to be flexible enough to account for all the different ways your employees get compensated and can meet the requirements of each state your employees reside.

Documentation and employee paperwork: Keeping records organized and securely stored, having proper documentation for your employees, and creating an employee handbook are just some elements to consider. Some documents will need to have restricted access depending on the level of sensitive information they contain.

Required public information: Posting required equal opportunity employment posters and labor law postings, or OSHA signage, for example. Employees will also require clear communication and resources for the benefits your company offers.

Clear hiring/termination process: Creating fair, standardized, and transparent hiring and firing practices that are documented and understood by all employees. 

Employee benefits: This includes understanding benefits employees are eligible for, such as FMLA and health insurance. Optional benefits like retirement plans, tuition reimbursement, and equity or stock for employees may also be present or future benefits in the mix.

What are important HR documents for small business?

One basic HR function that every small business should do is keeping and safeguarding important employee information. Here are some HR documents that every small business should keep with a secure electronic backup with good HR software:

1. Offer Letter or Contract. Depending on the employment type, you should keep a countersigned offer letter or contract that outlines the employment terms including compensation, benefits, and duration of employment if set.
2. Legal Documentation. While this varies by state, some common required legal documents include an Employment Eligibility Verification (I-9), Federal Income Tax Withholding (W-4), and Request for Taxpayer Identification Number and Certification (W-9). 
3. Health Paperwork. Documents like health insurance enrollment paperwork, employee emergency contacts, and worker’s compensation records are important to keep secure and confidential. Medical documentation that accompanies Family and Medical Leave Act Records (FMLA) and reasonable accommodation requests must also be kept confidential, and in some cases, cannot even be shared with that employee’s supervisor. 
4. Payroll Information. Each year, your business is required to send out annual pay stubs and report income and employment taxes to the IRS.
5. Employee Handbook. While not technically required, an employee handbook can be an invaluable resource for an employer as it lays out policies that protect the employer in an easily digestible manner. Employee handbooks for small businesses can be an invaluable resource to employees as well regardless of the size of the company. 

A note on storage requirements: not all of these documents should be stored in the employee’s personnel file. Any health information or medical records need to be kept separately and stored securely with limited access. 

There are many other recommended HR documents you may want to consider creating and maintaining such as a personnel file with compensation and employee performance reviews, organizational chart, and a business continuity plan. Documentation is a critical component of implementing and scaling good human resource management practices. 

How to Set Up HR for a Small Business?

Setting up HR for a small business can seem daunting, but with the right approach, it’s quite manageable. Here’s a step-by-step guide to help you get started:

Assess Your HR Needs

Begin by identifying what HR functions are crucial for your business. This might include recruiting, payroll, compliance with labor laws, employee relations, and benefits management. Understanding what you need will help you prioritize and focus on the essentials first.

Consider Outsourced HR Services

For many small businesses, fully in-house HR may not be cost-effective. Consider outsourcing certain HR tasks to specialized providers like Milestone. Outsourced services can handle complex HR tasks such as payroll processing, benefits administration, and legal compliance, allowing you to focus on growing your business.

Develop HR Policies

Create clear HR policies that outline how various HR matters are to be handled. This should include policies on recruitment, remuneration, workplace ethics, and employee conduct. Having these policies in place ensures transparency and helps in maintaining a positive work environment.

Implement HR Tools

Invest in HR software solutions tailored for small businesses. These tools can streamline HR processes like employee scheduling, time tracking, and performance management. Solutions like this not only save time but also help in maintaining accurate records and data analytics.

Train Your Team

If you’re handling HR internally, ensure that your team is properly trained on HR practices and compliance. Continuous training and professional development keep your HR team updated with the latest HR trends and legal requirements.

Regular Review and Adaptation

Finally, regularly review your HR processes and policies. This helps you identify any gaps or areas for improvement. As your business grows, your HR needs will evolve, and adapting to these changes is crucial for continuous success.

If setting up HR seems overwhelming, remember that help is just a call away. Reach out to Milestone’s HR experts for tailored advice and solutions specific to your small business needs.’

How Do I Set Up an HR for a Small Company?

The best HR for a small business is one that gets that job done without stretching your resources thin. That’s why many startups and small businesses rely on third-party HR service providers to supplement some or all of their internal teams. As for setting up, that part’s easy. Just get in touch with the experts at Milestone, and we’ll take a look at what you have covered, what you need assistance with, and how we can help.

Ramp Up HR Functionality Quickly with Milestone

For small businesses and startups, the list of things you need to cover is often bigger than your budget. Fortunately, outsourced virtual HR services can knock important items off that list while saving you money. When partnering with Milestone, you can count on:

• Experts with experience in your industry and business stage
• Services tailored to your needs and goals
• Transparent pricing

Reach out today to get started.