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Six HR Secrets you must know if you have Employees in Your Small Business




It would be great if every small business came with a start up manual that informed you of everything that you needed to know and warned you about all the pitfalls.  Unfortunately, it doesn’t work that way.  Most small business owners learn the hard way and that can be costly and sometimes mistakes can lead to the loss of their business.  At minimum, additional stress and sleepless nights are inevitable especially when it comes to the people aspects of their business.  There are so many issues, laws, regulations, and aggravations to consider.  Consider the old joke:  “If it wasn’t for employees and customers business would be a breeze”.  The people side of the business is a necessity that will make or break you so you’d better pay attention to it now or you will pay for it later.


In 30 years of human resources experience, my mission has always been to prevent problems before they become huge, costly and infect the entire organization.  The only way to do that is to build your awareness of critical issues and your skills for dealing with them.  This book scratches the surface on six areas that you must know if you have employees. 


What is HR?


HR can mean many things to many people.  If you had a bad experience with corporate HR it can be a negative word.  It really shouldn’t be.  HR is the single most important grouping of functions that you have in your company.  You can have great equipment and facilities.  You can have a great product and website.  You can have all of the money you need to fund your growth.  If you don’t have good employees that are productive, you have nothing.  HR stands for Human Resources.  Human Resources is a broad term.  Human Resources encompasses the entire employee lifecycle from recruiting and selection to termination.  Human Resources involves finding people, interviewing them, selecting them, determining how much they should be paid, hiring them, orienting them to the organization, signing them up for benefits, making sure that they are happy on the job and that they know what their job is, informing them of the job standards, counseling them when they aren’t doing well, rewarding them for good work, training them on new systems and processes, planning with them for retirement or promotion or firing them.  The list makes one tired just reading it.  The list doesn’t even mention all of the HR responsibility for making sure the organization is designed properly and keeping up with the entire myriad of federal, state and local laws and regulations.


Does HR affect you in your small business?  Yes.  It affects everyone even if you only have one employee.  Gone are the days when you could run your business in isolation.  Employees have access to information within minutes that we had to pay lawyers and other researchers to find for us in the not so distant past.  Employees are savvy so we must be savvy too and be prepared to prevent issues before they occur.  That’s no secret.


HR decisions that you make in your business may be the most important ones to determine your survival and success.


Chapter 1

In this chapter, you will learn why a law passed in 1938 can cause you to write big checks to employees and the Department of Labor.  The FLSA was not written for the modern workplace and yet employers must comply with the many components that are not so obvious.  Learn about common mistakes that small business owners make and how to avoid them.


Secret #1:  People Must be Paid based on What they Do


The number one area of employment litigation is wage and hour law.  Employees want to be paid fairly and if the perception is that they haven’t, they will sue or report your business to the Department of Labor Wage and Hour Division.  The primary federal law that governs wage and hour is the FLSA or the Fair Labor Standards Act that was passed in 1938.  This act covers wage and hour law quite extensively.  Unfortunately, even with amendments in 2004, the law does not take into consideration the modern technology centered work world of today.


The FLSA clearly states that employees must be paid based on job duties.  Many small business owners are under the impression that moving someone to salaried status eliminates the need to pay overtime.  This is absolutely wrong and creates a huge liability to the organization.  The FLSA spells out the categories of jobs that are exempt from overtime and there are specific requirements for those jobs.  For instance, under the Executive exemption, a supervisor must have hiring and firing authority over 2 or more employees in order to be exempt.  That pretty much eliminates assistant managers in most organizations today.  They must be paid overtime.  Just putting them on salary and giving them a title isn’t enough.  The law looks at their job duties.  The job duties and responsibilities determine the exemption status.


The FLSA also addresses how exempt employees must be handled.  An exempt employee can not be treated like a non-exempt employee.  If an exempt employee takes a few hours off on Friday, you cannot dock them for that time.  They are paid a flat amount not based on the hours they work.  If you dock them, you are treating them like they are non-exempt and you may be liable for their overtime. 


Litigation in this area is so common that attorneys advertise on prime time television for employees to come talk to them if they are being unfairly treated under this law.  There is a new app for I-phones and I-pads to track time and overtime.  Guess who developed and is promoting it?  The Department of Labor developed the application and has it on their website.


If you put employees on salary because they are a trusted loyal employee or have been there a long time, you need to revisit this status.  Review all of your employees and how you are paying them.  There may be state laws that govern wage and hour so make sure you are aware of them.  Before you make changes, make sure you discuss them with a trusted Human Resources professional or employment law attorney.


It is important to realize that this is just one area of the FLSA.  The FLSA governs break periods, child labor laws, when you must pay employees for time worked, travel time, training time and many other areas that affect how you pay your employees.  Be aware of the nuances of this law and the laws of your state. The implications of non-compliance on your business may cause you to write a big check.


Now that you know why paying people based on their actual job duties is so important,  keep reading because in the next chapter you will learn the secret of preventing employees from saying that they were not told about rules and standards or worse yet claiming that you promised them certain perks and benefits.


Chapter 2

In the last chapter you learned about the importance of following wage and hour laws.  Now let’s take a look at how secret two can be the difference between a well managed company and one with constant issues and problems.


Secret #2:   Have Written Policies and Procedures             


Entrepreneurs often start their own business to get out of the bureaucracy that is often stifling in big business.  Seeking to “do it differently” they don’t build infrastructure and instead manage by the moment.  This may work for a while but eventually it becomes important to have a collection of policies to help guide the organization and management.


Most entrepreneurs are moving so fast it is hard to remember decisions that were made yesterday let alone what happened two years ago.  Did we pay Sally to attend her cousin’s funeral last year?  When do employees get an extra week of vacation?  Is it after 5 years or 3 years or 7 years?  Policies and Procedures are a tool to help the business owner and the employees.  No one likes to be put on the spot when asked about employee benefits.  A well written employee handbook and policy and procedures guide give the small business owner the needed tools to answer questions and stay consistent.  They are communications tools to outline expectations for employees and a legal first line of defense to eliminate the “I was never told” excuse.


Written policies and procedures set expectations.  Everyone likes to know expectations.  Often times in small business, the work is so heavy and frenetic the discussion around expectations is forgotten.  This leads to issues and problems.  Sitting down day one with the employee and outlining your expectations for the job will eliminate many problems later.  By having a written guide, it shows the employee that the company cares about employees and is well organized and managed.


A well written handbook is a living document.  It isn’t a one time project.  Handbooks must change and grow as the organization changes and grows.  Handbook information should be customized to the size of the organization and the states where it has employees and conducts business.  Federal and state law changes, as well as key court decisions and rulings, will necessitate updates to the contents.  Business owners must see policies and procedures guides and employee handbooks as key components for the success of their business operation.  If they are seen as a necessary evil, the company culture will suffer and the power of these critical communication tools will be lost.


Sometimes business owners say this, “My handbook came from my brother in law’s sister’s company and we modified it.”  It is important to realize that a bad handbook and policy guide is worse than no guide at all.  Employees will make or break your organization.  If you select, manage and treat your employees well, you will have a great company.  Don’t borrow trouble from others.  Spend the time and money on putting together your culture and making sure you aren’t borrowing from another company.  You may be inheriting their problems and liabilities as well.


All employees should read the employee handbook when they start work for the small business.  They should also sign off on a sheet that states they have read and understand the policies of the organization.  This sets the expectations from their first day.  How impressive it is for an employee to join a small organization and see that owners and management care enough to put down things in writing and communicate them.


All policies and procedures and employee handbooks should be reviewed by HR professionals and employment law attorneys.  Well intentioned wording can create liability for the organization.


Now that you know the importance of having written policies and procedures, keep reading about your liabilities as an employer and the importance of management by walking around.


Chapter 3

In this chapter, you will learn how what you don’t know can hurt you.  Employers have significant liabilities for activities taking place in their workplace.


Secret #3:  You are Responsible Even if you Don’t Know About It


At first glance, this secret seems a bit strange.  How can you be held responsible for things of which you have no knowledge?  As business owners, you are supposed to know.  It is your responsibility to know and you will be held accountable for not knowing.  A good example is harassment in the workplace.  If harassment is taking place in your organization, you should know about it.  You should be out in your workplace enough or provide proper management so you do know.  Regardless of your awareness, you are liable.  Another example occurs during the hiring process.  You hire a new employee and don’t know that they had some violent episodes at their last employer.  It didn’t come up in the interview or on their application and they didn’t have a criminal record.  How were you to know?  Did you call previous employers?  If you didn’t, you are negligent because you should have called.


Every day in small business America there are employees stealing from their employers.  These incidents take place on the factory floor, in the accounting department or any other place where employees have access to assets.  How is that possible?  Employers must be diligent about setting up proper controls in their business.  Facilities and other assets should be inspected and monitored.  Daily reports should be available and consistently reviewed to monitor things like inventory levels, petty cash, supplies and other assets to ensure they are not walking out the door.  In a high profile court case, the prominent CEO stated that he wasn’t aware that his company was taking money from customers under false pretenses.  He didn’t know?  It was his job to know.  The court system of reasonable people isn’t going to believe you didn’t know what was going on in your own company.  Get out there and walk around your business operations.  Talk to your employees every day.  Be aware of your surroundings.  Look for signs of issues, problems and harassment.


Small business owners have many burdens.  Competent employees and managers must be hired then nurtured and managed.  The speed of business often isolates owners from the day to day operations and people.  Avoid this isolation at all costs.  Isolation creates liability.  It is a good use of your time to visit your operations regularly to observe and talk with your employees.


Coupled with visibility and observation, a culture of openness is important to avoid issues and potential litigation.  Do employees feel comfortable talking to managers and owners about their concerns?  Is there an open door policy?  Are there procedures and processes for reporting issues within the workplace to management and owners?  Ensure that staff has alternate means to speak frankly.  Observe your managers for their openness to differing thoughts and opinions.  Employees will share with you if you provide the opportunity and the culture that fosters open communication.  The benefits of this will pay off not only to avoid litigation but also in creating a positive, productive workplace.


Now you know the importance of spending time with employees and observing them in the workplace.  By being diligent and aware of activities in the workplace you can be proactive about potential issues and problems.  In the next chapter, learn about the new workforce and how some of your basic assumptions of interactions with employees need to change.


Chapter 4

The next secret may change your thinking about the best way to interact with employees.  Learn how the expectations of employees have changed and what that means for the business owner in managing and retaining good employees.


Secret #4:  Work is Play and Play is Work


It wasn’t too long ago that management was taught to not “fraternize” with employees and to stick to business.  Work was work and play was play and the two didn’t mix.  Well, times have changed.  Employees expect a different kind of workplace and a different kind of manager.  Work should be enjoyable and employees want their manager and the company to care about them as people not just as employees.  The new generation of workers wants to be “respected” and if they don’t feel so, they will quit.


As a small business owner, you constantly balance many things.  Balance is a good word to describe your relationship with your employees.  You want employees to know you care about them personally but not get too personal where they see you as a friend and not their boss.  You have to balance talk about their personal lives and “water cooler” talk with talk about the tasks at hand and what needs to happen every day to operate the business.  You have to modulate your inquiries into their family situations so that you don’t violate any laws about health information but at the same time show concern.


How can a small business owner show concern without falling into these traps?  The best place to start is to know your employees.  Who did you hire?  What kind of people are they?  What do they think is important?  All employees are individually unique.  Some need more attention than others.  Some will share everything about their lives and others will share very little.  Your ability to adapt to different personalities will determine your success.  Many small business owners are workaholics that are very task focused.  Small talk may even be seen as a waste of time by many entrepreneurs.  Be aware of your own preferences and personality.  You may have to force yourself each time you have a meeting with employees to engage in small talk for a few minutes.  Ask everyone about the weekend or if they saw the sports score or find another popular topic to discuss. 


You can find out a lot about your employees by looking at their desk or cubicle.  What are the pictures or other mementos they have as decorations?  These are clues that will help you to ask them questions to stimulate discussion.  When you show concern about things that are important to your employees in their personal lives, you will build a better organization and culture.


One area to avoid is discussions about religion and politics.  Employees can be very sensitive.  Discussions can get easily heated and out of hand and lead to problems on the team.  American workers can be very righteous about their rights of free speech.  Unfortunately, that free speech can lead to damaged relationships.  As a business leader or owner, engaging in these dialogues may be your “right” but certainly not a great idea.  Stick to topics that are friendlier and that build team versus those that cause team members to separate from the group.  If employees are engaging in these heated discussions during work time, the leader should redirect them to job related tasks and discussions.  Strive for a culture where everyone feels they are part of a team.


Now that you know the importance of showing you care about your employees as people, continue to read and learn in chapter 5 about the secret to keep employees from accusing you of being unfair.


Chapter 5

In the last chapter you learned about the need to get to know your employees.  In this chapter that attention can get you in trouble.  Learn how to balance the attention given to employees and save yourself from the mind numbing activity of explaining to employees why you made a decision.


Secret #5:  Consistency will Save your Butt and Keep the Whining to a Minimum


Parents that have more than one child know that if you give a bigger piece of pizza, cake, ice-cream, allowance or any other tangible item to one child and not the other there will be trouble.  This phenomenon carries forward as siblings’ age even to the point where the reading of the will of deceased parents is a test of the parental fairness doctrine.  This sense of fairness is ingrained in our being from an early age.  Employees crave this sense of fairness in the workplace.  If another employee has certain privileges, then everyone wants those certain privileges.  If anyone believes that they haven’t been treated “fairly” then they will whine, complain to you or the authorities and seek out others including other employees to join in the unfairness club or the “unfairly treated” employee may go to an attorney or government agency.  All of these reactions are bad for your business.  So, what can you do?


The answer is consistency.  Seems so simple but it really isn’t.  Some things are easy if you have policies and procedures that you agree to follow.  These documents give you guidelines to follow to ensure consistency.  When you are dealing with leave issues or absenteeism or conduct issues, as long as you are consistently using the employee handbook and policy and procedures guide, you should be in good shape.  But, what about all of the hundreds of other situations that come up in a week?  How can you be consistent with those?  If your employee is spending too much time surfing the net instead of working and you confront them about it, are you being consistent?  Have you confronted other employees that are spending the same amount of time?


With every decision you make as a manager or owner, you should ask yourself the following questions.  What has my practice been or what have I done in the past with these situations?  If you have a larger company, what about other managers? If you discipline someone for certain actions, is that consistent with others in the company?  If you “write an employee up” or give them a warning, have you done that with others in the same situation?  Past practice or lack thereof can come back to haunt you and will harm your business.


Workers are smart these days.  They will compare your actions to their coworkers.  Their perspective may be jaded.  You may be the type of manager that tries to customize your approach to each individual employee.  Some of that is ok.  If you have an employee that doesn’t like public praise, do it in private.  If you have an employee that really enjoys your discussions about your college team, that’s ok.  What isn’t ok is to only praise some employees.  It isn’t ok to give all of your attention to the employee that shares your enthusiasm for your team.  Be aware that time spent with employees is as important as specific actions.


Consistency with documentation is very critical to the success of your business.  Courts today have low tolerance for management and companies that show favoritism to certain categories of employees.  You have the burden of proof to show that your actions were consistent and lawful.  The best way to do that is to have a defined job description and job standards.  Then, if the employee is falling short and your documentation shows that you have counseled them about the inadequacy and you can prove you are consistent with all of your workers, you will not be vulnerable.  Consistency is your friend.  Strive for consistency.  Never make decisions emotionally or in haste.  Ensure you are consistent throughout the entire company.  Base your decisions on job related criteria like policies, job standards, and requirements.  Consistency doesn’t mean not valuing the diversity of employees.  It does mean that within that diversity your standards are applied equally to all.


Now that you know that you should consider past precedents and the treatment of other employees before making a decision, read on to learn about a special lens that will help you build the workplace of your dreams.


Chapter 6

In the last chapter you learned the importance of being consistent.  In this chapter, you will learn the secret of creating a workplace of adults.  You will learn how easy it is to turn the relationship with your employees into a parent child relationship and how detrimental that can be to the workplace.  Learn a fail proof technique for holding people accountable for their actions.


Secret #6:  Build a Workplace of Mutual Respect through the Job Related Lens


When you have an employee that is consistently late for work, what do you do?  If you call them in to your office and ask them why they are late, they will have a reason.  Some of those reasons no doubt will include trains, bridges, spouses, animals, alarm clocks or possibly some bizarre story that you really didn’t want to know.  How is any of this relevant to the job?  It isn’t.  Using the job related lens, the focus of the discussion should be on the need or job standard of being on time.  Additionally, the employee should be told how the lateness affects the company and how it is unacceptable.  It is the employee’s responsibility to deal with whatever home, road or other situation in order to not have it happen again.  Sticking with job related criteria, the burden of problem solving isn’t transferred from the employee to the manager.


Managers are not social workers.  It is easy to get caught up in the problems of others.  Owners and managers are problem solvers.  We love to solve problems.  When an employee starts telling us about spouse issues or children issues, we have a cadre of advice to give.  Resist the temptation.  It isn’t your job.  These types of interactions turn the workplace into a home place where the manager/owner is the parent and the employee is a child.  We don’t always do this consciously; it is our human nature to help others.  Unfortunately, it sends a message subtle or otherwise to the employee that they are not capable of solving these problems on their own.  Then, the pattern persists.


Workers of today need to be treated as adults.  Performance issues should be shared with them at the time of occurrence not days, weeks or months later.  Issues should be discussed in the context of the job without mentioning personal attributes.  What do I mean by that?  Sometimes in discussions of issues with work performance, managers mention personality attributes or make the employee feel stupid.  This interaction sounds like this when it occurs, “This report is done incorrectly for the fifth time this month.  Where is your head?  What is wrong with you?  We have gone over this and over this.”  At this point, the employee hangs their head like a small child that has just been berated for spilling the milk.  If we use the job related technique, the interaction is different.  “We need to talk about this report.  I noticed that these columns don’t add up.  Then the manager should be silent and let the employee talk.  The manager at some point should interject that this is the fifth time this month and that doesn’t meet the job standard.  The employee should be asked what they are going to do to correct this ongoing problem.  Two totally different approaches but one focuses on job related criteria and the other doesn’t.


Stay away from employees’ personal problems.  If they start to mention them in a conversation about work performance, it’s ok to acknowledge them and empathize that you know it’s tough, but then redirect the conversation to the job standards and the impact on the organization.  The issue isn’t about their problems it’s about the number of sales they are making, the widgets produced, the calls answered or the boxes unloaded.


This is the most important secret of all.  Using the “Job relatedness filter” will keep you out of discrimination trouble, consistency trouble, and situations that lead to trouble.  Taking on the burden of the personal problems of your staff is too heavy and stressful.  Don’t take on other burdens.  Stick with job related criteria and you will be happier and healthier and that will be good for your business.




The bottom line on these secrets is that being a small business owner or manager is hard.  The people issues can be overwhelming and lead to many sleepless nights.  It doesn’t have to be that way.  By using the practical advice in these six secrets, you can have a workplace of mutual respect.  You can have a workplace where people want to come to work and are productive.  You can have the workplace of your dreams.

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