5 HR Mistakes Commonly Done by Small Companies

Human resources is a part of all companies that hire employees whether they are large or small. Just because your company is too small to have its own human resources department does not mean that you can ignore the effects that human resources has on your business.

Effective human resources are at the heart of any company which has even a small number of employees. By not addressing the needs created by human resources in your business, it can suffer from poor documentation, actions that are not well considered and vague policies which lead to legal action, fines and even the closing of your business. Having a human resource software system for example can help set up proper rules and regulations.

What follows are five of the most common mistakes that small companies make when it comes to human resources. Quite often these mistakes can be avoided by taking proactive measures which can at least offer a path towards proper resolution.

Not Following Labor Laws

The state and federal government has specific labor laws that need to be followed for all employees. Such laws cover where and when employees can work. If you ignore such laws, it can really come back to bite the business if an employee decides to sue for working in a dangerous environment or even for working them more hours than they were contracted.

No Written Policy Procedures

All businesses should have a policy handbook in place that has concrete rules for many of the human resource issues that face companies on a daily basis. Such issues as proper dress code, sexual harassment policy, benefits packages, the classification of employees and so forth. Such policies need to be written down and provided in a policy handbook that is available for all employees. Just taking this step can clear away a lot of potential confusion down the road.

Proper New Employee Orientation

Most companies when they hire a new employee show them the break rooms, bathrooms, their desk and outline the job they have to perform and that’s it. An employee is more than just a body that occupies space, it is a valuable resource that can boost your business potential This means that spending a little more time in comprehensive training and acclimation to the environment can pay big dividends in the future.

Properly Vetting Applicants

It’s a tedious task, but it’s vital that all potential employees that you are seriously considering to hire be properly vetted. To save time, you should only vet the top candidates, but it’s a vital task to ensure that you are getting the employee that they promise to be. Finding a criminal record, past troubles with previous employers or worse, that they do not have the qualifications are best handled before you hire them, not days, months or years later.

Poor Documentation

Are all appropriate aspects of your employee’s work history being recorded? Having the right human resource software system can certainly help in keeping track of all employees. This knowledge should be at your fingertips when evaluating an employee’s performance. Not having this information ready can cost you, especially in disciplining or firing an employee, only to find out that proper procedures or poor information caused your company to be sued over it.

 

[LekshmiGPilllai]

This is a great breakdown of common HR pitfalls that small companies often overlook. I especially agree on the importance of having written policies and proper documentation—these can save a company from a lot of legal and operational headaches.

Another point worth emphasizing is employee orientation and training. It’s more than just a tour—it’s about making new hires feel welcomed, valued, and clear on expectations. Investing time here pays off in employee engagement and retention.

Also, small companies might consider outsourcing or using HR software to manage these tasks effectively without a full HR department. This can help maintain compliance and improve record-keeping without huge overhead.

 

[Priyani Gupta]

The article provides a clear and insightful overview of how essential human resources (HR) functions are for businesses of all sizes—even those without dedicated HR departments. It rightly emphasizes that neglecting HR responsibilities can expose small companies to significant risks, including legal troubles and operational inefficiencies. I appreciate the practical approach it takes, identifying common mistakes and suggesting actionable steps to avoid them, which is especially helpful for small business owners who may be juggling multiple roles.


Firstly, the discussion about not following labor laws is particularly important. Compliance with state and federal regulations is non-negotiable. Many small businesses might underestimate this because of limited resources or the assumption that labor laws primarily apply to larger companies. However, labor laws protect both employees and employers by setting clear boundaries on working conditions, hours, and workplace safety. Ignoring these laws not only risks costly lawsuits but can also damage a company’s reputation irreparably. Proactive education on applicable laws, or consulting with legal professionals, can be a lifesaver here.


The emphasis on having written policy procedures is another critical point. A well-crafted employee handbook clarifies expectations and company culture, helping to avoid misunderstandings. Issues like dress code, harassment policies, benefits, and employee classifications need clear documentation to ensure consistency and fairness. For small companies, this step can often be overlooked due to time constraints or lack of expertise, but the article correctly highlights that putting these policies in writing protects both parties and fosters a professional environment.


Proper orientation and training of new employees, as pointed out, is more than just a formality. Treating employees as valuable resources rather than just “bodies” in seats can lead to higher engagement, better performance, and reduced turnover. Investing time upfront to properly integrate new hires sets a foundation for success and reduces future frustrations or confusion. This human-centered approach is a hallmark of strong HR management and can dramatically influence a small company’s growth trajectory.


The article’s advice on vetting applicants is especially practical. While it’s tempting to speed up hiring processes, skipping thorough background checks and reference verifications can lead to costly mistakes down the road. Proper vetting ensures you’re building a trustworthy and competent team, which is crucial for small businesses where each employee’s impact is magnified.


Finally, the discussion on documentation and using HR software highlights how technology can streamline HR tasks. Good documentation is vital for performance evaluations, disciplinary actions, and legal protection. Small businesses may hesitate to invest in HR software, but as the article suggests, the benefits often outweigh the costs by preventing errors and enabling better decision-making.