Guide to Human Resources
Minimal firing and optimal hiring
Even if your company consists of you and a couple of employees, human resources is clearly one of the most complex factors in running your business. Between hiring/firing, recruiting, employee training, payroll and other necessary tasks, whoever is in charge of HR can quickly find themselves bogged down — and making errors. When mistakes are made, they can be costly, in terms of both time and money. For instance, some business owners choose to use contractors to avoid many of the tax and health insurance requirements of true employees. But when members of your workforce are misidentified, the IRS won’t hesitate to bring the might of the government against you.
If you don’t have dedicated staff to deal with payroll, hiring and other tasks, you could spend 40 percent of your own time handling them. In an 8-hour day, that’s nearly four hours in which you could be selling products or managing accounts. Make this (2017) the year HR management drives your company forward instead of dragging it down. How? By streamlining those elements that often take the most time: recruiting, hiring, firing and payroll.
Managing an effective, productive workforce is one of the most important tasks of any human resources department. According to the Boston Consulting Group, recruiting tops the list in terms of importance when it comes to impact on profit margins and revenue in general. As such, bad recruiting can be disastrous for your bottom line. For example, when a candidate has a bad experience with your company, they are less likely to buy your product or service. In fact, 23 percent of candidates will avoid your company’s offerings, and 9 percent will tell their friends and family to avoid it as well. (InfoGraphic - The Cost of a Bad Candidate Experience ties into a Bad Hire Decision ties into the cost of Replacing a Bad Hire).
One of the main reasons small businesses have so much trouble recruiting stems from job postings. How much detail is in that posting on an online job board? You may think open-ended job descriptions are best. But skilled employees want to know precisely what they will be doing for your business. Without clear job descriptions, you may attract a large number of applicants, but very few who will actually fit your business well.
Once you have created postings that include clear job descriptions, streamline the next step of the process. Use a recruiting software to input certain criteria that every viable applicant should meet. From there, candidates are ranked so you can quickly and easily see who would be the best fit for your company. Doing so allows you to skip the headache of unproductive interviews with applicants who are not a good match.
Minimal Firing and Optimal Hiring
Without a streamlined system, you may find yourself weighed down by employee turnover. Turnover is one of the costliest factors in running a business. Hiring, training, recruiting, interviewing and other elements can run up the price of replacing employees who quit. In fact, filling out new employee paperwork alone can take just as much time as training that same employee. In general, the breakdown is as such: (build a graph showing data below)
This formula does not take into account non-monetary costs, like onboarding new employees. Completing paperwork for new hires can often take just as much time as training them. Even a minor typo or missing a line in the paperwork can lead to massive fines from state and federal agencies. A streamlining system can fill out many of these forms automatically and ensure you are following all state and federal laws while doing so. This leaves you more time to focus on growing your business, rather than spending hours on tedious paperwork.
As you have probably seen on your own paychecks, there are quite a few deductions and other factors to take into consideration. Yet, about 60 percent of all small to medium sized businesses handle payroll internally. In fact, 54 percent of businesses spend between 1 and 5 hours per month dealing with payroll. From a monetary standpoint, nearly three quarters of businesses that manage payroll internally spend at least $500 a month — or $6,000 a year — doing so. About 3 percent report spending over $5,000 a month on payroll.
For some companies, spending that much on payroll isn’t a big deal. When internal human resources can’t keep costs down, however, it may be time to find a new solution. This is especially true when too much time is spent dealing with payroll tax. About 40 percent of all small to medium sized businesses spend at least 80 hours a year on tax preparation. In addition, about 50 percent of businesses spend between $1,000 and $5,000 on it. As such, it’s no surprise that taxes are considered the worst part of owning a business, between the monetary costs and legal compliances.
Though payroll taxes and regulations are a nuisance, chances are you’re probably familiar with the laws in your own state. But what happens when you hire employees and contractors across state lines? Suddenly, you have another set of legislation to worry about, adding more time and headache to your payroll preparation. You need a payroll software that allows you to see every state in which you have an employee. Moreover, you need one that automatically sets up your payroll system and taxes so you are in compliance with those state’s laws.