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Tips for Startups and Common Pitfalls to Avoid

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With the exhilaration of starting your own business comes the responsibility of dealing with what could seem like an endless array of employment issues. This post explores three areas that often create challenges for entrepreneurs and tips on avoiding common mistakes.

1. Record-Keeping. State and federal laws require employers to keep accurate records of employees’ work hours, compensation and other basic information to ensure compliance. Failure to do so could subject your organization to both civil and criminal penalties. Here are a couple tips to avoid record-keeping issues.

Develop a standard “personnel file” for each employee. The personnel file should include job applications, changes in employee status, employment agreements, and acknowledgment forms for receiving employer documents, such as employee handbooks and confidentiality/non-disclosure agreements.

Institute a time clock. Time clocks help ensure that employers are not paying employees for time that has not been worked. This is especially important for startups that must watch every penny to make sure their fledging company is able to make it off the ground.

2. Employee Hiring. A common mistake startups make is hiring too few or too many employees. Hiring too few employees can result in low employee morale and attrition. On the other hand, having too many employees on staff could have the costly effect of paying unnecessary wages and benefits, which of course, affects the bottom line. Here are three suggestions to help make sure you strike the right balance when determining how many employees you need.

Know your industry. As the old saying goes, “By others’ faults the wise correct their own.”  That is to say, use other businesses in your industry as a benchmark when making personnel decisions for your startup. 

Be aware of minimum wage and overtime requirements. Whether your startup will be subject to federal and state minimum wage and overtime requirements can depend on the volume of your business and the type of business you are operating. Because startups do not generally have a professional HR staff or a general counsel to consult, as an owner, it is imperative that you have a thorough working knowledge of wage and hour laws, which can be complicated and vary from state to state.

Consider independent contractors. Hiring independent contractors as opposed to employees can be an ideal way of reducing overhead costs and dealing with early uncertainty regarding profit and demand for the goods and/or services that you will be selling. Of course, misclassifying employees as independent contractors can have significant financial consequences, so be sure to consult an employment attorney when making these classifications.

3. Employee Handbook. A written set of personnel policies covering such matters as employee classification, pay/benefits, harassment, and employee leave is always a good idea, whether you’re hiring your first employee or your 50th. An employee handbook is an important tool that helps clarify expectations between employers and their employees.

Make sure your handbook is thorough and complete. Retaining competent labor & employment counsel to ensure that your employee handbook includes all required and/or necessary information will save you time and money in the long run.

Include notices and disclaimers. Certain laws require notice to employees, and handbooks are the easiest way to provide these notices. Handbooks should clearly state, however, that they are not contracts or guarantees of employment.

Gabe McGaha is an associate attorney at Fisher Phillips. Have questions about a legal or labor and employment matter and how it may affect your business? Contact Gabe at gmcgaha@fisherphillips.com.

Posted: 7/5/2017 2:45:08 PM | with 0 comments
Filed under: FisherPhillips, SmallBusiness




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