When leaders talk about scaling their businesses, there’s usually an emphasis on strategic initiatives for growth—increasing sales and marketing, improving quality and production, or securing new equipment or acquisitions.
Scaling can, however, also mean mitigating losses with strategic initiatives to downsize, right size or temporarily close.
As business owners scramble to keep up with the demands of changing marketplaces, some of the greatest challenges include employment compliance requirements, hiring protocols, employee retention and other HR-related functions. Regardless of scaling up or down, your strategy should address the need to adapt HR as the business changes.
If you are contemplating changes to your business model, here are some areas where HR functions might need to be addresses and/or adjusted.
Common Challenges with Growth
Operating Across State Lines. If your company is expanding across state lines, you’ll need to know and understand which regulations apply on the other side of the border. Some states have different rules for youth labor or paid rest periods, for example, and many cities and states require a higher minimum wage than the federal minimum wage of $7.25 per hour for covered nonexempt employees.
Hiring Independent Contractors. Some organizations opt to outsource certain functions to help scale their business. There are specific guidelines that need to be followed for independent contractors versus employees who are on the payroll.
Exceeding 50 Employees. Not only does managing a larger number of people become more involved, but the compliance requirements also become more complex. Once an organization employs 50 or more people, there is an entirely new level of employment laws that apply. As an example, the provisions of the federal Family and Medical Leave Act (FMLA) would apply to your business, as well as dozens more regulations that depend on employer size.
At this level you should seriously consider hiring a full-time, certified HR professional or using an outside firm to handle the additional administration and compliance requirements. Many business owners choose a hybrid approach as their company grows with a point person on staff to handle administrative tasks such as payroll, and an outside firm for other functions like regulatory compliance or reviewing employee benefits. Having someone dedicated to HR allows you to be proactive about lowering risk rather than reacting to events as they occur.
Common Challenges with Downsizing
It’s most often growth that inspires companies to think about scaling HR, but downsizing has its own set of challenges that are best handled by knowledgeable professionals.
Separating Employment. It’s never easy to tell an employee that he or she no longer has a job with your company. What is said and done leading up to, and during the process, can have serious legal ramifications. An HR professional can ensure that the separation process complies with fair employment regulations and steers clear of potential discrimination claims.
Severance Pay and Health Benefits. While you are not required to offer an at-will employee a severance package, depending on state law, you might be required to pay out unused vacation time in the absence of a governing policy. Also, under the Consolidated Omnibus Budget Reconciliation Act (COBRA), should you meet the minimum headcount requirements, federal law requires you to allow employees to remain on your current health insurance plan for a period of time.
Unemployment Benefits. Each state handles unemployment benefits differently, and how you handle an employee separation is often used as the basis for employee eligibility of benefits. In many cases, you are the determining factor for whether a former employee receives unemployment payments.
Job References. You are not required to provide a job reference for a previous employee, but if you do, it must be truthful and based on fact. You can potentially be held liable for providing misleading information (either positive or negative) to a prospective employer. Some employers choose to only confirm dates of employment and salary paid to avoid a potential issue.
Common Challenges with Change
Sometimes you grow your business, sometimes you reduce size, and sometimes you simply reorganize. Regardless of the change you are making, employees are impacted and a strategic approach to change management encompasses many HR functions, including, but not limited to the following areas.
Employee Relations and Communication. More than ever, an emphasis is being placed on creating engaging cultures that align the values, beliefs and behaviors of all employees and create a truly authentic team atmosphere. Do you know how to connect with your workforce to be actively engaged?
Employee Retention. How are you ensuring employees remain happy, loyal and aren’t lured away by competitors? Hiring is a lengthy and expensive process and losing good employees—along with the knowledge and skills they possess—can negatively impact your change initiatives and distract from your goals.
Recruitment. If you are in a position to hire, how will you attract the best talent to your organization? Do you understand the current labor market and what your competitors are offering? What are you doing to stand out to candidates? And, once you find them, are your hiring practices, benefits and job offers getting them to say yes?
Professional HR Can Turn Challenges into Opportunity
Every business needs the knowledge and experience of HR professionals to run smoothly, but not every business has the resources, or necessity, to hire a dedicated HR pro.
Many leaders turn to outsourced HR services to partner with their team for the guidance they provide along with the ability to ensure regulatory compliance, implement employment best practices and foster employee engagement.
As your business changes, make sure your HR approach changes with it. Check out the infographic below for a helpful comparison between In-House and Outsourced HR or reach out to our team to discover opportunities for your business to reach new heights with McCloneHR.
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