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When most companies talk about scaling their business, there’s an emphasis on strategic initiatives to increase sales and marketing, improve quality and production, secure new equipment or acquisitions, research new products or services, and the list goes on. Hours upon hours are spent strategizing these areas; unfortunately, one of the last things on the list is a strategy for scaling Human Resources (HR) and how its functions need to adapt and grow with the business as well.

What HR Issues do Small and Mid-Sized Businesses Commonly Face as They Grow?

As the economy continues to strengthen, many businesses are growing faster than they anticipated. While that’s a great “problem” to have, it’s leaving many business owners scrambling to keep up with all the demands that come along with that growth. Some of the greatest unforeseen challenges are added compliance requirements, hiring protocols, employee retention and other HR-related functions. Here are just a few examples of the types of issues many employers face as their companies grow:

  • 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.
  • 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. Once an organization employs 50 or more people, there is an entirely new level of complexity. Not only does managing a larger number of people become more difficult from an engagement perspective, but the added compliance requirements are considerable. As an example, the Family Medical and Leave Act (FMLA) must now be complied with, in addition to any Affordable Care Act (ACA) provisions that may apply based on employer size definitions. There are dozens more that may apply depending on your business model or industry and keeping them all straight is difficult.

    At this level, especially, a company should seriously consider hiring an HR professional or finding a service provider to handle the additional administration, employee engagement issues and compliance requirements. Many may have a point person on staff to handle the administrative tasks such as payroll, but choose to outsource other functions such as compliance, hiring, updating employee manuals, reviewing benefits, building culture, developing job descriptions, assessing leadership roles and more. Having someone dedicated to HR allows you to handle issues and be proactive about lowering risk rather than constantly being in reaction mode.

HR Requires More than Covering Administrative Tasks

It’s most often the additional tactical HR needs that become apparent as a business grows: payroll, benefits, compliance, etc. But a strategic approach encompasses much more and includes the following:

  • Recruitment.  How will you attract and hire the best talent to accomplish your growth goals? In a tight labor market, other employers are vying for your ideal candidate’s attention. What are you doing to stand out? And, once you find them, are your hiring practices, benefits and job offers getting them to say yes?
  • Retention.  How are you ensuring employees remain happy, loyal and aren’t lured away by recruiters? Hiring is a lengthy and expensive process, and losing good employees — along with the knowledge and skills they possess — will negatively impact your growth initiatives and distract from your goals.
  • Employee Relations.  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. As a company grows, sometimes hard decisions need to be made about long-time employees or leaders who may no longer be a fit or aren’t willing to “grow” with the company. Are you prepared to make those tough decisions?

The Importance of Implementing HR Technology

A major element of today’s HR landscape involves technology as a support foundation. Notably, technology helps your company remain compliant. The 1095 form, for example, can be quickly pulled for ACA reporting and, when filling out an I9 form, the right system will help ensure accuracy because it won’t allow you to advance if it’s not filled out properly.

In the event that auditors from the Department of Labor (DOL) show up at your door, you can quickly run a report to give them only the information they ask for. Having this information in a digital format is important because if a printed I9 form, for example, is tucked away in a personnel file along with multiple other records, the auditor may ask for the entire file folder. This means he or she will have access to any other information contained within the file and has the authority to examine everything. Even if the I9 form is accurate, but other items in the folder are deemed non-compliant, you could be fined.

Technology also helps with performance management by documenting reviews, employee training, benefits, disciplinary actions and more. Employee information and documentation is kept in a secure system and accessible via an online portal. Tech-savvy employees like that they can access information from home on their own time without having to bother HR, and it helps minimize human risk by allowing electronic signatures, password access and keeps data secure in the event of a fire, theft or other loss.

Another major aspect of company growth is the utilization of metrics. Technology provides analytics so you can see information such as how long it takes to fill job openings, productivity results, average length of service, turnover, cost of benefits per employee, what it costs to recruit and so much more. Metrics take away the guesswork and allow you to make strategic decisions based on real data.

Scaling HR with your business needs to be a two-pronged approach that involves both tactical and strategic initiatives to sustain long-term growth. Not every business has the capacity or resources to hire a dedicated HR professional, so they turn to an HR services provider to offer the guidance they need along with the ability to implement best practices, create employee engagement, ensure compliance and implement robust technology that can keep it all straight. If you’re not sure whether outsourcing some or all of your HR functions is right for you, check out the infographic below for some helpful insights.

As your business is grows, make sure your HR grows with it. Reach out to McClone for a complimentary HR Gap Analysis. We’ll help you discover areas of opportunity and help your business reach new heights.

In-House vs. Outsourced HR Comparison Guide

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A collection of articles from the McClone team with the helpful knowledge and insights to ensure your organization is well protected.