Running a business will always include a fair amount of risk. Entrepreneurship itself combines the risk-taking ability of an individual with factors of production to generate profits. Entrepreneurs, however, should aim to mitigate controllable risk wherever possible. One of the biggest risk factors for entrepreneurs and startups comes when hiring new employees.
Guidelines are put in place to ensure the hiring process is fair for all candidates. Aside from that, employment laws must never be overlooked in order to prevent lawsuits and protect employees. By establishing the following precautions, new employers can reduce the risk that comes with hiring new members to the team.
Avoid Bad Hires
Employees are a key and valuable resource for daily business operations. If this resource fails, it can lead toward many business problems. A big risk is taken when hiring someone without any work experience. For a startup, this decision should be reconsidered. If a candidate has any prior experience, however, then it’s better to do some homework by conducting background checks and contacting references. These checks help provide a better picture of how this particular person has performed over the years.
Speaking with previous employers will shed light on things the candidate may not say in their interview. One question that I believe should always be asked is, “Would you re-employ this person in the future?” The answer to this question should pretty much sum up the reference. See these tips on how to conduct a proper reference check.
Take caution as some people may provide false references. Before making a call, check the reference’s LinkedIn profile and consider calling them on the company’s landline number where they work.
Technically speaking, making calls to the provided references is considered a background check. However, this investigation goes a bit further by looking into credit checks, criminal records, and verification of educational certifications. This process must be initiated with the candidate’s consent.
When doing a background check, make sure to check only for the information relevant to the candidate’s projected job title. For example, it is usually only necessary to do credit checks for those applying for a position where they will be handling finances.
Employers must also comply with the federal, state and local laws that limit the type of information attained in a background check. If something concerning is uncovered during a background check, it’s usually a good idea to let the candidate explain the situation before making any decisions. Check out this infographic to help create an effective policy for screening potential employees.
Comply with Employment Law
It’s essential companies comply with all employment laws. Failure to do so can not only result in hefty fines for the offending company but also result in the eventual shutdown of a business. These laws are related to all aspects linked to employees, including working conditions, compensations, and anti-discrimination practices.
Entrepreneurs may overlook these laws or try to fly under the radar for one element of regulation or another. Therefore, some useful advice for all business owners is to consult a lawyer or attend training sessions that teach employers to comply with all employment laws. Handbooks are available with all the codes listed that you’re required to follow.
A best practice all new business owners should adopt is to issue an employee handbook. This handbook should highlight all the safety measures, rules and regulations that need to be followed by all individuals employed in the organization. As stated in this article by Society for Human Resource Management (SHRM), this method protects the business and employees since it was already made clear what to expect during their tenure.
Institute Fair Practices from the Start
In order to avoid playing an unfair game of favorites, opt to produce sound policies that benefit the workforce as a whole is a good idea. These policies can be made in regards to working hours, code of conduct, use of company equipment, working conditions, etc.
Yes, some employees may have more privileges than others, but this should only be the case when following an organizational hierarchy. This hierarchy should clearly include everyone from a senior manager to a machine operator. Consult your local small business support organizations and legal council to ensure a fair working environment.
Fair practices are useful for keeping employee turnover rates low while creating a robust and efficient atmosphere to work in.
Startups can be difficult to run as they require double the amount of time and effort a healthy, thriving business needs. Frequently, many business owners lose dedication and end up closing down their business due to heavy losses. However, that’s just part of the risk that every entrepreneur needs to take. But focusing on these 3 areas of risk when hiring new employees helps prevent entrepreneur burnout.
About the Author
Haku Kapule is a contributing editor at 365 Business Tips, a new blog that prides itself on presenting the best advice and practices for small and medium-sized businesses everywhere. He’s passionate about finding and offering useful tips to small business owners. Haku is an expert in digital PR and marketing strategy and has assisted with the increase of digital presence and customer support for small and large companies alike.