Hiring For Your Startup? Mitigate Risk With These Tips

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Bringing on a new hire always presents a risk for an entrepreneur. The success or failure of a small business can be determined by who you hire. You can greatly diminish these risks by establishing procedures to check applicants during hiring and by having set policies and procedures that you can communicate to new employees. This article discusses some ways that you as an entrepreneur can prepare for the hiring process and take steps to avoid conflict before bringing in your first employee.

Be Wary of Bad Hires

The best thing that you can do to mitigate future risk is to simply avoid bad hires from the start. Here are some simple, cheap steps can help you to hire the right person for your company.

The most important thing is to do your due diligence and check an applicant’s referrals, and then to conduct a background and credit check. Background and credit checks are especially important if you are hiring for a position that deals with finance.

When checking references, stick to former managers and co-workers provided by the applicant. Do not contact past co-workers or employers who are not listed, unless there is a very good reason to do so. Asking these people questions about the applicant will help you develop a more accurate picture of how that person performs on the job.

You can perform a background check cheaply online yourself or you can hire a third-party company to do it. Do not base hiring decisions based on instant public records. This can put you and your company in legal trouble as they do not always vet or filter the information they provide. It is important to verify any employment and education history. When verifying employment, do not ask about the applicant’s character, only if they worked there when they said they did and their position. Any false or misleading information listed in employment or education history can raise a red flag before you decide whether to spend money on background and credit checks.

It is also a good idea to perform a credit check on an applicant. Again, a third party can conduct this check for you. A credit check is especially important for positions that deal with finance and requires financial integrity. You must have the person’s written consent before running a credit check on them. The Fair Credit Reporting Act (FCRA) is federal legislation that sets the standards for employment screenings, including credit checks. Ensure you are familiar with what is required of you and the applicant before doing a credit check to comply with FCRA regulations.

Comply with Employment Law

Before you hire someone, it is important to understand and comply with all laws as they relate to compensation, working conditions, and anti-discrimination practices. This will help protect you and your employees. If you don’t fully understand any aspect of the law, attend training or classes, or consult with a lawyer to ensure that you understand, and comply with, the law. Keep and maintain any resources that you acquire on laws. You will probably regularly refer to them and they can change often, sometimes without notice.

It’s Important to Institute Fair Practices Early On

You want to establish HR policies and procedures before bringing on any new hires to avoid issues later. While small companies tend to run on a more “family” feel, allowing the first employees a lot of leeway in the hiring and onboarding processes, and in standards throughout the office, establishing policies and procedures can help to ensure that:

● you comply with all employment laws,

● all employees and situations are handled the same,

● employee and employer expectations are clear, and

● potential conflicts with employees are avoided.

Store these policies and procedures in an employee handbook. Emphasize that it is simply a convenient source of information about the company’s current practices and procedures and that these can change without notice. You also want to avoid stating that the company will take a specific action in certain situations as individual circumstances might call for a different response.

Here are some recommended policies to outline in the employee handbook:

● Employment screening – What is part of the employee screening processes, both before and during employment?

● Time off – How much time off do employees get per year? When do they begin to accrue time off? How is time off measured?

● Telecommuting – Who is eligible? How can eligible employees log hours to comply with the Labor Standards Act?

● Overtime – How much money do employees earn for working overtime? If they work overtime one week, will they be expected to work less the following week?

● Feedback – Can employees give feedback? How can they do so confidentially?

● Visas – What is required for employees who acquire a visa to work for your company?

Remember, consistency is the key to avoiding disgruntled employees and/or lawsuits. Having policies and procedures outlined in an employee handbook can help ensure that all employees are treated the same and that they know what is expected of them and you.

Preparation is the key!

Hiring and onboarding new employees is a time consuming and difficult process and knowing what to do to protect yourself and your employees after they start working can be confusing. However, following a set procedure of how to screen potential new hires can make the process more manageable. Once you bring on a new employee, having clear expectations for the employee and the business can help to avoid unnecessary confusion and friction in the future.

Good luck with your search!


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 everywhere.


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