Top 10 HR Mistakes That Can Cost You A Ton Of Money & Get You In Legal Trouble

by | Sep 12, 2013 | Blog

  • Amy Letke

    Amy Newbanks Letke, SPHR, GPHR, is the Founder of Integrity HR, Inc. Amy provides workplace solutions to improve performance, reduce liability and increase profits. She is passionate about helping other entrepreneurs and business owners achieve success. Contact us for more insights - 502-753-0970 or

Watch the video above or read the blog below to learn the Top 10 HR Mistakes!

Today I’m talking about the Top 10 HR Mistakes that can cost you a ton of money and get you in legal trouble. I’m bringing you this information because I want to help you avoid these types of problems in your workplace.

Fasten your seat belt because here we go!

HR Mistake #10: Not Having Accurate Job Descriptions

This is something that happens all the time in organizations. People get busy, the organization or business is growing, and those job descriptions end up taking a back seat. What happens then?

Employees aren’t really sure what they should be doing. Expectations aren’t properly managed. It’s really hard to measure somebody’s performance when his or her job is not appropriately documented. Then, when it comes to letting that person go what will you do when they say they didn’t know what they were supposed to be doing?

Okay employer, this is your opportunity. You really need to be focused on making sure you have absolutely accurate job descriptions. They will help you hire, manage and fire employees because you will have all the right documentation.

HR Mistake #9: Asking Whatever You Want In An Interview

We live in America and we are fortunate that we can ask a lot of the things that we want to. But you must be aware of the questions that are a lot riskier than others and the ones that are just flat out illegal.

If you want to avoid legal problems and costly litigation, get a list of appropriate questions and make sure to keep them focused to the job description. This will help you figure out if the candidate will be good fit for the job.

Make sure you don’t ask anything about age, race, religion, sex, national origin, and a couple other things that could get you in trouble.

HR Mistake #8: Failing to Properly Address & Document Performance Problems

This is always a favorite of mine because when you’re a business owner, a manager or a leader, having to deal with that problem employee is sometimes just too frustrating. You think you’re too busy. You think the problem will just go away all on its own. Or maybe you think they will just get better with time.

Let’s think about your last problem employee. Did they just magically get better overnight? Probably not.

Hopefully, you put together a performance plan or some corrective action. If you didn’t, then this is my charge to you: Do it! If you need to let that person go and you have no documentation, you have no defense.

Make sure you stay on top of it! Deal with performance problems properly, document them professionally, and address the behavior you need to have addressed. Lastly, write out an action plan and give it to the employee in writing.

HR Mistake #7: Hiring Too Fast & Firing Too Slow

You have to hire a little slower in order to find the right people who fit in your organization and culture.

A lot of employers going through the process of hiring are exhausted because they’ve interviewed so many candidates. Suddenly, someone comes in and the manager falls in love with that person. The employer makes an offer on the spot because manager thinks the candidate is perfect. But then what happens?

More often than not, it doesn’t work out if you don’t take your time and make sure that person is a good fit in your organization.

Any more, even if you’re hiring someone at minimum wage, that’s a $16,000 job or more! So you need to think about hiring as an investment in your organization at all times. If you’re investing 16, 20, 30, or 40 thousand dollars and above a year on someone, you need to treat that person as an asset.

You need to have a consistent process to help you higher better people that fit your culture and expectations.

Now, let’s talk about firing too slow. This is why I talked about having good performance documentation. If someone is not a fit for your organization or can’t or won’t perform the job, there are options. But the worst thing you can do is have someone that is a complete mismatch for your organization and the job and have that person stay in the job and fail. Nobody wants to fail.

Also, failing to let the person go properly with appropriate documentation can be costly and have legal implications.

HR Mistake #6: Thinking That Some Or All Employment Laws Don’t Apply To Your Organization

When I talk to small business owners, I find that it is a huge misnomer that some organizations think they are completely exempt from employment laws. While that might be true for religious organizations and not-for-profits, most organizations have to comply with all of the laws of the United States. If you’ve got employees here, you have to comply with the laws here.

Do you know all of the employment laws? Do you know all of the laws that depend on your company’s size? The big ones you need to think about are: EEOC requirements, Department of Labor requirements and OSHA requirements.

You need to stay on top of these and all employment law requirements because ignorance as an employer is a costly mistake.

HR Mistake #5: Making All Staff “Salaried”

I see this as a big problem in America right now. Some employers don’t want to have to deal with paying overtime so they just make everyone salaried. While that might sound like a great idea, it’s not. There is something called the Department of Labor and the Fair Labor Standards Act which direct how we’re supposed to pay people regarding overtime regulations.

Now, the Fair Labor Standards Act provides guidance on the five types of exemptions. There are some jobs that should be paid salaried but they must meet the salary test. If they don’t meet the salary test, you must pay them overtime based on the federal requirements and those in your state.

Don’t assume that taking the easy way out by making everyone salaried is going to be the right move for you. I’ve seen it be costly for employers to the tune of $50,000 – $80,000 in back pay due to the nonpayment of overtime. Don’t put yourself in that position!

(Check out our blog on the difference between exempt and non-exempt employees here.)

HR Mistake #4:  Keeping Poor Employment Records

I know those files are pretty boring. They are not going to help us expand our business or meet our strategic goals. But one of the leading issues I see in organizations is keeping poor employment records especially when it comes to I-9 forms. Can you believe those pesky little immigration forms can cause such headaches? They are never filled out correctly unless you are a student of the process.

One particular violation on an I-9 form can cost an employer as much as $1000 per infraction. But there is never just one mistake. So just think about the cost of those infractions when you’re filling out those I-9 forms. Make sure you fill them out correctly or it will cost you (Watch our video here on how to properly fill out an I-9 form).

Leave of absence documentation is another one you need to pay attention to. If you have to offer Family Medical Leave, you need to be on top of that documentation because that’s a direct cost in respect to benefits and people taking time off from your organization.

There are so many other areas where appropriate documentation is crucial because it could potential save you money and protect you from legal pitfalls.

HR Mistake #3: Withholding Praise & Constructive Feedback

When is the last time you thanked an employee for a job well done? When is the last time you sat down and had constructive coaching with someone?

You really need to do this because people leave organizations not because of big issues, but they leave because of small ones. It’s always about small issues like not being fair when it comes to vacation time or not feeling like an important part of the team.

You have to take time to meet with your employees and tell them how they are doing whether you as a manager want to do it or not. If you don’t meet and talk to your people and praise those good folks who you want to have stick around, they may not stay very long.

If you don’t take the time to sit down and give constructive feedback to those who aren’t meeting your expectations, you’re not building appropriate record keeping processes in the event that person needs to exit your organization.

Giving praise and constructive feedback saves you money, keeps your great performers with you, and helps you plan an exit strategy should you need to do that.

HR Mistake #2: Having “Favorites” In The Workplace & Treating Employees As Such

Hey, I understand that you may like to hang out with some employees more than others. There are probably a lot of employees in your organization that you would rather spend time with than others. However, I’m going to tell you that having “favorites” in the workplace is not a very good defense when you are trying to prevent issues and save legal costs for your company.

When you take a look at someone who leaves a company and feels like they were mistreated, more than likely it will come up as a protected class issue. That’s how people get coached when they are leaving and disgruntled if you don’t have proper documentation.

So make sure you go back and see how you are treating your people. Are you treating this equitably? Or do you have some areas where you need to train your managers and staff or even shift your thought process? Now is the time to do it to save yourself pain down the road.

HR Mistake #1: Not Updating Your Employee Handbook or Not Having One At All

From time to time, I am always surprised when I talk to employers and they say they don’t need an employee handbook because it will restrict them and cause problems.

Here’s the thing: you have rules in your workplace whether you write them down or not. The standards you set and share with your employees are policies in action.

Now I will give you this disclaimer right now: I am not an attorney. 

But I am your Human Resources Adviser. I can tell you that not having an employee handbook does set policy. I have seen more problems for employers who do not have employee handbooks than those who have one.

The trick is keeping your employee handbook updated. An employee handbook that is not updated is going to cost you money and cost you problems.

I recently reviewed an employee handbook for a prospective client and found out that they were too small to offer FMLA and they were offering other kinds of benefits in the employee handbook that they were not actually offering overall.  This was creating problems for them because they were committing to something that they weren’t providing.

If you haven’t taken a look at your employee handbook in the past year, then you need to do it now. Make sure you are only offering benefits and having good policies that you are actually adhering to. That’s the number one issue that we see when dealing with human resources in small businesses.

Okay, that’s it! Those are the Top 10 HR Mistakes. I want you to think about those and think about where you are in your organization. Don’t put yourself as a leader or your organization in harm’s way.

I want you to think about these Top 10 areas and make corrections where you feel appropriate. You should also think about ways to put systems in place to help reduce your risk.

If you would like to measure your HR Risk and HR Effectiveness, you can use our online HR Compliance Review. This 5 minute online review will quickly show you where there are gaps in your business and where you need to focus your efforts.

Click here to download the free HR Compliance Review

If you’d like to learn more about our complete HR Risk Assessment (Or HR Audit), click here or call us today at 877-753-0970.

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