Tip Tuesday: 5 Employment Pitfalls for Small Business and How to Avoid Them

Small Business

Starting a business can be a wonderful, challenging journey with many rewards along the way. When people think back to when they started their business, they usually smile as they remember the brave steps they took to start off.

For some people however, thinking about starting a business can be quite daunting – the learning curve can be very steep. One area that new businesses often struggle to get a grip on is employment.

Whether you are considering employing a family member part time, a specialist contractor, bringing in casual staff or building a team, it is important to get off on the right foot.

Here are 5 common pitfalls that new small business face:

  1. Underestimating the importance of employment contracts

You don’t need to worry about employment contracts unless you are a big business turning over $1 million, right?


All businesses should use employment contracts regardless of their size and the type of employment being offered. Employment contracts give security to both the employer and the employee, and can help resolve problems in case of a dispute.

Imagine a situation where your part-time employee has been showing up late to work and has been underperforming. How can you prove it? What were the conditions that were agreed to? What was expected of the employee?

Without a contract it can be very hard to prove that the employee has done anything wrong. If you do have a contract that clearly states what is expected of the employee, then you can use this to intervene and help solve the problem.

Wherever possible, employment contracts should be developed or reviewed by a lawyer, or HR specialist. This way you can have confidence that if something does go wrong, you will be well covered.

  1. Not using policies and procedure

Paperwork, paperwork, paperwork! Nobody enjoys it, but it can be important. A good business will have a set of policies and procedures which outline how staff should behave, how processes should be carried out and what is expected of them.

The best way to ensure the right things happen is to develop a set of policies and procedures. This can begin with an induction manual and onboarding procedure to make sure new staff start off on the right foot.

Policies and procedures manuals have a way of sitting on the shelf and not being referred to, so try to keep them short but informative, so that they can be referred to easily, when and where they are needed.

  1. Pigeon-holing staff

Being a busy small business person can sometimes mean you are blind to the possibilities around you.

When hiring new staff, the main driver is often that you are overworked and have identified and area of need where someone can help you out. This is most usually in a junior position, e.g. an apprentice or an administrative assistant.

Once this short-term problem is solved, it can be easy to leave things how they are and carry on with day-to-day operations. But as a businessperson, you also need to think of the medium and long term.

Generating a culture in your business is very important – after all you and your staff spend a lot of their time working together. A good owner and business manager will create a culture that encourages growth and contributions from their team.

Offering training and development pathways means that you can get more out of your staff, and also encourage them to have “buy-in” with the business. Working with others who WANT to work with you and for you can be one of the most rewarding aspects of business.

So don’t turn a blind eye to the people around you. They can be your best asset and help you achieve your own goals over the long term.

  1. Trying to be an expert in all things

There’s not many people in the world who are amazing at everything they do. But, if you’re like most small business people, you’re willing to have a crack and try things out for yourself.

This is a great trait, and this kind of can-do attitude has led to the growth of many businesses over the years. But ask a successful business person who has been around for a while whether they can do it all, and you might just find a few chinks in their armour.

Businesses who are growing, or who have grown to a certain size need to be able to share the workload – and expertise. It’s natural for the owner to have final say on just about every decision in business, but guess what – you can’t do it all and sometimes you might not know what’s best!

So what should you do? Well, that all depends on your business, your budget, your capabilities and growth plans. Solutions can vary and come with different risks and rewards.

Outsourcing can be a cheap and effective way of expanding your workforce. Whether you’re developing a website, making marketing materials, getting through a bunch of paperwork or other high volume or specialty activities, outsourcing is worth investigating. By handing off tasks to a specialist, you not only free up your own workload, but you gain access to their skills and training.

Using short-term employment options can be a great solution for time-dependant activities. Many businesses have peaks and troughs associated with the time of year, weather, school terms or other impacts.

By planning for these periods and bringing in staff at the appropriate time you can manage your costs across the year, but also make sure you don’t burn yourself out, right when your customers need you the most.

  1. Ignoring cultural fit

When asked about the most important aspect of hiring new staff, a surprising number of HR professionals will put “cultural fit” at the top of their list.

Rather than focussing solely on the skills learnt during a career, and the experiences a candidate has developed over time, understanding that cultural fit has a big role to play in a team’s operations can be the secret to success.

This applies to business large and small. A bad hire can cost a business so so much – one bad apple can spoil the bunch. Forbes Magazine offers some interesting insights and tips for success when it comes to hiring for cultural fit.

One large company estimates that bad hires have cost them over $100 million! Interestingly, despite this huge impact, businesses often consider the impact on bad hires on morale and lost productivity as being even more important than the monetary impacts!

So what can you do about it? Well, one solution is to trust your gut. Resumes and references are important, but when it comes down to it, meeting someone and getting a feel for who they are and how they operate is absolutely critical.

Don’t be afraid to ask around. Check their references, meet with them a couple of times and even test them out for a week (paid!) if possible, before committing to ongoing employment.

After all, if you don’t want to go to work with the team around you, then your dreams when starting your business may not be what you thought they were.

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