Demystifying HR

Mystified by the jargon, acronyms and requirements of Human Resources Management?  It can seem like a bad real life version of Dungeons and Dragons where there is a possibility that doing something (really) wrong can destroy your business.  The “science” of Human Resources does take some navigating and at times, it is best to get an expert involved. However, most of the time, experienced owners and manager navigate successfully through their human resources issues and do not need professional help.
This blog concentrates on a few HR activities that all small business owners will come into contact with and gives some thought about when to stop doing something yourself and get a HR professional involved.  

What is HR?
First, Human Resource management is about managing the staff resources that you have to run your business.  These resources can be employees, your family, contractors, casuals and temp agency staff.  Briefly, HR functions cover hiring; employment agreements;  90 day trials; promotions; job classification & grading ; salary & wage setting; reviewing performance; personnel & payroll records keeping; privacy; up skilling management and employees; resolving work problems; performance problems; policy development; health & safety; benefits; health care; training, ACC, managing organisational change, exiting employment; grievances; etc.

To help put the most important HR functions into context, we have listed these in the order that SME might encounter them when setting up and running a business:

  1. Set up – with your business plan, you need to think about the resources that you need, when you might need them, how you want to operate as a business and the thousand other things necessary to be successful.  These include developing a basic Human Resources or workforce plan (e.g., what to do if an essential staff member leaves, when you might take on additional resources), and some basic policies and procedures (e.g. how to keep payroll records).   These can evolve over time, but should be part of all business set ups.  Most SMEs will not need a HR professional to help, but if your set up initially involves 5 or 6 employees, some assistance to formalise policies, etc. is useful e.g. setting a Code of Conduct.
  2. Keep your eyes on the moneyMoney - even if you are a sole trader, you need to know how much you can potentially earn to determine whether or not the business will be financially viable regardless of why you set it up.   Therefore, how much can I earn, what should I pay a family member to help, what should I pay an employee are all important business expense questions.  HR provides up to date wage and salary information to make sure that you pay a fair and competitive rate that is enough to recruit the right person to do the work you want done, while making sure that you comply with all those Acts e.g. KiwSaver, Holidays Act, Parental Leave, etc.  If you do hire an employee, professional HR can set up letters of offer, employment agreements, give payroll advice, etc.
  3. Expanding your business – when you expand, you need to work out what your additional resources will do and what sort of person you need. This is a common area for mistakes by even experienced recruiters and managers – get the wrong person, have them do the wrong thing, and major problems will happen.  You most likely have heard that great expression “train hard – play / fight easy” from the sports world.  It has real relevance for business recruitment.  “Recruit hard and work will be easier” should be the catch cry for all recruitment decisions, but most small businesses don’t invest the time, effort and money.  They just take who they think will be best.  The current SEEK advertising recruitment process favours candidates and can generate volumes of candidates who have automated their job seeking process to a click on their smart phone. Good recruitment is not a science, but involving a HR professional can pay a good short and long Return on Investment.  
  4. Manage the risks of you and your employeesDay to day management - If you have selected the right person and have them doing the right things, any employment issues should be small.  But they can occur from simple things getting blown out of proportion to questions about wage increases, training, promotion, performance, employee concerns about their terms of employment, etc.  Most managers and owners with a good amount of common sense & communication skills can find out what the problem is and solve it.  However, there are some issues managers have not experienced before or new issues where professional help is essential to avoid the matter become all encompassing.  A good litmus test to decide if help is needed is to ask yourself – has the issue has gone past beyond being an annoyance?  Does it keep me awake at night?  Does it affect the business?
  5. Litigation - there are those issues where expert advice will save time and money straight away.  For example, if a lawyer or employment consultant is involved in an issue you have not been able to resolve, then you need help.    NZ Employment Institutions case law is dotted with cases where businesses faced substantial cost by not following the right process in their decision making and in most cases with professional help, this can be avoided.
  6. Knowing the legislation helps turning you into a target.​Legislative change including Health & Safety – whatever Government is in power, they will change employment legislation.  The next major change you face is the Health & Safety at Work Act from 04 April 2016.  For most small businesses it will not have a major impact if they have good health and safety processes and a good safety culture.  However, for those of you, whose livelihood comes from working at other organisation’s premises, expect big change.   As a minimum, the scale of fines and new responsibilities mean that H&S will become one the foremost factors in other organisations making a decision about you getting work.  As a minimum you may be faced with extra reading of a landlord’s & tenants H&S requirements and maybe a main contractors’ and supplier’s information.  You may also have to provide extra information, revamp any existing H&S policies and procedures just to get work.  If you are faced with this requirement, the most economical course of action may be to hire professional help.
  7. Business Change – as your business grows, as clients change, technology advances, etc your business and its human resources will need to change.  Most of the time, change will be small scale e.g. introducing new software should only require conversation.  However, it is inevitable that a major change will occur that will substantially affect 1 or more of your employees.  Any substantial change e.g. reducing hours of work, asking an employee to change their job substantially, etc needs careful planning and execution.  Get it right and your business prospers - get it really wrong and litigation can occur.  This is delicate area where professional HR can help navigate the potential minefield.
  8.  Terminating an Employee is fraught with risk - manage this risk with sound HR practises.Exiting an employee – even an “easy” exit for retirement or resignation can go hopelessly wrong.  Saying the wrong thing at the wrong time, not allowing an employee to change their mind can lead to litigation.  Even ending a 90 day trial can be complicated if it goes wrong.  Terminating employment through redundancy or firing an employee needs care and experience.  If you get it right, it can save a business.  Get it wrong and it will be time consuming and could cost lots. When to stop doing something yourself and get an expert involved?

It is your business and hopefully most issues can be resolved by you.  You will or should have network that you can call upon for advice.  However, free advice is worth exactly what you pay for it.  Most HR professionals do not charge for every minute of their time, and will listen to what your problem is and will offer advice.  Hire a HR professional when it is something that you cannot deal with yourself.

Finally, if you don't spend anything on HR, consider seeking HR professional advice for recruitment advice and assistance.  As stated above, start right by getting the right person to do the right things  should help your business to prosper.  Get the wrong person and it might not!

Author: Steve Newby
If you would like to discuss anything in this blog, contact NewbyHR,
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