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5 Human Resource Challenges Facing Small Businesses Today Having a firm foundation for your business's HR can save you money and set you up for success.

By Lyle D. Solomon

Opinions expressed by Entrepreneur contributors are their own.

Unfortunately, there are no shortcuts when it comes to effective HR management. So, if you are an entrepreneur who plans to hire employees, do yourself a favor. Consider these five HR challenges in making sure you are compliant in all aspects of your business.

1. Staying up to date on all current laws and regulations

The legal landscape of the workforce is constantly changing. If your small business isn't keeping up with laws surrounding wages, taxation, medical leave, and safety regulations, you could find yourself in a world of trouble. Not only would governing authorities have grounds to impose fines, but employees may file lawsuits.

Unfortunately, small business owners often find themselves out of compliance because they fail to understand the difference between an "employee" and an "independent contractor." The Department of Labor provides facts on the misclassification of employees and independent contractors to help clear this up. Make sure you also understand this important distinction.

To ensure you are keeping in compliance, regularly check in with local, state and federal regulations for any changes that may affect your business. Consult with an attorney who can give you advice on areas you need to improve on. They will help you avoid costly fees and reduce your likelihood for employee lawsuits.

2. Having a solid plan for employee hiring and retention

Employee hiring and retention is a vital part of any business. However, with limited funds, small business owners (quite literally) can't afford to bleed employees. When looking at the cost of hiring vs training, it's estimated to cost $4,000 to hire an employee, and nearly $1,000 for training. To keep employees, this means you not only have to find the right talent, but give them a reason to stick around.

Before interviewing, make sure you know what you are looking for. What kind of experience should the candidate have? Ask questions to get to know their personality and character. Getting along with your coworkers is just as important as their expertise. Competitive wages and benefits packages will also go a long way.

Related: 9 Ways to Turn Human Resources Into a Profit Driver

3. Having a vision for your company's culture

You probably have a specific vision for your business. But how much thought have you given to your company's culture? When joining a company, people want to know what to expect. What are the company's values, standards and expectations? Is this a place where new ideas and cultural diversity are welcome? Even if you set clear expectations for your employees, it is likely that you will still occasionally encounter someone who refuses to comply with company culture. Whether they let intolerance or their own personal beliefs get in the way, it is important you have a plan in place to handle these situations in an appropriate, professional manner.

Maintaining a current employee handbook is a great place to start. This provides a tangible reference for everyone to have access to the same set of standards. By updating the handbook annually with the most current labor and wage laws, you will also make sure your business is staying transparent and compliant.

4. Neglecting conflict resolution

At some point, the people in your business will not get along. To protect your employees and your business, you must know how to handle conflicts. Without proper conflict resolution, employees won't feel supported and the results could be disastrous. Not only is this another area that could lead to lawsuits, but countless small businesses face defamation from disgruntled employees. To protect your reputation as a company, consider an online reputation management service. If your reputation takes a hit online due to a misleading negative review, they will help you recover what was lost.

Neglecting this critical component of your business can prove costly. As part of further development, consider a management training program for all members of management over conflict resolution. This will help give you the necessary skills you need to develop communication guidelines and handle problems as they come.

Related: Is It Time to Outsource Human Resources?

5. Having a clear understanding of the cost of benefits

One important deciding factor when people search for jobs is the benefits package. This is a vital part of employee retention you don't want to overlook. However, it can be one of the most expensive aspects of your business. Most people will expect your basic medical, dental and vision package. But many also want retirement options and vacation time, too. Thankfully, there are options for small business owners.

Businesses with 50 (or fewer) employees can see if they qualify to participate in the Small Business Health Options Program (SHOP). This program was created as a result of the Affordable Care Act, allowing qualifying businesses to receive price breaks on health insurance. Participating companies partner together to pool risk, giving them the buying power of a larger company. It's highly recommended you speak with a financial advisor to help you make the best decision for your company and employees.

As a business owner, you already have a great demand for your attention. Making sure you address these Human Resource challenges properly could be one of the best decisions you make for your business.

Related: How to Know It's Time to Add an HR Department

Lyle D. Solomon

Principal Attorney of Oak View Law Group

Lyle Solomon has significant hands-on skills and expertise in legal research and writing and extensive litigation experience. He has been licensed with the state bar of California since 2003.

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