HR & Payroll Mistakes That Start-Ups Make All Too Often

It is normal for Start-ups to be somewhat rule-breakers when trying to build something successful and a few mishaps will inevitably occur along the way. Still, when it comes to HR and Payroll, this is one particular area that leaves no room for error. You certainly do not want to be breaking any rules with regards to both these responsibilities.

Small and large-scale companies always aspire to be able to expand their business globally in a gradual way, and for this to be possible, there are quite a few factors that need to be taken care of and Human Resources plays a huge role when considering functionality and growth for the future of a business.

Another essential factor to consider are salaries/wages. Payroll is highly relevant when considering the financial aspect of a business.

Start-ups must comply with the compliance surrounding HR and Payroll, and any errors could lead to legal and major financial consequences which no start-up company can afford to risk.

In some cases, penalties have been so incredibly severe that they can potentially drive a company out of business (anecdotal?)

Here are the biggest payroll and HR mistakes that have to be avoided at all costs:

Mixing business and personal finances

Start-ups often make the mistake of mixing personal finances with business ones. It is challenging for any new start-up business, but when you pay employees out of your own personal funds and then begin to try calculating your payroll process, it leads to all sorts of complications after that. To avoid this, it’s better to maintain good financial practices from the get-go.

Another important thing is to ensure that the staff get paid on the same day or date (every month or week). It is easy to let things slip your mind when trying to juggle everything else during the start-up process, but if employees fail to get paid on time, you’ll have unhappy workers to deal with, on top of everything else. Using ‘Payroll best practices’ from day one is the best decision any new start-up business can make.

Managing payroll compliance and tax obligations

Anyone that fully understands Payroll and the complexities that comes with it knows only too well that it often presents itself as a full-time job. Even for companies that employ only a small number of staff, when considering the tax obligations, processing payroll is never a quick and simple process.

Payroll is not only about paying salaries/wages. It’s about tracking hours, abiding by legal time frames, dealing with overtime, commissions, holiday pay, temp workers, full and part-time staff, and redundancy to name just a few. Then considerations regarding correct tax treatment have to be maintained because depending on the personal circumstances, tax rates will differ. Sounds complicated right? It’s also vitally important that all members of your team (temporary and permanent employees) are correctly classified within the system so that their pay and tax is compliant with requirements.

Another important aspect are the issues surrounding confidentiality and data protection under GDPR. There is no room for error when it comes to protecting people’s personal information and in-house practices always pose the risk of personal information falling into the hands of someone who is not meant to see it.  Start-ups may be considering managing payroll or allowing staff to manage it to keep business costs down. Still, you need to ask yourself if you are prepared to handle the consequences of this decision because this could quickly end up being a BIG costly business mistake. Is it worth taking that risk?

Payroll regulations are never straight forward. With government legal and employment laws forever changing, it can often be very challenging trying to keep up. Therefore,outsourcing payroll to a qualified and specialist team allows peace of mind in knowing that all regulations are met. Payroll providers manage all aspects including payroll compliance, tax, payments, Revenue returns, payslips, statutory reporting you name it. And they will take care of all of those things for your business plus much more, taking a whole load of stress off you as a Start-up company.

Lack of experience

Most entrepreneurs have vast experience and know-how when it comes to their trade, but that doesn’t mean they are savvy with all aspects surrounding HR. Bearing in mind HR is a skilled field within its own right.

Even so, you generally find that start-ups take on the duty of managing HR (including the recruitment and the admin side) themselves, resulting in more expenses, slower processes and worst-case scenario working disputes and legal complications, not something that any new start-up company welcomes.

Outsourcing to an experienced and qualified third party HR agency could prevent a whole load of stress and legal complications.

Outsourced HR agencies are highly skilled when it comes to recruitment and development. They can use their high expertise and knowledge in the area to manage this complicated task for any company, big or small, new or established taking away the stress and helping with regards to making better financial decisions to benefit businesses.

Companies want the best person for the job and employing someone who lacks the skills for the role in question could pose a financial liability to the company. Recruitment must be done effectively, one area that an HR agency is highly skilled at managing. Also, termination of employment contracts is another tricky area. It needs to be administered within the appropriate manner as well as abiding by employment laws and regulations, another aspect that HR agencies are extremely well-versed to manage.

While all start-ups face many challenges along the way, the good news is that many companies have already faced these same challenges and made these same mistakes before you and found solutions.

Many outsourced agencies are ready to lend a hand, HR and Payroll and just two of them, both of which could assist in helping you build a strong start-up… for a successful business future.