Human Resources Forms for Small Businesses

Savvy small business owners know that employment is one of the most heavily regulated aspects of owning and running a business. Federal and state regulations touch every aspect of employing people—from the time you think about hiring them until they leave your company. You probably don’t have and don’t need a Human Resources department because you have only a few employees. How, then, can you maximize your chances of staying on the right side of the law and of managing your human capital effectively? Forms are a good place to start.

They’re not the sum total of your Human Resources management approach, of course, but having the proper forms is important—not only for legal and record-keeping reasons, but also for the sake of efficiency. They are designed to protect you in case of dispute, to clarify terms and conditions, and to collect only the necessary information so you don’t waste time on issues that don’t matter. They represent the collective wisdom of those who have gone before you in employing people; follow the forms and you won’t need to reinvent the wheel, making the same mistakes along the way as those who were there first.

The list below is a collection of the most basic forms you will need to have on hand for your employment relationship with human assets. You can download them at many sites on the Internet, including IRS Website and Human Resource Forms.

Required Government Forms

Form W-4: This form is required for every employee; it authorizes tax deductions and lets the employee specify how many exemptions she is claiming.

Form W-9: This form verifies the tax identification number for independent contractors. If you hire individuals to do work for your business, but they are not employees, they will need to complete and submit this form so you can report their earnings to the IRS.

Form I-9: This form certifies the eligibility of employees to work in the U.S.

IRS Forms 940 and 941: These forms accompany and verify your quarterly deposits of withheld employment taxes.

Other Forms

Time sheet: Daily employee time is increasingly tracked electronically and somewhat automatically. However, if your business does not use time-tracking software, a form-based system is essential.

Application for employment: An employee’s application for employment becomes a permanent part of his personnel record. You should ensure that your applications are consistent and legally sound, including a signature section for the applicant to attest to the truth of the information.

Receipt of Employee Handbook: This form is a simple signature form that shows the employee has received (and on some forms, has read and understands) the Employee Handbook. It can be important in the event of disputes over policy.

Evaluation forms: Regular and thorough evaluations are important parts of employee satisfaction and motivation. Forms can help you ensure the evaluations are fair and accurate and should include forms for both the employee’s self evaluation and her manager’s evaluation.

Independent contractor agreement: The distinctions between an employee and an independent contractor are important parts of employment law. This form lays out the differences and contains a signature space where the contractor can attest that she understands the differences and accepts responsibility for her own taxes, safety, and so on.

Non-compete agreement: This form protects you from employees who may wish to use your intellectual property to compete directly with your business after leaving your company.

Offer of employment: This form simply helps you put in writing the specific terms of an employee’s job with your organization.

As you look at this list of essential forms, you will notice that the absence of a form (or rather, the absence of clarity and certifications contained in the form) invites legal risks ranging from mild to severe. A form costs you pennies, but a lawsuit or penalties caused by misunderstanding or outright deception can costs millions. Spend the time necessary to ensure you have the Human Resources forms that will keep your business legally sound and ready for growth.

Training for Today’s Human Resources Department

As regulations become more complex—and the legal risks of ignorance become larger—it is increasingly important to ensure that your Human Resources personnel are properly trained. Mistakes in this area can be costly, and not only in terms of potential legal fees and damages. Errors in human resource management can also impact your organization’s ability to attract and retain the people it needs to stay in business and serve your clients and customers effectively. You must train your Human Resources personnel to take good care of human assets.

This article identifies some of the most common mistakes in human resources management so you can create training solutions that will help you avoid them. Workforce Solutions can help you spot areas of weakness in your Human Resources team and will work with you to craft a comprehensive training program to remedy them.

Some Common Problems

No Human Resources worker or mid-level manager goes to work in the morning with the goal of undermining the organization. However, without proper training, employees may do just that by falling into these common traps.

Using Inconsistent and Ineffective Hiring Practices

How much money will your organization spend in screening, hiring, training, and compensating an employee only to ultimately discover that he is not a good fit for the job? Probably thousands. Multiply that number by the number of hiring decisions your business makes annually, and you’ll quickly realize the high potential costs of using ineffective hiring practices. There are also deferred costs—you’ll have to hire someone else, so turnover rates can be a direct result of hiring practices. Look for quality training or expert advice in how to teach your employees to make consistently effective hiring decisions. Such training is a short-term investment with long-term results.

PEO and consulting services from Workforce Solutions can help you fine-tune your screening, application, and interviewing practices so that you can more consistently hire the right people who will stay with you for the long term.

Failing to curtail or prevent absenteeism

According to the U.S. Bureau of Labor Statistics, companies lose 2.8 million workdays annually to unscheduled time off. While some absenteeism is unavoidable, much of it is not and is directly influenced by factors within your control to one degree or another. Workforce morale, flexibility of schedules, and other variables can influence the likelihood that an employee will be on the job when she is supposed to be. Training your managers and Human Resources personnel in the costs of absenteeism and how to curtail it can have immediate results on your bottom line.

Workforce Solutions can help you create screening surveys to identify employees who are most likely to be reliable; we can also show you how to improve employee morale and can help you assess whether flexible schedules are feasible for your business. If they are, Workforce Solutions can help you design and implement a system that works for you.

Failing to effectively engage employees

If your business is like many others, many of your employees are not as engaged in their work as they need to be in order to remain productive and for your business to be profitable. Human Resources personnel and managers can make careful hiring decisions, train an employee fully, compensate them fairly, and accommodate employee desires for flexibility. But unless Human Resources and managers can develop and implement a specific plan for keeping the workforce fully engaged, business goals will still remain elusive. Look for training programs that will teach Human Resources personnel and managers how to motivate employees by properly evaluating and rewarding their work. Regular attention to job satisfaction can also help ensure that employees remain engaged, so training in assessment and interview methods can be helpful. Employee motivation and morale are not accidents—they are the logical outcome of identifiable business decisions and conditions. Learning about and maximizing the correlation is important training for any Human Resources department.

Failing to effectively manage change

Change is inevitable in any organization, and in fact, because businesses are constantly changing, you may rightfully ask whether change management is necessary. Isn’t change the normal state of things, after all? This is certainly true of organizations, but human nature resists change. We take the same routes to work day after day, like our coffee just so, and feel stressed when change happens around us without our say-so. Many businesses make the mistaken assumption that employees will happily roll with the punches and easily incorporate business changes. Training programs in change management are therefore effective ways to prevent problems that may result from this built-in human resistance to change.

These broad categories of problem areas include long-term problems and solutions that can have dramatic results. But it is also important to ensure your Human Resources staff is adequately trained in the tasks they perform daily. These small tasks can add up to big problems if not properly attended to. It is a good idea to regularly refresh your staff’s training in the following:

Human Resources policies
Record keeping procedures
Data backup procedures
Privacy policy regarding employee information
Important legislation touching on their jobs
Managing employment applications

An Outside View of Your HR Department

It’s a well-known fact that we instinctively recognize: to gain a clear view of something, we often need to step away from it. Distance can bring clarity. The same is perhaps doubly true in the business world where deadlines, budgets, and other pressures can create tunnel vision and limited perception. Companies spend millions on software, training, and other tools to help managers and employees see the big picture more clearly. Human Resources departments are susceptible to the same risks. It can be very difficult to gain an accurate view of any department’s effectiveness—add the emotion, variety, and complexity involved in working with human assets, and the task may well be impossible. That’s where external consultants can help.

Why Consider HR Outsourcing?

Before you can remedy problems in your business, you need to be able to identify them clearly. A Human Resources consulting engagement from Workforce Solutions can bring objectivity that may be impossible to achieve if you rely solely on internal resources. An external consultant is an experienced HR executive and applies expertise to your organization without political, personal, or financial entanglements. With an objective view of your department, you’ll have a clearer vision of its strengths and weaknesses.
Once you have that clear vision, an external consultant can help you design and implement change. You have enough to do with the day-to-day management of your business—creating significant new policies or practices while running your business is a challenge that many businesses simply cannot tackle. A high quality consulting team can manage that change for you, ensuring less resistance from employees and allowing you to stay focused on remaining profitable.

What Does a HR Consultant Do?

A consultant can fill a number of roles, ranging from advisory to practical. Some are engaged merely to observe processes and procedures and recommend changes, while others become hands-on business partners and perform specific business tasks. While the details of consulting engagements vary greatly, the most common services provided by Human Resources Consultants include the following:

Assessment and Recommendations: Consultants provide a detailed and accurate view of your Human Resources department and recommend best practices for improving the way your human assets are managed.

Training: Consultants can assess training needs and develop programs to meet them. From management training for executives and middle managers to sales training for the direct sales force, consultants can educate your workforce to be as effective as they can be.

Specialized Expertise: Many small to midsize businesses, while very good at what they do, lack expertise in important business areas that are not directly related to their core product/service. Consultants fill those gaps by applying their expertise on such arcane or complex matters as employment law, tax and payroll requirements, hiring and retaining qualified workers, and so on.

Within these service areas, Human Resources consultants are likely to observe processes and make suggestions for change in the following areas. Of course, the help doesn’t stop at making suggestions; consultants at Workforce Solutions and others can help you implement those changes effectively and on budget. Here are some of the specific topics in which you can expect to receive help:

Screening and hiring practices
Tips for complying with employment regulations
Benefits administration
Workplace safety
Record keeping
Employee retention
Employee morale and motivation

Success Stories

You should consult with colleagues or read trade publications to learn about successful consulting engagements—and to learn what to avoid. When a consultant and his or her client work well together, the results can be dramatic, as in the cases described below.

Change management and communication strategy. A major telecom company undergoing rapid growth hired Mercer, a large Human Resources outsourcing firm, to help manage that growth in terms of employee benefits. Mercer designed and executed a communication strategy to apprise employees of changes in their benefit plans. The strategy included several delivery formats and communicated effectively with a wide and diverse audience. The result? 95% of employees enrolled in a health plan online, and 90% felt the communication they received about their options met or exceeded expectations. In this case, the consulting team at Mercer provided expertise and experience, designing an effective solution the client company could not have created on its own.

Interdepartmental communication and cooperation. BT, a large European communications company, hired Novell Consulting to assist the company in improving communication and coordination among its various business lines. BT needed help in delivering the right information in real time to the right people. Novell consultants analyzed BT’s challenge and designed a solution tailored specifically to meet its needs. Brian Giffen, project sponsor in the BT CIO office, reports, “Novell delivered on time, on budget and exceeded our expectations. I am used to consultants who play back what you already know—Novell took what we knew and added considerable value from their own experience.” Novell consultants had expertise and access to resources and technologies BT did not have; it made clear business sense to bring in outside help in this case.

Personnel replacement. When a key employee takes a leave of absence—or even a planned vacation—departments and businesses can suffer if an interim replacement is not fully effective. Temp agencies just won’t cut it when business success is on the line. A company in the film industry was planning for the maternity leave of its Human Resources manager who had threatened not to return if an experienced Human Resources professional did not cover her duties in her absence. (During a previous leave, her staff sent her work at home and called her constantly—a scenario no one wanted to repeat.) The company hired M2 Inc., a Human Resources consulting firm, to assess its needs and find a suitable replacement. The consultants found and the company hired a professional Interim Vice President of Human Resources, and M2 worked with the company and the Interim VP to make sure the department ran smoothly until the four-month leave was over and the original VP returned.

With a little research, you can find many such stories of successful consulting engagements that have met the clients’ needs effectively. To be sure, you may also find stories of consulting engagements gone terribly wrong.  Workforce Solutions will work to ensure that we fully understand your needs and that your stakeholders are fully onboard with the suggestions our team of experts will offer. Click here to schedule your free initial consultation and to learn how we can help you in your Human Resources challenges.

When and What to Consider: Human Resources Outsourcing

As costs associated with human capital continue to increase, companies of all sizes are turning to outsourcing as a potential solution. Outsourcing HR department functions to a third party is a proven way to reduce costs and mitigate risk. No longer merely payroll processors, HR contracting firms today provide a wide variety of services in complex and sophisticated arrangements with clients.

Due to the potential complexity of the outsourcing process and the importance of HR services, many organizations delay the step for longer than they should, losing the opportunity to quickly cut costs and improve organizational efficiency. Due diligence and care are required, certainly, but delays result in unnecessary expense and lost opportunity. This article is intended to help you take action by discussing indicators that it is time for your organization to seriously consider outsourcing HR services. It then gives some important areas to consider as you move forward and begin to talk to employees, stakeholders, and vendors about the process.

What is HR outsourcing (HRO)?

Because HR is a cost center rather than a profit center, outside vendors can often execute its functions more efficiently because they specialize in providing HR services. Outsourcing those services is the process of entering into a contract with a vendor who will provide the services for a fee. In essence, an outsourcing employer is purchasing services that used to be handled in house. The services offered by vendors range from the simple, such as payroll processing, to complex multi-tiered arrangements in which the vendor takes over payroll and benefits administration, recruiting and hiring, and more.

One type of HR outsourcing firm, the Professional Employer Organization (PEO), delivers expert and efficient employee-related administration, sharing the responsibility and risk of managing workers. Significantly, employees are paid through the PEO’s tax ID number. Because the PEO is the employer of record, it can bring economies of scale to bear on major expenses such as employee benefits. By contracting with a PEO, small to midsize employers can take advantage of volume pricing on benefits packages that would not otherwise be available to them. The specific services offered by PEOs and the applicable service level agreements are negotiable and meticulously spelled out by contract.

What metrics indicate outsourcing is right for you?

Many business factors can indicate that your interests might be well served by turning all or parts of your organization’s HR functions over to a PEO. Three of the most straightforward are costs, risk, and business growth.

Costs
The most common reason that firms choose to outsource their HR services is to cut costs; costs, therefore, are a reliable indicator you can watch to help determine whether outsourcing is right for your organization. If your HR costs are excessive or consistently outpace business growth, outsourcing might make sense. You save money by reducing staff and purchasing services from a vendor whose specialized systems and employees allow them to produce those services more efficiently.

Moreover, PEOs can often negotiate lower premiums on insurance because they can pool all of their clients’ employees to purchase insurance at volume discounts. Outsourcing also cuts costs because you repurchase the services of the PEO or other vendor without regard to efficiency or production costs; those costs are now the responsibility of the vendor. While it’s true that those costs will be passed on to you through the agreed fee, you can still realize a return on investment by divesting administration-heavy HR tasks.

Samuel Borgese, CEO of Catalina Restaurants, found substantial savings by outsourcing some HR functions. It was important to him and his HR staff to avoid the expense of installing a large HR system and to allow his staff to focus on strategic tasks rather than transactional elements, such as data entry.  He reports, "Outsourcing provides significant savings in hard dollars and in the deployment of human capital. […] It's very difficult for a VP of HR to be a strategic player if he or she is managing the HR infrastructure. If they are freed from this, they can concentrate on workforce deployment and strategic issues." (qtd. in Fay Hansen, “Midsize employers in sweet spot for end-to-end HRO.” Workforce Management 2/12/07).

Risk
In addition to costs, risk is another factor that could lead you to consider outsourcing HR functions. If financial and other risk in your industry is particularly large or volatile, you can redistribute some of that risk by outsourcing. A PEO or other vendor has a substantial stake in the ongoing success of your business, and so accepts some share of risk inherent in your market conditions and business cycle.

You also transfer direct risk when you outsource payroll and benefits administration. Laws governing these aspects of the employee-employer relationship are complex, and mistakes can be extremely costly. It is the core business of a PEO such as Workforce Solutions to stay abreast of changes in HR laws and tax codes. It makes sense to turn those transactional elements of HR over to a PEO, allowing you to focus on your core business.

Business growth and transformation
Is your organization getting ready to expand into a new state or region? Do you project substantial growth in the next year? Outsourcing HR functions in times of growth makes sense because a PEO likely already has knowledge of tax laws and other issues pertinent to your targeted area of expansion. A PEO might already have a state tax ID number where you’re planning to open a new office, saving you the hassle of establishing your own, and ensuring your business is prepared for multi-jurisdictional practice.

If you are not moving to a new area but are planning significant growth and hiring additional employees, outsourcing makes sense; you are spared the growing pains of adjusting to a larger payroll requiring more data entry time. And because growth requires substantial investment in value-added business activities, outsourcing HR can free resources that can be leveraged to ensure successful growth. That is, you could spend money on marketing, or even on recruiting high-quality employees rather than on an expanded enterprise resource planning system that can handle the additional employees.

Outsourcing can spur important transformations, even in stable businesses that are not planning substantial growth. Because the IT infrastructure for HR functions is the property and responsibility of the service provider, in-house HR departments can often grow strategic projects that had been put on the back burner in favor of more urgent transactional projects. Respondents to a 2007 survey on maximizing HRO investments reported that “less technology upgrades are needed in house. IT resources [had been] stretched, and now the outsource vendor has completed some of the projects that were ‘on the list’ for years,” reported the head of HR for a retail company of 36,000 employees (“How to Maximize…” HRFocus, April 2007). Similarly, a respondent to a 2007 survey by EquaTerra, an HRO consulting firm, stated, “[Because of outsourcing, we] have had time to implement better performance management programs and not spending time on transactional activities has brought us to the board room table more often” (EquaTerra, “Taking the Pulse of Today’s Human Resources Outsourcing Market,” April 2007 PDF.)

If you are looking for strategic business transformations, outsourcing is a good place to start because HR employees who may be currently hobbled by paperwork and data entry can be freed to design and implement value-added projects. The manager of a 1,675-employee manufacturing firm reported that that was the most significant benefit of his company’s outsourcing activities (“How to Maximize…” HRFocus, April 2007).

Proceed deliberately

You’ve evaluated the factors and determined that HRO makes sense for your organization. Now how do you proceed to ensure success? It’s an ongoing process, of course, but the following guidelines are essential:

First, it’s important that your company’s stakeholders understand and are signed on to the goals and objectives. The process can be complex and it impacts every employee, especially if you are considering an end-to-end outsourcing arrangement. Make sure you have a clear picture of what you hope to accomplish with HRO and how you will measure success.

You should also screen and select vendors carefully. Use a proposal process to get access to a wide range of service providers, and check references of final candidates thoroughly. Those who have already outsourced HR functions advise that shoppers should ask for references from vendors, and then call the references and ask detailed questions. “[Ask] what they would have done differently and what were the big surprises. What were their objectives in making the conversion, and have they been satisfied? Last, what has been their experience with cost and service?” (“How to Maximize…” HRFocus 2007). Moreover, most experienced managers who have participated in HR outsourcing say they would do it again if given the choice, but with significant lessons learned. Many state they would seek different vendors or change the scope of work the vendors are tasked with performing (EquaTerra, “Taking the Pulse of Today’s Human Resources Outsourcing Market,” April 2007 PDF.)

Consider outsourcing in stages, beginning with payroll and other transactional functions, such as benefits administration. Doing so allows you to evaluate a vendor’s performance on a relatively small scale while reversing the arrangement might still be possible. It also affords you a more manageable set of metrics with which to measure the success of the outsourcing arrangement. Then, as your confidence in the concept and vendor grows, you can add additional services. Moving in stages gives you the opportunity to ask questions at each phase, learning from the experiences of colleagues and consultants who have navigated these particular waters.

See what HRO can do for you

As outsourcing HR functions grows in popularity, many more businesses will consider it as a solution to various company woes. For organizations just beginning to research the practice and its potential benefits, several metrics are reliable indicators that HRO might be right for them. These indicators include HR costs, level of risk, and imminent business growth and transformation. There are others, of course, but these categories align with business priorities and with the main value propositions of HRO, so examining them first makes sense. Call Workforce Solutions, a full service PEO, for a free consultation tailored to your business to help decide whether HRO is right for you.

Workforce Solutions is your partner for Human Resources concerns, including questions about how to properly train your Human Resources employees. Contact us today for a free consultation.