If you manage the typical small or medium-size enterprise (SME), you’ve got your hands full just trying to stay profitable. So it’s imperative to be careful in dealing with your biggest expense – your employees.

“Often small and mid-sized business owners and managers don’t really know what they don’t know – and may unwittingly make mistakes in overtime, wage and hour regulations, discipline and discriminatory practices,” says Christine Pahl, human resources client consultant at FrankCrum.

FrankCrum (www.frankcrum.com) is a self-described national professional employer organization.

“Unfortunately, these mistakes can be costly as well as create distractions that keep the company from performing at its best,” she adds.

Amen. I couldn’t agree more.

She says many companies make these five salient mistakes:

Improperly classifying employees as exempt

This may result in non-exempt employees not receiving overtime pay they are entitled to.

Paying someone a “salary” does not automatically mean they are exempt and a mis-classification can violate laws regarding recordkeeping, minimum wage and overtime.

Any of these violations may result in a lawsuit, with employers frequently unable to justify the reasons for their actions, which leaves them without a defense to the lawsuit.


Many employers are not aware they are a covered employer under the Family Medical Leave Act or what their obligations are to the employees who qualify for protection under this law.

Hiring practices

Although most employers know not to ask an applicant’s age, other questions to avoid include those about medical history, prior workers’ compensation injuries, criminal record, marital status, sexual orientation, and political or religious affiliations.

It’s important to remember that position descriptions and interview questions should focus on necessary position requirements.

Discriminatory practices

Review all aspects of employment, including hiring, promotion, pay, discipline, termination, training opportunities and more.  It’s not enough to focus on intentional or obvious discriminatory practices.

A proactive review of trends in these areas and the impact on employees may reveal unintentional practices that should be corrected.

In addition, employers should post an EEO statement and distribute a written anti-discrimination policy to be signed by employees and management, outlining the policy as well as redress and complaint procedures.

Corrective actions

FrankCrum uses the term “corrective action” rather than “progressive discipline,” because it keeps the focus on resolving problems and maintaining a successful relationship with the employee.

The earlier issues are dealt with and documented, the less likely it is that confusion about performance and expectations will lead to a claim.

“Business owners and managers need not become HR specialists,” says Ms. Pahl.  “But they should have knowledgeable advisers who can help them avoid HR problems.”

Again, agreed.

From the Coach’s Corner, here are related HR/management tips:

HR: Overcoming Tech Trends, Boomer Retirements — There are ominous implications for human resources departments — from the same tech trends that have empowered consumers to force businesses into the digital age.

HR Strategies for Addiction Recovery Plans — Your human resources program should include plans for employee addiction recovery. Why? Consider a study by the National Institute on Alcohol Abuse and Alcoholism.

Are You Guilty of Micromanaging? Here’s How to Stop — Micromanagement is a ramification of ignoring best practices in management. People who micromanage lose maximum efficiency, productivity and teamwork – in other words, optimal profitability.

Unpaid Interns: Safeguards to Avoid Legal Issues — Many students will work for an unpaid internship, if they can further their career prospects. They know they’ll benefit from training, business networking or getting a job with the companies once they graduate from college. But unpaid internships can be risky for a business. Here are the safeguards.

With Employees’ Help, 3 Strategies to Succeed with Your Strategic Plan — Have you developed your strategy? It’s important to proceed without engaging in self doubt. But you’re concerned about involving your employees? There are three closely related basics in working with your employees to get the job done.

Elevate Sales via 5 Best Practices in Pricing and HR Training — Sophistication in pricing by salespeople is an excellent driver to grow earnings rather than just looking for ways to cut costs. Instead of growing their profits with sophistication in pricing, many businesspeople miss growth opportunities when they mistakenly cut muscle – usually in human capital and branding. Here’s a better way.

“The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.”

-Peter Drucker


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.