The 7 Most Common HR Mistakes Small Businesses Make — And How to Avoid Them
In the hustle of running a small business, HR often takes a back seat — until something goes wrong. From unclear contracts to reactive hiring, the mistakes are easy to make but costly to fix. Here are the top seven HR missteps small businesses make — and how to stay ahead of them.
- No Written Employment Contracts
Verbal agreements might feel easy at first, but they’re risky. A clear, compliant employment contract protects both you and your employee. Include position details, hours, pay, leave entitlements, and termination terms. Don’t forget to put updates to contracts in writing too!
- Ignoring Award Compliance
Many roles in Australia are covered by Modern Awards. Getting pay rates, overtime, and allowances wrong can result in serious back-pay claims and fines. Use the Fair Work Ombudsman’s Award Finder tool and double-check your payroll and time keeping ensuring compliance. Create a delegate to ensure compliance is maintained, we recommend HR and payroll to sync quarterly to review any award changes
- Hiring Without a Process
Too many businesses rush recruitment, relying on gut feel. Instead, define the role requirements clearly, use structured interview questions, consider using robust reasoning or personality questionnaires. Err on the side of a little more rather than less process to get it right in the long run.
- No Onboarding Plan
Day-one chaos leaves a poor impression. A simple onboarding checklist — including workspace setup, introductions, key policies, and first-week goals — boosts engagement and productivity. Setting up a 30- & 90-day plan of what success looks like creates an accountable culture
- Avoiding Difficult Conversations
Poor performance or toxic behaviour won’t fix itself. Document issues, give timely feedback, and follow a fair process if formal action is needed. Don’t delay — it only gets harder.
- Missing Basic HR Policies
Even a small business should have core policies like a Code of Conduct, Leave Policy, and Anti-Discrimination Policy. These set expectations and protect your business legally and provide clear minimum standards for everyone to work to.
- No Training for Managers
Many small businesses promote great individual contributors into leadership roles without any people-management training. Even basic training in communication, performance management, and workplace laws can prevent major problems.
Quick Tip: You don’t need everything at once — just start with the essentials and build over time.
If you have a number of these challenges, we recommend seeking to set up systems, document and processes that don’t rely on personal effort. Also seek to share the load with a few other people in your business if possible.
