Many businesses are unaware of the liabilities associated with the human resources aspect of their business. Due to double-digit increases in group health costs, many have become painfully aware of the cost of benefits programs. Several other areas also present liabilities to your business. If they affect you, perhaps in the form of a lawsuit or an audit by a regulatory agency, the costs can be staggering.
Here are the first five of the top 10 liability issues most businesses face in the area of human resources:
- Letting untrained supervisors create problems. Having untrained supervisors can create a variety of human resources problems for your business. In many circumstances, your supervisors are agents of your business—they act on your behalf. That means your business often bears the full responsibility for their actions (and suffers the consequences).
- Having inconsistent application of policies. Want to open up the door to trouble? Start by handling human resources policies differently from one employee to another. Perhaps this situation happens in your business because you just can’t remember how you treated a similar situation last year. An employee handbook goes a long way towards clarifying policies and establishing guidelines for all.
- Failure to have effective documentation and discipline practices in place. Beware. It’s not okay to handle disciplinary issues by impulse. You need to have an established disciplinary program in place and have good documentation every step of the way. This includes your performance appraisals. Don’t find yourself in court without adequate documentation. This is another good reason to train your supervisors.
- Not managing your termination process. At some point, most businesses find it necessary to fire someone. The reason could be something as obvious as theft, or maybe it’s simply that the employee can’t perform the job to your standards. Terminations present possible liability to your business. Don’t fire someone on impulse or give your supervisors the ability to fire someone on the spot. A better approach is to use a progressive disciplinary process, which may include suspending the employee and having a termination review process in place to give a senior manager or owner a chance to review the circumstances. It might be a good idea to get an outside, objective opinion.
- Ignoring sexual harassment. In the past few years, sexual harassment discrimination charges and lawsuits have been in the news. In many cases, the judgments and awards against companies for sexual harassment have been eye-popping. We’re talking about multi-million dollar verdicts. Could your business survive a significant hit like that? You should take action to minimize your liability. Once again, train your supervisors. And secondly, train your employees. The sooner you know about these problems, the better. Hiding it will only compound the liability.
For liability issues six through 10, look for an article on managing your liability in next month’s issue. IBI