Top 5 HR Mistakes Small Businesses Make and How to Avoid Them

When you’re running a small business, HR often takes a back seat to more immediate priorities like sales, customer service, and day-to-day operations. But overlooking human resources can quickly lead to costly mistakes—from compliance issues to high turnover—that hurt your bottom line and your workplace culture.

The good news? Most HR pitfalls are preventable with a bit of foresight and the right processes in place. Here are five of the most common HR mistakes small businesses make—and how you can avoid them.

1. Skipping Proper Documentation

The mistake: Many small businesses rely on verbal agreements or informal practices when it comes to things like contracts, policies, and performance expectations. This might feel easier in the moment, but it can create big headaches later if disputes arise.

How to avoid it: Put everything in writing. Employment contracts, job descriptions, workplace policies, and performance reviews should all be documented. This protects both your business and your employees by setting clear expectations and providing a record of decisions.

2. Neglecting Employment Standards Compliance

The mistake: Failing to follow provincial or federal employment laws is one of the most serious HR missteps. This can include overlooking overtime rules, vacation pay, or termination notice requirements. Even unintentional errors can result in fines or legal disputes.

How to avoid it: Stay informed about the employment standards that apply in your province. Regularly review updates to labour laws and ensure your policies align with them. If you’re unsure, consult with an HR professional or employment lawyer to avoid compliance risks.

3. Hiring Too Quickly (or Without a Process)

The mistake: Small businesses often rush hiring to fill an urgent need, leading to poor hires who aren’t the right fit. Others skip structured interviews or background checks, relying on “gut feeling” alone.

How to avoid it: Develop a hiring process that includes clear job descriptions, structured interviews, and reference checks. Taking time upfront reduces the risk of costly turnover and ensures you’re building a team that supports your long-term goals.

4. Overlooking Onboarding and Training

The mistake: Once a new employee is hired, many businesses assume they’ll just “figure it out.” Without proper onboarding, new hires can feel unsupported and disengaged—leading to lower productivity and higher turnover.

How to avoid it: Create an onboarding program that introduces employees to your company culture, policies, and systems. Provide training opportunities to help them succeed in their role. A structured onboarding experience can make a lasting difference in employee engagement and retention.

5. Ignoring Employee Feedback and Engagement

The mistake: Small business owners sometimes focus solely on operations and forget to check in with their employees. When workers feel undervalued or unheard, morale suffers—and eventually, so does performance.

How to avoid it: Foster open communication by scheduling regular check-ins, conducting employee surveys, and encouraging feedback. Even small gestures, like recognizing achievements or asking for input, can go a long way in keeping employees motivated and committed.

Need help navigating HR for your small business?

HR mistakes can be costly, but most are preventable with a bit of planning and consistency. Our team offers practical, tailored support so you can avoid mistakes and focus on what you do best—growing your business.