9 hot-button HR problems every small business needs to work on by 2023

Whether 2023 will be a good or a difficult year for your business may depend on what you do with the remaining challenges of 2022.

As a small business owner, I know how easy it is to feel overwhelmed with everything that’s on your plate. New items keep appearing on your to-do list, especially now with year-end tasks like budget and workforce planning, year-end reports, performance review seasons, and more. It might feel like your only option is to put your head down and push as hard as you can to get it all done.

But with the old year coming to an end and the new year approaching, it might be wiser to hit the pause button and assess the state of your business, especially when it comes to your workforce. With no end in sight to the war for talent, is there anything you could have done or wished you had done differently in 2022?

“It’s tempting to focus on moving forward rather than pausing to evaluate and correct the missteps you’ve made this year,” said Jen L’Estrange, founder and chief executive officer of Red Clover, an outsourced staffing firm. “Skipping this step would be a huge mistake.”

I asked L’Estrange to share her take on the top items that should be on every small business owner’s end-of-the-year checklist. Here’s what she shared.

Learn from missteps

A trap many business owners fall into is starting work on your plans for the next year rather than taking the time to evaluate what you did well and what you didn’t do well in the year that is coming to an end . Sometimes it can be easier to plan ahead than to look back.

“We tend to think in the future,” says L’Estrange, “and closing processes is less satisfying than planning for the new and different in the coming year. However, the consequences can be problematic if open items and issues are not addressed before the end of the year. Sometimes the mental energy we expend avoiding what we don’t like doing costs us more than actually doing it.”

In other words, what we don’t finish this year will inevitably come back to haunt us next year. This is especially true for issues related to managing your cash and increasingly those related to employees and HR or HR.

For example, one problem that many entrepreneurs continue to struggle with is payroll. Faced with a shortage of skilled workers, many tried to increase wages, considering where they wanted to position themselves in the market and what the company could really afford. That’s a lesson we’ve learned, along with the potential to introduce a more variable pay structure for the coming year. “Variable pay typically achieves the same goals, but with much more flexibility — up or down — according to the needs of the business,” says L’Estrange.

With every company fighting for talent, you can’t afford to be at the top as you head into 2023.

Focus on sensitive issues

L’Estrange points to nine key areas related to people and human resources that should be a priority for any small business owner at the end of the year:

  1. Employee bonus: Review your service package and assess how competitive it is compared to your market. If you plan on making any additions, make sure you have a reasonable budget. For example, if you’re considering adding health benefits, a 25 percent increase in gross base salary costs is a good starting point for budgeting purposes.
  2. manual review: Employee handbooks should be reviewed annually to ensure compliance with new rules and regulations. It is also important to ensure that the policies remain aligned with the company’s values ​​and culture, and with the needs of the company and its employees.
  3. Bonuses and Deferred Profit Sharing: With the end of the year and the financial analysis that comes with it, it’s also a good time to look at employee bonuses. “For companies that have a pension plan in place,” says L’Estrange, “we typically recommend paying out some of that bonus money as deferred profit sharing, as it can have tax advantages for the company and owners.”
  4. Compensation Structures: With the ongoing turmoil in the talent market and the enactment of pay transparency laws in a number of states, you should review your pay structures for internal fairness and market standing. “When compensation is clearly understood and perceived as fair, employees will continue to be engaged and actively contribute to the company’s goals,” says L’Estrange.
  5. Merit (salary) reviews: Every company should conduct a performance review at the end of the year. In the tightest job market in decades, you need to make sure your employees feel their contribution is valued. “If your employees believe that going ‘beyond’ will be rewarded,” says L’Estrange, “then they will respond positively to challenging goals; if they don’t, they won’t.”
  6. Promotions: “Promotions meet an organizational need as well as an individual’s need – and readiness – for career growth,” says L’Estrange. Look at advertising opportunities through the lens of business operations first. What roles do you need to be successful next year? Then see who you have who is willing to take on extra responsibility.
  7. Performance development talks: Performance development conversations, conducted separately from salary or performance reviews, are an opportunity to connect with employees and share feedback on how things are going in their current role. “These reviews are more forward-looking — they focus on what needs to change to facilitate learning, career growth and, as a result, greater contribution to the organization,” says L’Estrange.
  8. employee feedback: Conducting employee surveys, focus groups, or even 1:1s are great ways to get feedback on what is and isn’t working within the organization. “However, if you ask the question, be ready for the answer,” says L’Estrange. “Behind a successful employee survey there is always an action plan in which the problems raised are openly addressed, if necessary with a solution plan.”
  9. workforce planning: This is part of the budgeting process and includes estimates of the headcount required, evaluation of new job openings, and any organizational changes needed to fuel the growth of the business. “This includes promotions that create a vacancy and new products or services that require labor to deliver,” says L’Estrange. Human resource planning begins concurrently with the overall financial budgeting process and is updated throughout the year according to business needs.

Prepare for 2023

Even as you work to assess how the past year has gone, it’s important to ask yourself important questions to better prepare for the year ahead. L’Estrange suggests covering topics such as:

  • Do I have a budget and staffing plan to guide my hiring decisions? Do we have updated, accurate job descriptions?
  • What security precautions have I taken to protect the prize? How do these specifically relate to how I pay my employees?
  • How do I continue to build and grow a workforce where employees feel safe and valued for their jobs?

A wild ride

Nobody knows what will happen in 2023. But it seems a good bet that the economic turmoil we’ve been witnessing this year will continue – meaning it’s time to get your ship in order when it comes to how you hire , reward and reorganize. “Establishing good business metrics to support decision-making on all employment issues is critical to navigating the storm,” says L’Estrange.

Finally, while fixing all the mistakes from 2022 is important, it can be just as valuable to pause and celebrate all the victories of the past year. 2023 promises to be a wild ride, so buckle up, get ready – and make it great.

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