Five Common HR Mistakes Small Businesses Make (And How to Avoid Them)
Sep 25, 2025
Five Common HR Mistakes Small Businesses Make (And How to Avoid Them)
Running a small business is hard enough without the added pressure of HR mistakes that can affect compliance, culture and confidence. Yet, many business owners unknowingly make errors that could easily be avoided with the right knowledge and systems in place.
In this episode of The HR Link: People-First Conversations, Amy Christopherson, founder of Grounded HR, explores the most common HR mistakes small business owners make and shares practical ways to fix them. From contracts to record keeping, she explains how to build a stronger HR foundation that gives you clarity, peace of mind and a thriving team.
Mistake 1: Using Generic Contract Templates
One of the biggest mistakes small businesses make is relying on free contract templates from the internet. While tempting, these generic templates rarely protect your business or your employees.
Each industry has its own requirements, Awards and nuances that need to be reflected in your employment contracts. Without the correct clauses, you may risk non-compliance with Fair Work legislation or fail to protect your business assets.
How to avoid it:
Invest in tailored employment contracts drafted or reviewed by an HR professional. A one-off review can prevent costly mistakes later.
Mistake 2: Missing Policies and Procedures
Policies and procedures are not just paperwork; they are your framework for consistency and fairness. Many small business owners skip them altogether, assuming they are unnecessary or too time-consuming.
But clear policies reduce confusion, help employees know what to expect and make tricky situations much easier to manage. You do not need a 100-page manual—just a few well-written, relevant documents that reflect how your business operates.
How to avoid it:
Start small. Write one new policy each month, beginning with the areas you use most often, such as leave, onboarding or performance.
Mistake 3: Avoiding Tricky Conversations
No one enjoys having difficult conversations, but avoiding them only makes issues worse. Whether it is about performance, behaviour or attendance, delaying discussions can erode trust and impact team morale.
Amy encourages business owners to lead these conversations with clarity and kindness. Prepare ahead of time, focus on the facts and approach the discussion as a human conversation, not a confrontation.
How to avoid it:
Plan what you want to say, stay calm and always follow up in writing. Documenting your discussions protects both you and your employees.
Mistake 4: Misunderstanding Leave Entitlements
Employee leave entitlements are one of the most commonly misunderstood areas of HR. Under the National Employment Standards (NES), all employees—casual, part-time and full-time—are entitled to certain types of leave.
Problems arise when leave is not accrued or tracked correctly, or when employees are discouraged from taking time off. This can quickly create compliance risks and impact wellbeing.
How to avoid it:
Understand the NES and any relevant Award conditions, keep your payroll system up to date and encourage your employees to take their leave regularly. A well-rested employee is a more engaged one.
Mistake 5: Inconsistent Record Keeping
Accurate record keeping is essential for compliance and for managing people effectively. Many small businesses fail to keep written notes of key discussions, performance reviews or informal agreements, which can cause problems later if disputes arise.
Good records protect both you and your employees, and make future decisions easier and fairer.
How to avoid it:
After important discussions, follow up with an email or make a diary note. Store all documents securely in one location and ensure you can access them quickly when needed.
The Ripple Effect of Getting HR Right
Amy often reminds business owners that HR is not just about rules and risk management; it is about people. When you handle HR well, you reduce stress, improve communication and create a workplace where everyone knows what to expect.
By putting the right systems and advice in place, you can move from reactive to proactive HR—and that shift changes everything.
“When things are written down and processes are clear, you take a lot of the overwhelm away from yourself,” Amy shares. “You can lead your team with confidence and heart.”
Build Stronger HR Foundations with Support
You do not need to handle HR alone. With expert advice and practical tools, you can protect your business and empower your team.
Explore The HR Link, a flexible, people-first HR support service for Australian small businesses. Designed by Grounded HR, it gives you access to monthly HR consults, chat support and templates to help you handle HR confidently.
Free Resources for Small Business Owners
Grounded HR offers a range of free tools to help you get started:
Learn more about how to lead with a people first approach to HR through our The HR Link: People-First Conversations Podcast is available on Spotify, Apple Podcasts, and YouTube.
Follow Grounded HR for more people-first HR insights:
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