PEO to the Rescue: Common HR Mistakes Managers Make
By Chris PetersonFirst published Updated
The short answer
The three costliest HR mistakes managers make are compliance missteps (FMLA, ADA, OSHA, discrimination and harassment law), payroll and tax errors such as misclassifying employees or missing overtime, and poor recordkeeping. A PEO helps prevent each with supervisor training, payroll and tax administration, and employee file and handbook management.
Managers and supervisors carry heavy loads, especially in small and mid-sized businesses, where they handle everything from hiring and onboarding to keeping production running. They're also on the front line of compliance with local, state and federal labor rules. Many companies lack the time to train every manager on every nuance, and even managers who know the law make mistakes that can be very costly. That's one reason businesses outsource HR to a professional employer organization (PEO).
What are the most common HR mistakes managers make?
1. Compliance
Keeping up with labor's alphabet soup of federal rules is hard and time-consuming. If a manager violates workers' comp, FMLA, ADA, OSHA, or discrimination and harassment laws, the whole business is at risk.
Take the small business owner who fired an employee for frequent health-related absences. She correctly worked out that her business wasn't covered by the FMLA, but she didn't consider that the employee was protected by the Americans with Disabilities Act. The result: a disability discrimination claim against the company.
How a PEO helps:
- Workplace liability management
- Supervisor training
- Employee litigation responses
- EEO, OSHA and Title VII compliance
2. Payroll and tax administration
Other common mistakes happen in payroll and taxes. Failing to pay overtime, or to pay employees on time, is common, and illegal.
How a PEO helps:
- Classifying employees correctly as exempt or nonexempt under the FLSA
- Writing and putting in place sound employment policies
- Payroll processing
- Withholding tax filings and deposits
- State and federal unemployment insurance filings
- W-2 and W-3 management
3. Recordkeeping
Documenting employee performance, conversations and complaints can head off disputes and legal claims later. It's tedious, so busy managers often set it aside.
How a PEO helps:
- Employee file management
- Employee handbook development and compliance
- Employment agreements, including confidentiality and non-compete agreements
- Safety manuals
- OSHA log maintenance
- Annual wage and premium audits
- Compliance record retention
Why does it matter?
Everyone makes mistakes, but mistakes with employment law can sink a company. In NAPEO's 2024 study (sponsored by the PEO industry association), PEO clients were 50% less likely to go out of business than similar companies without a PEO.