9 HR Tips for Cannabis Business Owners to Drive Growth

The burgeoning cannabis industry is seeing massive growth, not only with company size but also with new players entering this competitive market thanks in part to the widespread acceptance of cannabis legalization.

Within two years, cannabis jobs in the US are set to double to half a million. This ever-changing industry must be ready to pivot and adapt to new regulations and opportunities, making it imperative for cannabis business operators to adopt strong human resources practices to avoid setbacks.

With this immense growth, comes a need for new hires. But before these businesses start bringing in new talent, it’s imperative to create a strong HR strategy and define your corporate culture. One of the biggest missteps a fledgling business can make is to bring on new staff before building solid infrastructure.

According to a survey of leading enterprise U.S. cannabis businesses, the biggest HR challenge in 2019 was managing rapid growth while scaling the workforce to meet increased demand. Managers felt pressure to ensure strategic hiring plans with many noting that high turnover rates were a direct result of insufficient performance management practices and training programs.

Follow these tips to develop a complete HR strategy, something cannabis businesses must adopt to succeed in an ever-changing, competitive industry.

1. Find an HR partner to help ensure growth and compliance.

Managing the employee relationship should be a priority for any business, but bringing an internal HR team onboard may not be an option for new cannabis businesses. Most businesses will wait until they have 50, or even 70 staffers before hiring a full-time HR manager. Beyond that, the constantly evolving labor and policy laws, as well as the issues with cannabis payroll, make outsourcing HR services to cannabis-specific partners a smart choice for business owners.

From managing employee benefits to ensuring compliance with the Fair Labor Standards Act (FLSA), there are many sides to workforce management that business leaders may not have the experience or resources to maintain. With a new industry already struggling to manage legal compliance and financial support, a single mistake in adhering to the work and pay rules can result in a hefty fine. With the high risk and liability involved in managing cannabis business workforce, licensees should seek cannabis-focused HR and payroll partners.

Partnering with an HR and payroll provider specializing in the cannabis industry will not only help ensure all employee documentation is orderly and correct, but also provide systems and processes needed to streamline operations. Leverage applicant tracking, background checks, offer letters, time and attendance tracking, PTO policies, employee classifications, benefits, payroll deductions, and beyond for sustainable growth.

2. Ensure diversity and inclusion while creating workplace discrimination policies.

In 2019, the application process for a cannabis license contained strict requirements surrounding diversity initiatives, with more focus on these efforts in the coming years. Developing stronger diversity & inclusivity plans with effective recruiting tactics underscores the value of unique perspectives and supporting peers in the workplace.

The end of the decade saw a decline in the number of female executives in the cannabis industry. Vangst, the largest staffing company in cannabis, published a report finding that of the 38.5% of employees that self-identified as female in the industry, only 17.6% held an “Executive” or “Director” position. This is in contrast to 82.4% who self-identified male.

With continued growth and momentum, the cannabis industry will be able to attract more like-minded, skilled professionals from mainstream industries. In the past year, KushCo Holdings appointed Rhiana Barr (former Nestle and Cetera Financial Group HR Executive), as Chief People Officer, and Harborside brought on a female HR leader from the pharmaceutical industry. As the cannabis industry continues to prove itself legitimate with financial gains and international acceptance, the trend towards more diversity and inclusivity will progress.

3. Define job roles and responsibilities.

It’s the job of cannabis business owners and employers to ensure appropriate company policies are developed and implemented so employees are aware of what they can, and cannot, do. In many localities, workers who handle cannabis plants and products are held to stricter rules and regulations than those who don’t. A simple mistake by an employee or employer can lead to costly legal trouble for a cannabis business.

Outlining the specific boundaries or legal limits for each employee’s role begins with clear job descriptions and on-the-job training. This lets staff know what the expectations are for their performance, and helps employers avoid compliance issues or costly mistakes that could put their cannabis license at risk. It can also be beneficial to post job descriptions and policies where they are accessible to the whole workforce, like in an HRIS or company intranet, so employees can refer back to this information as needed.

4. Offer comprehensive wellness and benefits programs.

Although there have been advances in recent years, basic employee resources like access to banking and receiving a direct deposit, many cannabis businesses still struggle with these limitations. Today, doors have begun to open for these businesses to offer comprehensive benefits, 401(k), and beyond. Insurance and 401(k) brokers who will transparently serve the cannabis industry are becoming easier to find.

While Section 280E hinders employers from offering a 401(k) matching program, some production businesses may be able to deduct contributions to their employee benefits plans. However, dispensaries may not be able to even if the two entities are owned by the same parent company.

With the difficulty in obtaining and executing benefits and 401(k) programs, partnering with cannabis-friendly financial advisors and brokers is a key step in attracting and retaining qualified employees.

5. Verify employee eligibility with thorough background checks.

With an industry that is constantly changing, many cannabis business owners may not be aware of the latest legal requirements for running a business and hiring employees.

In Colorado, regulations for cannabis businesses have become increasingly stricter since their original legalization. In an interview with Vox, Ron Kammerzell of the Colorado Department of Revenue said, “You come out with the best-laid plans for how you think something’s going to work and how the regulatory framework is going to perform, and you’re going to have to make adjustments to that.”

Regardless of industry, federal law mandates all new employees fill out an I-9 Employment Eligibility Verification form, confirming their identity and that they are authorized to work in the United States. Companies that are federally audited and neglect to perform employee verification are subject to fines and other unwanted consequences.

6. Create an employee training and performance management program.

Despite more than half of the United States having some form of cannabis legislation in place, there is still a lack of standardized, industry-approved education and training programs for cannabis workplaces and employees. Instead, there are consultants like Cannabis Trainers which have developed compliance and risk management programs on their own.

Some states, like Massachusetts, have mandated that cannabis employees take part in these sessions. There are also many cannabis businesses that have created their own training programs in-house. It’s critical for businesses to create, or continue expanding, employee development programs to include product and plant specifics, workplace collaboration, and responsible sales & customer service best practices.

A valuable tool for reducing employee turnover is performance management and how it aligns with company culture. Instead of the typical annual review, employers are encouraged to adopt continuous performance management, with one-on-ones frequently scheduled to improve communication, address issues fast, and ensure the entire team is engaged. Many HRIS platforms help foster these conversations so managers can combine human interaction with trending evidence in order to identify at-risk employees before they leave the company.

7. Be prepared for changes to federal banking policies and payroll options.

Cannabis businesses have been legally operating in many states for years, but haven’t been able to access federal banks, financing, or mortgages due to federal laws.

With new legislation looming that will finally allow cannabis businesses to utilize federal banks with FDIC insurance, employee payroll processing will become undeniably easier. This change will also allow cannabis businesses to partner with any payroll company without federal law standing in the way.

8. Find ways to incorporate corporate social responsibility initiatives.

With so many nonprofits and volunteer programs still hesitant to partner with cannabis businesses, especially involved with cannabis product sales or production, it can be a challenge to find ways to give back to the community. Fortunately, this is beginning to change. In 2019, Cresco Labs launched its SEED initiative to “ensure that all members of our society have the skills, knowledge, and opportunity to work in and own businesses in this industry.”

Another way cannabis companies can help their community is by focusing efforts on those most affected by the War on Drugs. Contribute to worthy causes and donating to nonprofits, like Last Prisoner Project or work with organizations on record expungement efforts.

Demonstrating a socially conscious mindset will attract a wider, more qualified talent pool while also increasing employee satisfaction by providing thoughtful opportunities for staff to partake in team-building community volunteer efforts.

9. Make employee retention a priority.

Keeping qualified talent is always a topic of concern, whether you’ve just opened your cannabis business or you have been operating for years. Employee turnover is expensive and time-consuming, especially when the industry is seeing massive growth. It’s vital to find ways to maximize employee productivity and cultivate a corporate culture where staff enjoy their workplace and feel incentivized to stay in order to minimize turnover.

Increasing employee retention assures productivity and profit. If staffing levels are anemic for operational needs, productivity and profit suffer.

One study indicates companies can see $1,800 increase in profits with a 10% increase in employee engagement. How do companies achieve this?

• Properly onboard every employee. Studies have shown that a positive onboarding process yields up to a 25% increase in employee retention rates and a 70% increase in employee performance.
• Develop a cannabis employee handbook. Let team members know about the company and people they work with by memorializing the company’s mission, values, policies, and employee perks.

• Create a professional development program. Show staff that their employer is willing to invest in their individual career paths as well as their performance and skills today.

• Offer employees a fair and competitive wage. Ensure compensation packages offered are not only in line with local and industry standards, but that employees are paid equally. Create a plan to review compensation internally annually to ensure there is not a gender pay gap. A 2020 report by Mercer indicates, 56% of employers conducted a gender-based pay equality analysis, a rise from 35% in 2016.

Ensure your cannabis business retains qualified and happy employees while steering clear of federal audits with comprehensive HR strategies and policies. Get in touch with a Greenleaf HR business consultant today to find out how we can help.