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The Importance of Human Resource Management for Cannabis Businesses

More states across the United States have legalized cannabis for recreational use and its business. About 34 US States and over 40 countries globally are now supporting the legalization or decriminalization policies of cannabis. It is just a matter of time before cannabis becomes a globally-traded agricultural commodity. If this trajectory is anything to go, cannabis will become one of the best performing asset class in the next decade while affecting every sector.

As an emerging market, it has a lot of gray areas in terms of business policy whether in finance, legal, production and even HR. To ensure compliance with employment laws, sustainability, the formation of high-value human capital and performance improvement cannabis businesses needs proper HR policy. In line with this, here we will highlight the importance of human resource management for cannabis businesses. 

Strict State Rules Regulate the Cannabis Industry

With the legalization of cannabis, human resource professionals must work out how best to adjust to new and strict regulations that differ distinctively from one state to another. It is not possible to take a blueprint from standard retail business and blend it to the cannabis industry because regulations and requirements are different. HR professionals that are taking interest in pot legalization will have the greatest impact on HR practices in the cannabis industry. As an example, there are HR professionals that have developed management software specific to cannabis businesses. 

The importance of human resource management for cannabis businesses is to: 

• Develop policies that fit regulations, 

• Reduce compliance responsibility, 

• Allow flexibility from one state to another

• Making it easy for dispensaries to operate in a friendly and legal environment

The biggest problem for cannabis businesses is compliance with strict state rules, which limits their ability to hire and pay employees correctly. Most dispensaries are struggling to find the right employees because of the background checks requirements and state-mandated prerequisites that do not necessarily apply in other industries. The hiring process is complicated for dispensary employers that need a professional human resource development approach. 

The importance of human resource for cannabis businesses with reference to state rules will be summarized into:

• Compliance regulation because people and personnel management are at the core of this industry

• Offering strict compliance direction and,

• Communicate shifting regulations clearly and as they come to their customers. 

Paying Employees Legally Is Difficult 

A major issue facing cannabis dispensaries is payroll challenges because marijuana is still considered a Schedule 1 drug, enlisting it on the same tier with heroin and LSD. The federal government still considers it highly illegal. As a result, cannabis businesses struggle to pay employees and budtenders legally. It is true that the sale of recreational cannabis continues to get legalized throughout the US. However, players still have to grapple with loopholes to ensure they are operating legally within federal and state regulations. 

Many ‘reputable’ and well—known banks refuse to do business with them, and the dilemma is whether to pay employees illegally (under the table) or to find reputable cannabis banking and pray they know what they are doing. With illegal payments, it only takes a small instance for the labor board to discover you and pounce on your business. You could pay so much in tax fines or employee compensation penalties. 

So how can hiring this role to a professional human resource management help address the challenge of paying employees? The importance of human resource management for cannabis businesses is best utilized where you can make your HR partner a banking partner. 

Cannabis banking solutions partner will take care of all the guesswork in your payroll, banking solutions and HR policies by ensuring you are federally insured. They are professionals that understand cannabis banking issues better. 

Look for a partner that removes restrictions on how much you can deposit. While most banks allege to support cannabis businesses, they have strict regulations on how much you can deposit at once. Find a HR partner that acts as a banking solutions partner at the same time. 

Compliance Needs

The issue of compliance is very big in cannabis business given the legal pitfalls that businesses are likely to encounter with state and local employment law. 

• How do you hire people correctly? 

• How do you compensate them correctly? 

It is important for any cannabis business to look at HR policy compliance as a priority. Given that this is also a fairly new legal industry; owners have an additional responsibility in HR development and leadership. 

First, understand the benefits of a compliant and sound HR policy:

• Human capital value 

• Liability control

• Controlled budget

• Conflict resolution

• Sustainability

• Performance management and improvement, and 

• Corporate reputation management 

Compliance will allow cannabis businesses to build high-value human capital while maintaining steadfast principals. 

Externally, cannabis space investors will definitely review target businesses HR policies as an item list in their due diligence process. Other items considered during the diligence process are;

• Personal and property insurance protection and management

• Intellectual property and their potential infringement, and 

• Background checks for the management team. 

All these items fall within compliance needs that are met through human resource management. So compliance is not just an internal function, it is a key factor in external relations and stakeholder management. 

Addressing Challenges of Emerging Markets

Cannabis dispensaries are by all means a typical example of an emerging market. There are general characteristics that define emerging markets and which are visible in cannabis market; information opacity, fragmentation, trade barriers (through regulation), trade barriers, value discovery, price discovery, alpha generation and regulatory uncertainty.

The importance of human resources management for cannabis businesses will be manifested through regular and timely communication of changes in policies. This will solve information asymmetry and at the same time, help dispensaries with compliance even when there is uncertainty in the regulations.

 Another importance is in price and value discovery as they help in determining prices of employees and make the cost measurable and legal to help determine the final price since labor forms part of production cost. 

Help Cannabis Businesses Develop Solid HR Policy for Growth

An emerging industry that just got legalized is fragmented and operates with ad hoc policies. However, this is dangerous for cannabis dispensaries that are heavily regulated and have stringent rules on employee eligibility and start-up regulations. 

As it is, it will require a lot of time to develop HR policy given additional regulations that pertain to cannabis businesses and to establish best practices in the cannabis business. It is not easy to combine all these while there are aspects of business requiring your attention, especially business growth.

The best way is to find an HR partner that will handle all aspects for you especially in formative years. The partner is well aware of current regulations and how they affect dispensaries and they will help you develop a policy that is relevant to an emerging market, specifically cannabis. 

Look for a partner that can double up as a banking and HR partner to ensure all your employee and compensation needs are tackled. The partner should be able to do all the hard work for your business while covering payroll, HR, employee onboarding, employee compensation, safety, workers benefits, administration and compliance. 

The importance of human resource management for cannabis businesses cannot be underscored especially at formative stage of the industry. It will help dispensaries navigate legislation and ensure compliance while building an HR policy that will build sustainability in the industry. If you are looking for a reliable partner,  talk to us


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