Managing a small business is no easy feat. Between handling customers, watching your bottom line, and juggling operations, one of the trickiest challenges you might face is dealing with difficult employees. Whether it's an employee with a bad attitude, poor performance, or disruptive behavior, mishandling the situation can harm morale, productivity, and even your business reputation.
In this guide, we’ll walk you through practical HR advice for managing difficult employees in a small business setting. We’ll break down the types of problem employees, strategies for handling them, and tips on keeping your workplace healthy and productive.
Why Dealing with Difficult Employees Matters?
Before we get into the “how,” let’s talk about the “why.”
Impact of Difficult Employees:
- Lower team morale: One disruptive employee can drag down the entire team’s motivation.
- Reduced productivity: Conflict or underperformance can lead to delays and poor output.
- Higher turnover: Good employees may leave if toxic behavior goes unchecked.
- Legal risks: Mishandled situations can result in lawsuits or compliance issues.
- Customer dissatisfaction: Poor employee behavior often spills over into customer service.
As a small business owner, you don’t have the luxury of a full HR department—but that doesn’t mean you’re powerless. Let’s dive into how to deal with these issues effectively.
Types of Difficult Employees
Different employees cause different problems. Here are the most common types you may encounter:
1. The Chronic Complainer
Always negative, always finding something to gripe about. They can demoralize others and resist change.
2. The Underperformer
Struggles to meet deadlines or produces subpar work. Often makes excuses and drags down team productivity.
3. The Know-It-All
Thinks they have all the answers, often undermines authority, and disrupts teamwork.
4. The Gossip
Thrives on rumors and drama, creating divisions and toxic environments.
5. The Rule Breaker
Constantly ignores policies or cuts corners, sometimes endangering safety or legal compliance.
Step-by-Step Guide to Handling Difficult Employees
Now that you can identify the types of problem employees, let’s look at how to handle them with confidence and professionalism.
1. Stay Calm and Objective
It’s easy to take bad behavior personally, especially in a small team. But reacting emotionally can escalate the situation.
Tips:
- Don’t retaliate. Avoid sarcasm, anger, or public confrontations.
- Keep records. Document incidents factually—what was said/done, when, and who was involved.
- Separate the person from the behavior. Focus on actions, not personality.
"Address the behavior, not the individual’s character."
2. Address Issues Early
One of the biggest mistakes small business owners make is avoiding confrontation. Hoping it’ll get better rarely works.
How to do it:
- Schedule a private meeting. Never confront an employee in public.
- Be specific. Point to actual examples of the behavior or performance issue.
- Ask for their perspective. Sometimes there’s a root cause (e.g., personal issues, misunderstandings).
Example Script:
“I’ve noticed a few missed deadlines lately, including the one last Friday. Can you share what’s been going on?”
This opens the door for honest conversation without being accusatory.
3. Set Clear Expectations
Many difficult employee issues come down to a lack of clarity. If expectations are vague, employees may not even realize they’re doing something wrong.
What to clarify:
- Job responsibilities
- Behavioral expectations
- Performance goals
- Communication standards
Use a Performance Improvement Plan (PIP):
- Outline specific areas for improvement
- Set a timeline for progress
- Define consequences if improvement doesn’t happen
4. Provide Support and Resources
Believe it or not, some difficult employees want to improve—they just don’t know how.
Offer:
- Coaching or mentoring
- Skills training
- Regular check-ins
- Mental health support
Show you’re invested in their growth. It can make a huge difference.
5. Be Consistent and Fair
Inconsistency breeds resentment. If you let one employee get away with bad behavior while punishing another, you’ll damage trust across the team.
Ensure you:
- Apply the same rules to everyone
- Avoid favoritism
- Follow your policies
"Fair treatment isn't just good practice—it's legal protection."
6. Know When It’s Time to Let Go
Not all employees can be saved. If someone refuses to change, the cost of keeping them may outweigh the risk of letting them go.
Signs it’s time to terminate:
- No improvement despite clear guidance
- Toxic impact on the team
- Repeated policy violations
- Serious misconduct
Before you terminate:
- Document everything
- Consult legal or HR guidance
- Review your policies and employee handbook
Letting someone go is never easy, but sometimes it’s the best thing for your business.
Legal Considerations for Small Business Owners
Firing someone—or even just disciplining them—can backfire if not handled correctly.
Here are a few legal tips to keep you in the clear:
Understand At-Will Employment
In many states, you can terminate an employee for any reason that isn’t illegal (e.g., discrimination). But there are exceptions.
Avoid These Legal Traps:
- Discrimination: Never base decisions on race, gender, religion, age, disability, etc.
- Retaliation: Don’t punish employees for whistleblowing or filing complaints.
- Wrongful termination: Even at-will states have exceptions, especially if there’s no documentation.
If you’re unsure, always consult with an HR expert or employment attorney.
Preventing Future Problems
The best way to handle difficult employees is to avoid hiring or developing them in the first place.
Tips for Prevention:
1. Hire Carefully
- Check references.
- Ask behavioral interview questions.
- Look for cultural fit.
2. Set the Tone Early
- Use onboarding to explain values and expectations.
- Give feedback early and often.
3. Create a Positive Work Culture
- Recognize good performance.
- Foster open communication.
- Encourage team collaboration.
A strong, respectful culture makes it harder for toxic behavior to thrive.
What to Do When You Feel Overwhelmed?
If you’re wearing all the hats—manager, owner, HR rep—it’s normal to feel out of your depth. HR issues are sensitive, time-consuming, and full of legal landmines.
You don’t have to go it alone.
⭐ Recommended: Get Help from a Dedicated HR Partner Like Bambee
If managing difficult employees is taking a toll on your time or sanity, it might be time to bring in expert help. That’s where Bambee comes in.
Why Bambee?
- Dedicated HR Manager: You’ll be paired with a real person who understands your business.
- Custom HR Policies: Tailored to your business and legally compliant.
- Employee Relations Support: Get help with performance issues, terminations, and coaching.
- Affordable Pricing: Made specifically for small businesses—no massive corporate budgets needed.
- Peace of Mind: Know you're staying compliant with labor laws and handling employees the right way.
With Bambee, you can focus on running your business—not running around chasing HR problems.
👉 Learn more about Bambee here and get a free consultation today.
Final Thoughts
Difficult employees are part of running any business—but how you handle them sets the tone for your entire company. Stay calm, be consistent, document everything, and don’t be afraid to seek help when needed.
Remember:
- Address problems early.
- Be clear, fair, and firm.
- Support improvement, but know when to say goodbye.
Small businesses thrive on strong teams. By managing employee issues well, you’re protecting your people, your culture, and your future.
Need help today? Don't wait until a small HR problem becomes a legal crisis. Try Bambee and give your business the HR support it deserves.
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