As Texas experiences sustained economic expansion, small to medium-sized businesses face mounting challenges in human resources management, compliance, and employee-related risk mitigation. Neil Katz, CEO of Exceptional HR Solutions, recently discussed how fractional HR services provide expert support without the expense of a full-time department during an interview on The Building Texas Show.
Katz, with over 25 years of HR experience, noted that business owners often dedicate 10–50% of their time to people-related issues, diverting attention from core operations. Fractional HR services help companies navigate hiring, onboarding, investigations, compensation, and compliance, enabling leaders to concentrate on growth. "Hire experts in their disciplines," Katz advised. "Get back to what you love because you probably don’t love dealing with this stuff anyway."
A critical area of risk for Texas businesses involves the misclassification of employees as 1099 contractors. Katz warned that if a worker uses company email, equipment, or receives the majority of their income from one employer, they should likely be classified as a W-2 employee. "People don’t get to choose if they want to be a contractor. The law defines what a contractor is and what is not. If you’re not sure, the rule of thumb is to hire them as an employee." This distinction carries significant legal and financial implications for businesses.
Exceptional HR Solutions also supports municipalities, including the City of Bonham, providing specialized expertise without the overhead of a full-time HR director. Katz emphasized that fractional services are ideal for small cities and businesses requiring professional HR support but lacking the budget for a dedicated department. The company's approach allows organizations to access comprehensive HR management while controlling costs.
The importance of proper HR management extends beyond administrative convenience. Compliance failures, particularly regarding employee classification, can result in substantial penalties, lawsuits, and operational disruptions. For growing businesses, these risks threaten stability and expansion potential. Fractional services offer a scalable solution, adapting to organizational needs without the commitment of full-time hires.
Katz's insights highlight a broader trend where specialized external support helps businesses navigate increasingly complex regulatory environments. As Texas continues to attract new enterprises and expand existing ones, effective HR management becomes crucial for sustainable growth. The full interview with Neil Katz is available on The Building Texas Show's YouTube Channel, where he discusses common pitfalls in employee classification. Businesses seeking HR support can visit ExceptionalHRSolutions.com for more information.
