Businesses require some kind of HR function as soon as they have one employee. However, it’s imperative to begin planning for a dedicated HR function early in development (SHRM recommends doing so once a company reaches 10 employees). However, to save money, research shows, 54 percent of small businesses handle employment matters themselves or have another staff member handle HR issues piecemeal. And these staff members who take on HR responsibilities typically are not prepared to do so.
5 Priorities for HR for Small Business
In fact, 70 percent of businesses with five to 49 employees add HR onto the workload of employees with little to no experience in workforce issues, according to ADP’s Ad Hoc Human Resource Management Study. Some 23 percent of the time, these “ad hoc HR managers” fill roles including office administrator and chief operating officer, while 12 percent work in finance and handle payroll, expenses, and corporate travel.
So what are your top priorities as a small business (under 25 employees) when it comes to HR? Here, we’ll take a look at the five main areas small businesses should focus on in order to effectively manage their employees, from recruiting to new hires to career development.
1) Compliance and establishing systems.
There are workplace laws and standards every company with more than one employee must follow, some related to employee rights and others to employer responsibilities. There are also laws that vary by state. If you’re handling hiring, onboarding, payroll, and termination in-house, your dedicated HR professional must be familiar with current workplace legislation and compliance. Establishing systems for HR functions supports compliance, for example, your new hire onboarding packet contains the correct information to classify an employee properly, set them up in payroll, send the right information to federal agencies (W-4, I-9) and so on.
2) Workforce planning.
Your HR strategies should be in alignment with business goals, including forecasting, OKRs, revenue model and succession planning. Your HR designate must be part of your executive team in order to understand how to support the goals of your company and to help you reach them.
Not the fun part of HR, but a necessary and important part of HR including payroll, paperwork, benefits. This also relates to compliance, because not knowing how to classify an employee or what your company is legally required to provide can come down to how the paperwork is filled out and whether or not it is accurate and error free. A typo can cost a lot when it comes to the administrative side of HR.
This is where your employer brand begins, and HR teams at high growth companies often find themselves working to recover from a poor reputation, rather than building a good one. Small business recruiting is an opportunity to create a great candidate experience, set forth a positive and inclusive company culture, and establish your brand as a “want to work for” in your industry. Your HR pro must also be able to create a recruiting strategy that reaches the top talent you need to meet your company goals, maintain a robust hiring funnel, and build community relationships.
5) Training and development.
Employee engagement is directly tied to employee retention, and opportunities for career development and learning is one of the largest factors in employee engagement. Simply put, HR can reduce turnover and improve retention by doing one thing: Offering learning opportunities and a path to advancement for all employees. Depending on your company size, industry, and budget, this could look like self-paced training with a learning management system, or more formal training classes on or off-site.
Finally, having dedicated HR staff – even if it’s only a team of two – to handle all of the above can set your company apart from competitors in the talent marketplace whether you’re in a growth phase or not. Your employer brand matters, unhappy employees don’t stick around, and the cost of noncompliance and accompanying liability can bankrupt a small business. If you’re outsourcing some of your HR tasks, like payroll or employee screening, you’ll still need a dedicated HR staff member to work with your HR vendors and to be a point of contact for your employees.
List of HR Small Business Resources
I’ve put together a list of more resources for small businesses who have hired or are considering hiring their first HR professional.