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9 Common Human Resource Management Challenges for Small

Businesses (/blog/post/2019/03/13/9-Common-Human-Resource-
Management-Challenges-for-Small-Businesses.aspx)
by Tim Austin (/blog/author/Tim-Austin.aspx) March 13, 2019 8:13 AM
Human resources are one of the most important components of any small business. However, the
responsibilities often fall to the owner or an executive, as many small businesses don’t have the capacity
for a designated HR department or full-time employee. Often, managing these HR functions in-house
creates many challenges. 

Small Business Challenges

When you devote so much time to growing your business and improving your products and services, how
are you supposed to nd the resources to manage HR? From recruitment and retention
(https://www.groupmgmt.com/human-resources/recruiting-and-training/) to payroll

/
(https://www.groupmgmt.com/payroll/) and bene ts (https://www.groupmgmt.com/employee-bene ts/),
it’s important that HR doesn’t fall by the wayside in a small business. De ciencies in any of these areas
could result in:

Non-compliance nes
Lack of talented employees
Ine ciencies that slow down your production cycle

Below, we identi ed some of the most common HR challenges for small businesses and how you can
overcome them.

Hiring process
Hiring new employees is a major time and nancial commitment for a small business. When job ads and
interviews are improperly handled, the recruitment process can quickly become a time-consuming
headache. 

For one, it takes an average of 23 days to nd the right candidate, according to Glassdoor
(https://www.forbes.com/sites/nextavenue/2015/07/13/7-ways-to-deal-with-todays-long-job-hiring-
process/#44a12fefc903), taking time away from other important projects. For more technical positions, it
can take a lot longer. On top of that, poor job descriptions can attract non-quali ed applicants, eating away
even more time to manually sift through each resume.

A hurried interview process or failing to ask the right questions can then result in bad hires, which can cost
nearly $15,000 according to CareerBuilder (https://www.prnewswire.com/news-releases/nearly-three-in-
four-employers-affected-by-a-bad-hire-according-to-a-recent-careerbuilder-survey-300567056.html). While
many small businesses rely on referrals when it comes to hiring, interviews need to be consistent and
conducted in a way that attracts quality talent and provides a clear path toward making a job offer.

Employee training and safety

Once employees are hired, having HR resources can be a great asset during training to prevent costly
errors and even injuries from occurring. However, many small businesses simply don’t have the time to
properly train new hires, which could affect workplace safety (https://www.groupmgmt.com/risk-
management/workplace-safety/).

According to the National Safety Council (https://www.nsc.org/work-safety/tools-

resources/infographics/workplace-injuries), a worker is injured on the job every 7 seconds, with 25
percent of these injuries caused by contact with objects and equipment. Proper training can help prevent
workplace injuries like sprains, strains, cuts, lacerations, and punctures as well as promote morale and
retention.

Employee handbook

/
Along with poor training, new employees may look to the employee handbook to gain a better
understanding of the work environment and job expectations. When was the last time you updated your
handbook? An outdated employee handbook can cause miscommunication and even legal issues for a
small business. Employee handbooks should be updated at least annually to re ect the ever-changing
employment laws and regulations.

Payroll
For small businesses, managing payroll (https://www.groupmgmt.com/payroll/) and ling taxes
(https://www.groupmgmt.com/payroll/business-taxes/) can be a time-consuming and challenging task.
Small and mid-sized companies spend an average of $2,000 per employee each year to handle payroll,
according to PricewaterhouseCoopers
(https://www.adp.com/~/media/Solution%20Builder/Documents/PWC%20TCO%20Study%202011.ashx).
Proper bookkeeping and tax ling may be a hassle, but they play an integral role in the success of your
business when it comes to avoiding compliance issues. The IRS (https://www.irs.gov/pub/irs-
soi/13databk.pdf) found that 40 percent of small businesses incur an average of $845 in penalties each
year, which can be a huge nancial burden.

Time tracking
Depending on where you live, you’ll need to comply with local, state, and federal laws regarding vacation,
paid leave, breaks, and overtime for your employees. Without a solid time tracking system in place, it can
be di cult to ensure your employees are being paid fairly. Utilizing an online platform can help save time
and energy for both small business owners and their employees.

Employee bene ts
In order to attract and retain top talent, it’s important for small businesses to include quality bene ts
(https://www.groupmgmt.com/employee-bene ts/) in their employees’ compensation packages.
Employees want comprehensive bene ts that include everything from health insurance
(https://www.groupmgmt.com/employee-bene ts/health-bene ts/) to retirement plans
(https://www.groupmgmt.com/employee-bene ts/401-k-pro t-sharing/) to supplemental insurance
(https://www.groupmgmt.com/employee-bene ts/supplemental-insurance/). However, many small
businesses nd that it can be very expensive and time-consuming to purchase and manage these bene ts
on their own, compared to the buying power of group bene ts.

Compliance
Small businesses must adhere to federal regulations
(https://www.groupmgmt.com/blog/post/2018/12/21/Youre-Violating-Federal-Regulations.aspx), and
failure to comply is common and costly. Perhaps the most common compliance issue for small
businesses is employee misclassi cation. According to the U.S. Department of Labor (DOL)
(https://dpea cio.org/programs-publications/issue-fact-sheets/misclassi cation-of-employees-as- /
independent-contractors/#_edn22), up to 30 percent of audited businesses had misclassi ed employees.
Many misclassify workers as contractors in error, so it’s important to know the difference. While the
consequences vary depending on whether the DOL and IRS deem the misclassi cation intentional or
unintentional, it can be a costly mistake. 

Other laws include the Fair Labor Standards Act (FLSA), Equal Pay Act, and Americans with Disabilities Act
(ADA), to name a few. It’s important to stay educated on these federal regulations in order to stay
compliant.

Con ict resolution

When growing a business, there is a potential for con ict in the workplace, and ignoring it can cost time
and money. A study by professional training and coaching company CPP, Inc.
(https://img.en25.com/Web/CPP/Con ict_report.pdf) found that 85 percent of employees experience
con ict in the workplace. Workplace con ict wastes nearly three hours per week, costing billions in paid
hours. Not having an HR resource to properly handle con ict resolution
(https://www.groupmgmt.com/blog/post/2018/12/04/How-to-Resolve-Workplace-Con ict.aspx) will only
take up more time and money in addition to dampening employee morale and retention rates.

Employee retention
When HR management issues aren’t handled properly, it can be di cult for small businesses to retain
quality employees. According to the Society for Human Resource Management (SHRM)
(https://www.shrm.org/hr-today/trends-and-forecasting/research-and-surveys/Documents/2017-Human-
Capital-Benchmarking.pdf), retention is a growing problem for many, with the average turnover rate sitting
at an unhealthy 18 percent. Running the gamut from bad hires to insu cient bene ts to con ict issues,
employees are less likely to stay with companies that don’t take initiative when it comes to HR
management.

Your HR Solution
Between recruiting and retaining employees (https://www.groupmgmt.com/human-resources/recruiting-
and-training/) to managing employee performance (https://www.groupmgmt.com/human-
resources/performance-audits/), there are many challenges small businesses face when it comes to the
responsibilities of HR management. Outsourcing HR (https://www.groupmgmt.com/human-resources/)
through a professional employer organization (PEO) (https://www.groupmgmt.com/about-us/faqs/peo/)
like Group Management Services can help small businesses save time and money, while allowing you to
focus on growing your business. 

GMS provides comprehensive HR services, including payroll administration

(https://www.groupmgmt.com/payroll/), risk management (https://www.groupmgmt.com/risk-
management/), employee bene ts (https://www.groupmgmt.com/employee-bene ts/), and more.
Additionally, GMS can perform HR audits (https://www.groupmgmt.com/human-resources/hr-audits/) to

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help your business improve HR functions in a fraction of the time. Contact GMS
(https://www.groupmgmt.com/contact/) today to see how we can help you cover these challenges in
human resource management, so you can focus on your core business.

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Tags: human resource management (http://www.groupmgmt.com/blog/?
tag=/human+resource+management), human resources (http://www.groupmgmt.com/blog/?
tag=/human+resources), small business (http://www.groupmgmt.com/blog/?tag=/small+business)

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