Like most small business owners, you’re used to handling all business activities yourself. This includes all HR tasks. In fact, 54% of small businesses handle HR in house. But owners usually give HR work to staff with little practice managing employees.

According to one report, 31% of employees felt unqualified for their job. If you have over 20 staff, it’s not enough for you to give HR work to someone in finance or operations. Creating your own HR team can improve employee experience and free you to focus on your business.

Improve Your Firm With HR for Small Businesses

HR personnel are experts in handling HR issues, including employee relations and motivation. Your own HR team not only helps you follow employment law; it ensures the health and safety of your staff.

When should your business hire an HR person? Businesses that are growing toward at least 50 employees should have an HR manager. They can develop policies that lead to employee well-being and engagement. The employee satisfaction that HR managers help you create is vital for small business success.

What Is the Role of HR Personnel, Exactly?

Your HR team helps with far more than just dealing with difficult employees and handling employee complaints. They can help you create conditions where staff thrive. That can make your employer brand strong.

Here are some typical roles your HR department will play.

human resources

Ensuring Compliance With Employment Law

HR makes sure your business obeys all local, state and federal employment laws. That includes handling I-9 documents that prove U.S. citizenship for each employee. But HR also tackles labor laws. Those include the Family and Medical Leave Act, Americans with Disabilities Act, and the Fair Labor Standards Act.

They maintain employee files, too, making sure all paperwork is always in order. Some paperwork you’ll need on your staff includes:

  • Resumes
  • Proof of education and training
  • Work reviews
  • Tax and medical records

You’ll need more documentation if your employees have disabilities or other special needs. Letting your HR team handle these issues helps your small business avoid costly legal problems.

Hiring and Retaining New Employees

Great employee experiences begin with the hiring process. HR works with you to manage hiring new employees. They create methods to attract and recruit the best talent for your business. This includes:

  • Writing job descriptions
  • Ad placement
  • Resume and application gathering
  • Interviewing and reference checks
  • Job offers

The role also includes managing layoffs and terminations. These procedures have employer regulation implications that HR staff know how to meet.

They also know when to hire others skilled in areas like hiring temps or technical labor.


Employee Training and Development

A positive employee experience goes beyond hiring. How your company onboards, trains and develops employees are key to employee retention. These activities also build your brand reputation as an exceptional employer.

HR implements practices and procedures and develops employer-specific resources. They put the best orientation, education and training, and career planning tools in place. They also bring in the right professionals to help. This ensures employees get what they need to stay happy and productive at work.

Compensation and Benefits

This is another area, if not done professionally, that can lead to regulatory woes for small business owners. HR personnel are experts in handling employee compensation and federally mandated employee benefits. These also include fringe benefits, like gym memberships and tuition reimbursement. HR manages all important tasks related to paying employees. This includes:

  • Employment taxes
  • Unemployment insurance
  • Workers’ compensation insurance

HR works with outside specialists on different aspects of employee compensation and benefits. This can include:

  • Timekeeping
  • Payroll
  • Life, health and disability insurance
  • Retirement planning

They also manage the costs of payroll and benefits, taking those tasks off your busy hands.

human resources management

Creating and Updating Employee Handbooks

Your employee handbook is critical to managing staff and avoiding costly litigation. It’s where you share your firm policies, practices, and procedures in writing. Besides your code of conduct, the handbook should also cover important rules. Some examples are:

  • Diversity and anti-discrimination
  • Sexual harassment
  • Hiring
  • Discipline
  • Complaint reporting methods

This worker’s playbook answers staff questions and helps prevent misunderstandings. It’s also a tool to communicate your company’s mission, vision and core values. HR can manage your employee handbook if you have one or help you develop the all-important tool if you don’t.

Handling Performance Reviews

One stressor that small business owners experience is conducting performance reviews. HR helps remove barriers to positive employee relations by overseeing this function. That includes:

The extent to which they handle this depends on the size of your business. But HR personnel are authorities in determining what those measures should be. They can conduct this process in a way that preserves a positive employee experience, too.

For example, HR can give employees tools and training to improve performance and productivity. HR also helps you track staff’s professional advancement, so your employees grow. This helps with retaining the best talent.

human resources department

What Are Some Other HR Activities?

There are a few other HR services you’ll want your department to handle. Here are three important areas you should allow an experienced professional to manage.

Employee Experience and Culture. A positive employee experience includes a focus on employee engagement and well-being. It comes from creating a positive culture that tackles each employee’s unique professional needs and personal challenges.

Studies show that today’s employees care about people over profits. They expect organizations to promote values they can follow. They also care for how organizations treat employees.

That’s why HR professionals often get made “chief culture officers” in small enterprises. If they do this work effectively, you have the foundations for a winning workplace.

Diversity, Equity, Inclusion and Accommodation. While “diversity” (or “DEIA”) is a hot topic in business, few employers make it a strategic priority. But there are major benefits to adding authentic DEIA to all aspects of your business. Businesses with above-average diversity in their management can see revenues increase by 19%. That’s because their products are more innovative than less diverse competitors.

HR professionals help enterprises confront issues small business owners often find daunting. That includes dealing with five generations of staff and addressing the historical injustices faced by Black people in employment. They also confront issues faced by other racial and ethnic groups and women. It also means making your business accessible to disabled employees and addressing issues that LGBTQ employees face.

Your HR team should be experts in creating a diverse, fair, inclusive and accommodating culture. That’s how you foster an empowering environment focused on employee belonging. Remember, this only works when you embed DEIA into your culture, and HR can help you ensure that.

hr management

Onboarding and Exit Interviews. Hiring talented people into a firm where the focus is employee happiness and DEIA is only the beginning. Bringing them into your company with structured onboarding is a key retention strategy. Great onboarding leads 68% of employees to stay at companies for over three years.

Businesses with standardized onboarding experience 50% higher employee productivity. New employees who feel welcome and have the tools they need to succeed are more productive.

HR should focus on four elements, listed from least to most effective:

  • Compliance — informing new employees about your legal and company policy.
  • Clarification — making sure new hires understand their job duties and manager expectations in their role.
  • Culture — sharing company values and norms to help new employees adapt.
  • Connection — introducing new hires into information networks and helping them make friends with others at work.

Engaging employees in strong onboarding programs leads to less employee attrition. But when employees leave your firm, HR should conduct exit interviews. That helps to determine what retention strategies your firm might have used to keep them. Conduct these meetings face-to-face, using surveys, questionnaires or some combination of the three.

How Do I Set Up HR for a Small Company?

It’s essential you build your HR team based on the needs of your business and industry. This guarantees your HR professionals have the right skills to manage your staff and unique business issues. You’ll also want your HR staff to have exceptional people skills. Whether you put HR on your payroll or outsource the function, here are tips for getting it right.

HR Department

1. Hire an HR Professional

Depending on the size of your firm, having in-house HR might be ideal — if you have the budget. This way, you can maintain control over:

  • Hiring
  • Retention
  • Benefits
  • Firm culture
  • Internal communications

Keep in mind, it’s often hard to find all the skills you need in one person. You may need to hire a team of experts.

But, if you have 50 or fewer employees, consider hiring an HR generalist to save costs. This person can hire vendors for tasks that can get automated. That includes:

  • Compliance
  • Payroll
  • Benefits
  • Onboarding

There is no standard number of HR professionals to have on staff based on how many employees you have. A restaurant has different needs from a tech firm. So, a consultant can best help you find the HR experts your business needs.

2. Outsource Your Human Resource Management

When you need some help, but not full-time, outsourcing is a solid option. It also may cost less than hiring full-time employees and still give you the expertise you need. You only hire the help you need for a specific task, like recruitment or benefits management. Consultants give you access to a larger talent pool, too.

But you don’t always get full control over your HR with this option. Offsite HR management could be unavailable to handle urgent employee issues. Your employees could experience delays in getting important questions answered, too. Take care when choosing this option, particularly to get compliance needs met.

HR Online

3. Use an HR Software

HR software can automate tasks to keep small business owners organized and efficient. Some HR apps for small businesses can make you feel you have a full staff of HR management. Many HR software programs and apps help you:

  • Hire
  • Onboard
  • Train
  • Pay
  • Document
  • Dismiss employees

Remember, as you grow, you’ll have an increasing number of employees to manage. Using software and apps alone becomes trickier. So, use some strategies above to get the help you need at that point.

Check out The Hartford’s Business Owner’s Playbook, with resources for starting and growing a business. That including tips for managing talent and providing benefits.

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