HR Management

Challenges of HR in a Small Business

Regardless of the company size, the HR department performs a myriad of functions that help run the organization smoothly. From hiring to firing, and managing everything in between, the HR department has its task cut out for them. When it comes to effective HR management, there are no shortcuts. However, for an HR operating in SMBs, there can be various challenges that require immediate attention and deft handling.

Listed here are the most common challenges faced by HR in a small organization:

  1. Creating a sound strategy for recruitment and retention

Hiring and retaining employees is a vital part of any business maintained by the HR department. The right talent can genuinely improve the process and is a critical resource to drive company growth. Hiring candidates is a time-consuming affair that requires a significant financial commitment. To have the best employees, it is essential to hire them and create opportunities for growth that make them stick with the organization. 

Small businesses have limited funds and the loss of valuable employees is a huge blow to them. Failing to ask the right questions during the interview can result in a sloppy hiring process with many “misfits” in your organization. Get to know their personality and work ethics along with their core skills and competencies. Provide an opportunity to grow with meaningful training programs, competitive salaries, and valuable perks to hold onto efficient employees.

  1. Performance management

Employee performance management is no longer limited to MNCs or large organizations. Even small businesses can gain clarity into their processes and provide timely and fair appraisals to employees based on the data. For a one-person department, it is challenging to track employee performance along with managing various daily tasks. However, managing and tracking employee performance is a year-long process and not a one-time event.

Start by creating personal development plans and rope in the line managers for maximum efficiency. Encourage a culture of feedback in the organization that is directed toward employee improvement. Doing so will ensure that you can align the poorly-performing employees with the company goals on time and compensate high-performing employees with fair compensation.

  1. Payroll processing

Manual payroll processing is cumbersome and error-prone. It takes up significant time and can be a long and thankless process. Payroll processing requires data from various sources like employee timings, leaves, loans, etc. But calculating and consolidating data manually takes time and can result in human error. Computing the wrong salary has a poor impact on employee morale and can damage the company’s reputation.

According to a PwC study, small and mid-sized companies spend an average of $2,000 per employee each year to handle payroll. Maintaining payroll without a proper mechanism is a hassle and can add significant problems for the HR department. An automated system consolidates all data and presents the HR department with accurate and timely data.

  1. Training and compliance

A workplace training program improves employee skills, and productivity, and makes them efficient to carry out their duties well. In-house training programs mould employee thinking and lead to quality performance. It is a continuous process that enhances the skills, capabilities, and knowledge of the staff. Training is crucial to organizational success and development and should be designed as a continuous process. 

A well-trained employee is well-acquainted with the process and requires minimum supervision in daily work. Compliance training teaches employees the ethics or rules of the organization and helps them abide by them. Handing over an employee rulebook and expecting them to learn it is a bit stretched. Well-trained employees demonstrate quality performance and utilize their resources efficiently.

  1. Staff enquiries

The upper management should always practice an open-door policy in the organization to boost employee engagement and experience. This also makes employees feel that they can reach out to their superiors with zero boundaries. In certain cases, especially in the absence of a consolidated system, employees often need to pursue HR managers. This can be for small requests like reimbursement purposes, knowing the leave balance, getting payslips, clearing paperwork etc.

In a small business, HR managers often have to perform tasks that can be easily met by an automated system and require zero manual intervention. 

  1. Conflict resolution

When planning to grow a business, there will come a point when not everyone will get along. Workplace conflicts can disturb the entire environment and drain significant time and resources. Without proper intervention and resolution, employees won’t feel secure which leads to a disastrous situation. It can invite lawsuits, defamation notices and mudslinging in the market from disgruntled employees. For small businesses with limited resources, handling legal calamities can land them in choppy waters.

Neglecting or not providing timely resolution to conflicts can prove costly to the organization. Not only does this lead to added costs but also results in reputation loss in the market. Implement a management training program to train the management on the effectiveness of timely resolution of workplace conflicts. This will mitigate ugly situations at work and also provide a direction to solutions in case of a crisis. 

  1. Focusing on employee wellbeing

Employee wellness has become a critical component of employee retention and satisfaction at the workplace. But for a small business HR already stomped with a myriad of responsibilities, focusing on creating employee well-being programs becomes secondary. In a world that is reeling with the effects of a global pandemic, ignoring health and overall wellness does not bode well. HR professionals need to ensure that all employees are working well, getting the medical attention they need, and maintaining a healthy work-life balance.

Companies that earlier did not offer healthcare benefits are now realising its importance and relevance. Even small organizations should invest in a robust healthcare program for employees that allows them to seek services whenever required. Creating a safe environment for customers and employees has become of paramount importance.

The last two years have significantly changed how we approach work and demonstrated the importance of HR strategies in meeting organizational goals. However, for a small business, the challenges are many. What makes it easy is the availability of HR management systems that automates routine tasks, and reduces the burden on the HR staff. 

Paylite® is an end-to-end HRMS system that meets the ever-growing needs of modern-day workplaces. It makes your HR process streamlined, smart, and swift, replacing the age-old legacy systems with system-driven workflows. It offers world-class security features that keep your valuable data safe and secure. To make the operations of your growing business more streamlined, book a free demo today