Small businesses are presented with a unique set of challenges when it comes to managing human resources (HR).  Unlike larger companies, which have dedicated HR and legal departments, small businesses may lack the resources to efficiently manage recruitment, payroll, or legal compliance.  While dedicating time to improving products and services is indeed a hallmark of any successful business, it’s nevertheless crucial not to neglect these vital components, as any deficiencies in these areas could result in fines, retaining less-talented employees, or suffering production inefficiencies that could drag down your bottom line.  In many cases, choosing to work with a professional employer organization (PEO) may be the best solution for your business’s needs, alleviating much of the difficulty imposed by the 6 most common HR challenges:

  1. Hiring new employees.  This is a major financial and time commitment for any small business.  Not only does it take an average of about 3 or more weeks to find the right candidate but, without a proper job description and an exceptional and consistent interviewing process, it could also lead to bad hires.  This is a very costly but common mistake that can be remedied by a savvy and efficient HR department. 
  • Training and safety.  Many small businesses struggle to properly train new employees. This could negatively affect workplace safety, leading to injuries or other costly errors. Proper training (including updating that dusty employee handbook) fosters an effective and productive work environment and promotes morale and employee retention, leading your business towards new heights. 
  • Payroll and benefits.  Managing payroll, filing taxes, choosing the right compensation packages for employees, etc., are time-consuming tasks for businesses that are already stretched thin.  It’s necessary to have a system in place to properly track the time your employees are working, including breaks, overtime, and vacation.  Proper bookkeeping can also help you avoid costly tax penalties.  Furthermore, purchasing the right benefits packages and managing them effectively will save your business both time and money.      
  • Legal compliance.  In running a business, there are many federal regulations you must adhere to including, for example, fair labor and equal pay laws.  However, according to the IRS, the most common mistake is employee misclassification, which most frequently involves designating a worker as a contractor rather than an employee.  This can lead to unwanted legal, financial, and ethical consequences that could hamper your business productivity. 
  • Conflict resolution.  In any work environment where there are human beings involved there will inevitably be employees experiencing conflict.  Workplace conflicts eat away at time and money and dampen morale, leading to further problems down the road.  Having the resources to properly handle conflict resolution in a safe, ethical, and professional manner is vital to your business’s success.
  • Employee retention.  It can be very difficult for small businesses to retain their high-quality employees if HR management issues are not properly handled.  Average turnover rates can be remarkably high, particularly in workplace environments that lack the resources necessary to keep those employees on board.  Bad hiring, insufficient benefits, and inevitable workplace conflicts further exacerbate these problems.

            Small businesses face a host of challenges related to human resources, from the initial hiring and training, to maintaining legal compliance and promoting workplace safety, to retaining top talent and growing the company, etc.  However, without dedicating sufficient time and resources to managing the vital aspects of the HR side of the business, long-term growth and financial success will necessarily be limited.  On the other hand, by managing your HR department with aplomb or by outsourcing the responsibility through a PEO you will not only save time and money but you’ll be better able to focus on growing your core business and steering your company towards an even brighter and more successful future.