2 Things That Make HR for Small Businesses Necessary

HR plays an integral role in making your business a success. Human resources are the most valuable asset of any organization. HR for small businesses can be a competitive advantage to growing a company if used properly. For example, businesses more focused on evolving their workforce are 1.7X more likely to meet financial goals and 3.5X more likely to retain high performers.1

Even though HR is the foundation of every organization, many small business owners make mistakes with their HR — such as handling it themselves or passing it off to an employee with limited HR experience. 

But not having HR expertise can cause problems. Though HR can help organizations in numerous ways, from payroll to workers compensation to benefits to recruiting, most of it maps back to two areas — employee retention and workplace compliance. 

HR Is Essential to Employee Retention

These days it may seem like hiring is a bigger HR problem for small businesses. But research done by Zenefits among 600 companies, found that 63% of them say retaining employees is harder than hiring them

Why? Currently, employees have options, and it’s a job-seekers market. 

But retaining existing employees is more valuable than hiring new ones. Recruitment, onboarding, and training are all necessary to successfully hire a new employee. The time and costs associated with doing so make it very expensive to hire — So much so that turnover can cost an organization 33% of an employee’s total compensation.2 

For small businesses, the cost of turnover can be even higher. When you think about what factors into turnover, it can be several things. Salary and benefits, leadership, work-life balance, and growth opportunities are all reasons employees may leave a job. Each of these factors falls under human resource management. For that reason, HR for small businesses is critical to retaining employees.

The sole purpose of human resources is to manage the lifecycle of employees in a business. HR has the expertise to engage in efforts that directly impact employee retention. The reasons employees leave — such as benefits administration, professional development, compensation, and company culture — can all be addressed with effective HR programs. Without an HR function, growing businesses will eventually struggle to maintain these areas. HR efforts are even more valuable once a business has a defined retention strategy because it usually makes it easier to hire.

HR Upholds Workplace Compliance 

Outside of everything that HR does to retain employees — HR is also responsible for upholding workplace compliance. Compliance is one area that business owners dread. Workplace compliance requires a lot of effort from employers, and employers don’t always see the relevance of such measures on their bottom line. 

Unfortunately, the average small business owner ends up spending $12,000 a year dealing with compliance issues.3

Keeping up with workplace compliance trends is a full-time job. Every business is responsible for ensuring their workplace is compliant with new laws and regulations — HR is essential to do this successfully. Specifically, HR can continually evaluate and redesign policies, procedures, and programs to avoid risk or penalties.

Because of the risks associated with running a business and managing people, most business owners are aware of the importance of HR. The biggest challenge of HR for small businesses is understanding all that it encompasses and how to manage it in a cost-effective yet impactful way.  

If you’d like to learn more about the options available for HR for small businesses — reach out to one of our team members today. Or download the guide below to learn about the benefits of outsourcing your HR. 

1 Deloitte High Impact Workforce Study, 2020

2 Department of Labor and Statistics 2017

3 NSBA, Small Business Regulations Survey, 2019