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The Biggest HR Problems Faced By Small Businesses

5 Mins read

As a small business owner, human resources issues are, perhaps, one of the toughest challenges you will experience. While you have to work under the same rules and regulations of the more prominent companies in your industry, the simple fact is that you don’t have the budget to match. In fact, many small businesses just can’t afford to hire an HR team, and their owners often deal with it all themselves.

However, it’s vital – perhaps more so than if you run a major global company – that you take your responsibilities seriously. The result of failing to address HR issues appropriately could signal the end of your business. With this in mind, here is a heads up on some of the many issues you might experience as a small business owner – and the impacts they could have. Let’s get started right away.


Let’s start with something that you might not even think about – hiring employees. Sure, you are likely to have good ideas on the best people for the job. But without an HR specialist on board, it can be tricky and time-consuming to create the kind of job description that helps you find the right person. There are other issues, too. It’s vital that you understand the applicant’s legal rights throughout the hiring process, and there are a whole bunch of laws that you must follow. Failure to do so could result in a nasty financial penalty – or worse.


Once you have started hiring employees, your responsibilities go through the roof. Ultimately, workers safety is entirely down to you, and if you don’t provide a safe environment and rigorous training, you run the risk of being sued. As any workers compensation attorney will tell you, there are somewhere in the region of 8,000 accidents in American workplaces every day – and 13 deaths. If you don’t have the right HR processes to run training sessions and guard against injuries, you could end up in seriously hot water.


Sadly, plenty of discrimination goes on in the workplace these days – and it’s vital you don’t allow it to go on in your business. If one of your workers complains of something like sexual harassment, racial discrimination, disability discrimination or any other harassment issue, it’s going to end in tears unless you are equipped to deal with it. Prevention is key, particularly for small businesses that can ill afford the cost of going to a trial or the impact on your reputation that such a case can bring about.

Shutterstock Licensed Photo – By Aleutie

Employee arguments and conflict

Conflicts occur in all kinds of businesses, but the very nature of a small company means the impact can be huge. When people don’t get on in a large organization, it’s easy to avoid each other, but when everyone is working nearby, it’s a different story. There’s another key difference, too – large corporations have an HR department to help sort out the issues and act as a mediator. When you are running things yourself, you have to be exceptionally careful that you remain neutral, professional, and don’t take any sides. If you make the wrong decision, or someone feels you have taken sides, you run the risk of legal action being taken against you.


Moving on from the previous points, favoritism is a real problem for small businesses. It’s easy to see why. After all, there could be a group of people working for you that have been there since day one – and you might be tempted to reward these loyal people with promotions or pay rises, while forgetting about the newer members of the team. However, this can cause untold problems. Not only does it create unnecessary tensions and encourage the development of cliques, but it can also damage your business. For example, you might promote someone based on loyal service, but they may not be equipped to manage people properly. You end up with an ineffective manager, and also lose a highly skilled worker in another area of your business. Be careful about favoritism, as it’s one of the things that could result in serious damage to your company’s reputation in more ways than you might think.


As a small business owner, the likelihood is that you won’t be able to match the paychecks of your larger, rival competitors. Your ability to remain competitive, then, will often rely on the benefits you provide employees, rather than the salary. There’s health insurance, life insurance, remote working opportunities and all kinds of other things that you could offer – but don’t forget, you also have to manage them. Without an HR representative, you’ll find that things can quickly get unruly, and it’s very difficult to keep everything under control. Confusion is more common than you might think, especially when your time would be better spent making money for your business.

employee benefits
Shutterstock Licensed Photo – By one photo


When you have an HR team to rely on, the onboarding of new employees is a piece of cake. But when you are growing as a small business, it’s difficult to find the time to spend with newcomers without losing time in other areas of your business. In fact, many small business owners are happy to leave new workers with more experienced employees and just let them learn the ropes that way – but this can be counterproductive. All new workers need a lot of support and training when they start a new job, and it’s not much of a surprise to hear that over 40% of new employees leave within a year if they have had poor training. It’s vital that you lay out a proper plan for bringing new people on board, and also refine and update it over time.

Record keeping

If you are anything like the average small business owner, the chances are that your office is overrun with paperwork, files, and necessary documents. But when it comes to things like employee contracts, payment details and tax forms, it’s not really good enough to work in such chaotic conditions. Ultimately, you will pay the price for your mess and carelessness, and could even end up in dangerous hot water with the IRS or a court of law. Let’s face it, none of this stuff is super exciting, but it’s also incredibly important. The benefits of hiring an HR professional for your business are pretty clear when it comes to organizing your business issues.

HR professionals

It’s also important to remember that although it seems like hiring an HR professional will clear everything up, it’s actually not the case. Why? Well, as a small business, you can struggle to find an appropriate person to fulfil the role to your expectations. At the end of the day, the vast majority of human resources professionals will be looking to grow their careers at a big company, and not tackle the many inherent problems HR issues can cause for a small business. You will need to find creative individuals, too, that are happy to work in what many HR workers would call ‘challenging’ conditions, where there is not enough budget to implement things like training and benefits. That said, if you find the right person – it could be the key to keeping your business afloat, and even starting a successful growth process.

OK, so there you have it – some of the many HR problems faced by small business owners. There’s a lot to think about, and it’s also a big decision to bring in a professional into your business or outsource to a third party HR firm; especially when your margins are so small. If you can manage it yourself, you will save money – but you have to keep those processes watertight and under control.

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About author
Ryan Kh is a big data and analytic expert, marketing digital products on Amazon's Envato. He is not just passionate about latest buzz and tech stuff but in fact he's totally into it. Follow Ryan’s daily posts on Catalyst For Business.
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