HR has become one of the biggest management challenges facing small business leaders as it has grown more complex and complicated in recent years.
While there may be many reasons why small employers struggle with HR, there are a few common issues that impact businesses regardless of location or industry. These 6 are often at the root of a small business owner’s HR frustrations.
1. HR administration requires a lot of time
Larger organizations have entire departments dedicated to HR that can ensure all tasks are handled properly. Small businesses aren’t as lucky. In many cases, HR administrative tasks fall on a business owner or other company leader, adding to their list of responsibilities. However, HR is far more time consuming today than it was even a decade ago, and not investing the necessary amount of time can cause compliance issues to arise.
When small business leaders have to use their time to work on HR administration, it takes their attention away from activities that lead to business development and growth. This is an issue many small business owners encounter.
2. Compliance with HR and employment laws
The last few years have seen a significant rise in new and updated HR-related legislation. And these laws aren’t just occurring at the federal level – state and local legislation are also being enacted that make compliance even harder for small employers.
Failing to maintain compliance with employment laws at each level can lead to serious penalties and fines for employers. But keeping up with new legislation and effective dates can be incredibly difficult.
3. Employee benefits
One challenge that impacts small business employees (both current and future) are the benefits available to them. Small businesses today need to enhance their benefit packages by offering things like voluntary benefits and modern perks, or they risk losing current employees frustrated with limited benefit choices. However, this is easier said than done for many smaller employers. Meanwhile, the cost of healthcare insurance — the most fundamental of benefits — has been rising fast in the small businesses market, sometimes by double-digits. With these increases showing no signs of slowing, and employee demand for benefits growing, it’s becoming more difficult for small business leaders to keep up.
4. Attracting and hiring talent
We mentioned the importance of employee benefits on retention, but they also play a vital role in attracting and recruiting new employees. Recruiting is becoming more challenging for employers big and small, but larger companies have more resources to invest in strategies and efforts.
Meanwhile, small business owners need to compete with these larger organizations for the same talent, which isn’t easy.
Missing out on top talent can prevent a small business from growing, which is why recruiting should be a priority for owners and leaders. By addressing employee benefits, looking at compensation and other workplace perks, building an employer brand, and enhancing processes small employers can take the steps necessary to overcome their recruiting obstacles.
5. Increasing HR costs
Perhaps the most substantial challenge facing small employers is the rising costs associated with modern HR. Rising healthcare rates, perks and employee benefits, adopting HR technology, and ensuring compliance with current and future laws cost more every year, not including the time spent managing HR. This can be a major issue for business owners.
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Cost is one of the main drivers for small business owners to seek outsourcing solutions to meet their HR needs. HR outsourcing is growing in popularity among small employers for this very reason.
6. Employee expectations
The modern workforce is more generationally diverse than ever with baby boomers, Gen X, millennials, and Gen Z now all in the workplace. This has resulted in a major shift in the expectations of employees and job seekers that employers of all sizes are expected to meet or exceed. Doing so keeps current workers happy and engaged, while also making a company more attractive to potential candidates.
However, failing to meet these expectations could result in employees choosing to seek new employment opportunities and job seekers passing over a business in favor of another.
Keeping up with ever-changing employee expectations is much harder for smaller employers. But failing to do so can negatively impact the employee experience and make recruiting top talent a bigger challenge than it already is.
Overcome the problems by outsourcing HR
Despite the difficulties and challenges surround modern HR, small employers have options to overcome them. Outsourcing all or some HR responsibilities is quickly becoming a popular solution for business leaders who are overwhelmed and want to focus on business growth. The most popular option is to outsource to a Professional Employer Organization. The nation’s 900 PEOs serve more than 175,000 small businesses employing 3.7 million workers.
Working with a PEO can actually result in lower costs, because they aggregate workers into benefit pools, making it possible for them to negotiate lower rates and to offer a broader range of voluntary benefits. In addition, because HR is the business of a PEO, they stay up-to-date with compliance issues, and know what deadlines a business has to meet and what forms it has to file.
Ready to hire a PEO? “Here’s What to Ask When Choosing a PEO“
There are other alternatives, including working with benefits brokers, hiring an HR consultant and outsourcing only certain functions like payroll. Working with a broker or advisor can help small business owners find the right options for their business to overcome HR challenges!