Top 10 HR challenges for small businesses and how to deal with them

Top 10 HR challenges for small businesses and how to deal with them
Mel Stead
Mel SteadOptimal HR Services Limited

Posted: Tue 26th Sep 2023

Along with cash flow, generating new business and marketing, HR can present a raft of challenges for small business owners.

Here are the 10 most common HR challenges I've seen small businesses face in my 30 years in the field, and what your business can do to overcome them.

Typical HR challenges for small businesses

1. Lack of time or experience to deal with staff issues or put effective contracts and policies in place

This is the number one issue. Business owners don't have enough time to deal with staff issues and brush them under the carpet, hoping things will resolve themselves. This could mean you're exposing yourself to potential employment issues.

If necessary, ask for expert help to make sure you're complying with employment law and to avoid any unnecessary problems with staff.


Watch this webinar to understand what you need in place to make sure you're running your business legally:


2. Meeting employment law regulations with handbooks, contracts, policies and procedures and job descriptions

These can become out of date very quickly and pulling one from the internet won't meet the unique needs of your business.

These documents are all legally binding, so they must be relevant, current and useful in order to add value to the business.

3. Line managers assuming the role of HR with limited knowledge and training

This means doubling up job roles to cover HR or promoting people who are technically good in their roles but have no line management experience.

If your business is growing and you have no qualified HR professional in the company, you should consider appointing one or outsourcing to a consultancy. As your employee numbers grow, you won't be able to cover HR in other roles and will need proper support.

4. Owners or management not acknowledging the need for HR

In growing businesses, owners often leave these HR-related tasks to other members of the team, thinking it's not an essential part of the business. With employment law being so tight, leaving HR to an untrained team member is a high-risk strategy and could be expensive.

The cost of using an outsourced HR provider to help you is nothing in comparison to losing a tribunal claim!

5. Long-term sickness

It's important to have someone on the team who knows how to deal with this from a legal standpoint.

Sickness costs the company money and causes delays in efficiencies. Companies often leave employees when they're off sick – out of sight, out of mind – or they just don’t know what to do.

This is the wrong strategy. You need to deal with any issues in a timely fashion, sympathetically and in line with best practice.

6. Performance management and personal development

It can be hard to understand how and when to measure performance and develop staff. Start off by creating personal development plans, in consultation with your team members. Set objectives, goals and a realistic timescale.

7. Training and retention

To keep the best people, you need to provide the right support and training. Often staff are left to identify training courses themselves and sort their own development out, with resistance from the employer. Training should form part of the personal development plan set out for each member of staff.


Watch this webinar for practical advice and guidance to help you deal with any HR challenges or questions within your business:


8. Recruitment

It's tough to find the time or put mechanisms in place to vet candidates and attract the right people when you already wear so many hats as a business owner. Employee referral schemes work well here, where they can recommend suitable candidates in exchange for a reward if the candidate is hired.

But there's always a trade-off. While recruiting in-house means you'll have to set aside time to vet applications, outsourcing to a specialist HR consultancy means they'll do it for you, as well as managing the interview process. Though there's a financial cost, it will save you lots of time.

9. Rewarding and recognising staff

It's important to understand what constitutes best practice and craft a bonus or incentive scheme which is relevant, achievable, accessible and motivational to your employees.

10. Resolving conflict

Where do you start? What happens if you get this wrong? It's important to resolve conflict as soon as it arises to prevent the issue from worsening and harming your brand's reputation or finances.

If a conflict arises and resolving it is not part of your skillset, seek professional advice immediately.

Relevant resources

Mel Stead
Mel SteadOptimal HR Services Limited

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