HR Basics for Small Business

The Milestone Team January 27, 2022
HR Basics for Small Business

As the owner of a small business, there’s a good chance you’ve personally handled many of the business’s HR duties and responsibilities, so you know the headaches that come when trying to tackle it on your own. Small businesses often risk assigning HR duties to employees that don’t have the proper HR training or knowledge, which hampers their own quality of work, leads to mistakes in core HR functions, and could lead to poor retention and onboarding. 

HR for small businesses is critical to your overall success and potential to grow as a company. Your people—and your ability to attract and keep valuable employees—will determine how well you perform overall. 

While HR might not be the first area you think of to improve your bottom line, it prevents costly mistakes and allows you to find and keep the people you need who will directly affect your bottom line. By better understanding the HR basics for small businesses, you make more informed choices about how to build an effective HR function—whether by hiring the full time talent you need or by other methods, like HR outsourcing

HR may not be the first area you think of to improve your bottom line, but it can prevent costly mistakes. By better understanding the HR basics for small businesses, you can make more informed choices about how to build an effective HR function. Whether by hiring the full time talent needed or by other methods, like HR outsourcing. This helps you to keep the people in roles that will directly benefit your bottom line. 

What does HR do for a small business?

While it’s common for employees of a small business to wear many hats, HR duties are too extensive, overlapping, and critical for developing culture to delegate to non-HR employees. Many small businesses attempt to divide the work between non-HR employees to save on the cost of hiring a full-time HR employee or outsourcing to HR providers, but with poor results. HR does more than you might think. 

What is HR and its roles and responsibilities? Key HR functions for a small business include many of those similar to a large company, just consolidated: 

  • personnel and business management 
  • recruitment, retention, and onboarding
  • employee satisfaction, engagement, and compliance
  • compensation, payroll, and incentivization
  • Employment compliance federal and state
  • learning and development for employees

Too often, small businesses don’t know what a successful HR function looks like or how vital this can be to reach the next phase of growth

How do small businesses set up HR?

Small businesses are in a unique position: they are small enough that they may not require an entire HR department, but they still require critical HR expertise, especially if they are hiring. So how do you navigate a critical need without the ability to hire an entire team of HR employees? 

Small businesses are in a unique position: they are small enough that they may not require an entire HR department, but they still require critical HR expertise, especially if they are hiring. So how do you navigate a critical need without the ability to hire an entire team of HR employees? 

Small business owners often use a combination of tools, resources, and internal employees to tackle the HR roles and responsibilities list above. Many small businesses decide to invest in at least one HR employee who can oversee all HR responsibilities. They can operate with a bird’s-eye-view over the HR practices in the company. But often, they require help in completing some of the tasks involved, like interviewing candidates, onboarding talent, or administering training programs. In these cases, small businesses could delegate these tasks to existing employees or potentially work with an HR outsourcing provider for assistance. 

Small businesses may decide to invest in at least one HR management member who can oversee all HR responsibilities. They can operate with a bird’s eye view over the HR practices within the company. However, they often require help in completing some of the tasks involved, like interviewing candidates, onboarding talent, or administering training programs. In these cases, small businesses can delegate these tasks to existing employees or work with an HR outsourcing provider for assistance. 

Many small businesses with a full time HR employee will also leverage outsourcing expertise for strategic HR initiatives and to help facilitate compliance in accordance with the latest trends. Outsourced HR can be engaged one time or on an ongoing basis to help fill in the HR gaps most small businesses with full-time HR hire experience. Outsourced HR can also help bring best practices when it comes to recruiting, onboarding, compliance, payroll, etc. 

Do small businesses need HR?

HR is important for small businesses because so much rides on a few key decisions. Hire an employee who isn’t the right fit, and that’s a large percentage of your team not pulling their weight. Slip up on hiring compliance, and run the risk of costly fines. Fail to create a healthy company culture from the start, and you’ll face critical retention issues and problems hiring new talent down the road. 

Small businesses need HR, but affording the necessary resources can be difficult. Outsourced HR providers can often be utilized in these situations, especially when there’s a chance that your HR needs for hiring and onboarding are temporary. Outsourced HR providers can help you establish legitimate and compliant processes and policies. 

What are the important HR requirements for small business?

While HR can improve your business strategy through recruiting and retention, you’re also obligated to meet legal business requirements to prevent costly fines or lawsuits. By setting the tone and adhering to internal and external HR processes, you send a clear message to employees (and customers) that they can expect similar attention to detail in other processes. Correctly documenting your legal compliance can make lawsuits, investigations, and inquiries cheaper and easier to manage.

For example, your small business should have a clear plan for the following HR requirements:

  • Payroll: Payroll should be consistent, clear, and reliable. Getting paid is a basic function of HR, but with benefits often stretching far beyond just monetary compensation, payroll has become more and more complicated to manage. Payroll also needs to be flexible enough to account for all the different ways your employees get compensated and can meet the requirements of each state your employees reside.
  • Documentation and employee paperwork: Keeping records organized and securely stored, having proper documentation for your employees, and creating an employee handbook are just some elements to consider. Some documents will need to have restricted access depending on the level of sensitive information they contain.
  • Required public information: Posting required equal opportunity employment posters and labor law postings, or OSHA signage, for example. Employees will also require clear communication and resources for the benefits your company offers.
  • Clear hiring/termination process: Creating fair, standardized, and transparent hiring and firing practices that are documented and understood by all employees. 
  • Employee benefits: This includes understanding benefits employees are eligible for, such as FMLA and health insurance. Optional benefits like retirement plans, tuition reimbursement, and equity or stock for employees may also be present or future benefits in the mix.

At Milestone, we know how vital HR can be for the success of a small business. We also know most small businesses aren’t covering HR responsibilities as well as they would like. We provide HR services for small businesses to help your team determine and fulfill their HR needs, by either providing consultation and guidance or by providing HR outsourced employees who are expert at jumping into an HR situation to create positive change. 

We are the right outsourced HR help when you need it. Learn more about Milestone and the work we do today

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