Small business big challenges and how HR can help

Small business big challenges and how HR can help

Running a small business is a challenge at the best of times. You need to keep on top of your cash flow, generate new business, look after your existing customers, maintain your marketing strategy and manage any HR issues that might arise. There are certainly a lot of pressures that come with managing a small business, and that’s before we even consider the impact the pandemic has had on our lives and businesses over the last two years.

HR can help you overcome some of the challenges your small business may face. For example, taking the time to develop your internal business structure, policies and practices aligning your culture and values with your business goals and keeping your employees motivated and engaged are all critical elements of a successful business. Incorporating HR into your company to manage these elements can help you overcome challenges your business faces and turn them into opportunities to thrive.

In this article, we will look at some of the main challenges for small businesses and how you can overcome them:

Staying on the right side of employment law

For small businesses staying on top of the latest legislative changes in employment law can be a challenge in itself. You need to be aware of the requirements and ensure you have all the required legal documentation in place and up to date. This includes employment contracts, health and safety, grievance and disciplinary policies that all businesses are legally required to hold, as well as inclusive job descriptions. One of HR’s most critical functions in any business is to keep these documents up to date in line with rapidly changing employment laws. As well as making sure all your documentation is compliant with the latest employment laws you should also consider incorporating some bespoke policies intended to protect your business and make them personal and relevant to your situation.


Hiring the right people is one of the biggest challenges for small businesses. Due to a limited selection of qualified candidates, limited funds, a competitive job market, and an inability to offer the attractive salary package individuals seek, you could struggle to attract the right people. In addition, working for a small company that doesn’t have strong branding can also be off-putting to prospective candidates who may opt to apply for roles in more established organisations, making recruiting even more challenging.

While this might seem like a gloomy prospect for small businesses seeking to attract better talent, there are definite advantages for candidates choosing to work for an SME over a global giant. For example, small businesses are more often able to offer more flexible, diverse roles and responsibilities than some bigger organisations. This means that experienced professionals are keen to take up roles offered by smaller businesses because of the exciting challenge they present and the opportunity to grow with the company. HR can help you position yourself to the right hires. In addition, when you find the right people, HR can help you retain them, so you’ll save money that a lot of smaller businesses waste on hiring the wrong people and having to continuously repeat and pay for the recruitment and training process.

It’s essential to keep in mind that although your sales and profit are an important focus, it’s also vital to recognise employee issues as they arise rather than when they become critical. This is where HR is invaluable to small businesses in helping you grow by helping you hire and retain employees. By putting HR practices in place, you can help support your employees.

Help you define your company culture

As a small business owner, you undoubtedly have a vision for your business. However, have you given much thought to your company culture? Does it matter?

The short answer is yes. It does matter. When new hires arrive, they want to know your company values as well as your standards and expectations. Do you welcome new ideas and innovation? Are you an inclusive, culturally diverse employer? Even where your expectations and visions are clearly set out, you are likely to occasionally meet an employee who goes against your company culture. How are you equipped to deal with those situations is important. You’ll need to have a professional plan in place to deal with any issues that arise.

Creating and maintaining an employee handbook is a great way to introduce and outline what is or isn’t acceptable within your organisation. This is a tangible item that shows that everyone has access to the same set of standards. In addition, ensuring your employee handbook yearly will ensure that you remain compliant and transparent regarding employment laws.

Creating a conflict resolution strategy

We all want to get on with our colleagues. However, there will be times when your staff do not agree, which may result in conflict. You’ll want to put in place a process for handling such circumstances to protect both your employees and your business. Conflict resolution is vital as without it, your employees will feel unsupported, leading to them feeling demotivated and unproductive and generally unhappy at work. For your business, it can also result in legal action being taken if you have a particularly disgruntled employee. Consider asking your managerial staff to take a course in conflict resolution. This will give them the tools to develop communication guidelines for your business, so you are ready to deal with any problems as they arise consistently.

Line managers assuming the role of HR

This is known as doubling up on job roles. Whilst it might make sense in the early days as your employee numbers grow, it isn’t sustainable to expect senior staff to take on the HR aspect of their role whilst doing another full-time job, making it impossible to cover everything that needs to be done off from an HR aspect whilst remaining legally compliant and ensuring your employees are looked after.  If you are in this position, you should consider hiring an HR assistant or outsourcing to avoid running into any HR regulatory or employment law issues that could end up costing your business. 

How to reward and recognise employee achievements

Employees who are recognised and rewarded for their efforts are more engaged, which means you have a higher chance of retaining them because they are happier and more productive. An HR function can help you understand best practice initiatives to help you create internal incentive schemes or employee benefit packages that your employees will see as relevant attainable and will motivate them to achieve.

Many small businesses are indeed great examples of small business practices that offer excellent opportunities to their staff. However, some small businesses face many challenges when it comes to people and compliance management simply because they don’t have the knowledge, time, or resources to implement everything required. Bespoke and business-specific HR advice and resources can make all the difference, leading to more engaged staff and fully compliant and up to date documentation, policies and processes.