Written by Stacey Gibson, PHR, SHRM-SCP, Stratus HR Director of Human Resources | Mar 21, 2024 7:11:20 PM
I recently read results from a survey where more than one third of U.S. employees who work for a small business (50 employees or less) reported they do not trust their company’s Human Resources (HR) department.
According to the survey, bias, inconsistency, lack of employee care, confidentiality, and inexperience (among others) are to blame for feelings of mistrust.
As the HR Director of a small business, I understand what small businesses experience and how difficult that can be from an HR perspective. However, by identifying the areas where these feelings of mistrust develop, there are simple ways to counter them.
Small Businesses Have Limited Resources
Small businesses often operate with limited financial resources, which makes a fully functioning Human Resources department more of a luxury than a need.
But that does not mean the normal HR administration tasks and employee issues do not exist; rather, they are not well managed. And that could lead to low morale, struggles with employee retention, high turnover, and more susceptibility to employment lawsuits.
Limited resources make it difficult to afford an HR manager
Establishing and maintaining an in-house HR department is difficult for small businesses to afford. From competitive pay, employee benefits, and employee training, to purchasing HR technology and creating office space, there is a lot that goes into funding HR departments.
With a tight budget and time constraints, there is little left to dedicate to a well-organized, high-functioning HR team. But you still must ensure all the admin tasks are on par, that all interpersonal conflicts are managed, that federal and state compliance regulations are met, that human resource planning accounts for upcoming staffing needs, and that any other HR challenges are handled.
Ignoring your people problems will not make them go away, but will instead have the reverse effect. What may start out as a minor problem but goes unresolved (or is not a satisfactory resolution) typically becomes a much bigger problem that results in employee turnover and morale issues. And non-compliance with any host of local, state, or federal regulations can lead to costly penalties.
Limited resources lead to a non-HR professional being tasked with HR responsibilities
Without a dedicated HR manager on hand, all the HR administration tasks, as well as the management of employee issues, fall on the lap of somebody else. In fact, of those who responded to the survey, 88% said they had “worked for a small company with no dedicated HR person.”
What happens when minor HR challenges arise
When a small business designates someone as the internal HR contact who has a different full-time job, you can assume their full-time job takes priority most of the time.
In most cases, the primary HR contact will be busy handling their actual full-time job, making non-threatening employee issues and concerns secondary. This creates a downward spiral for employee morale when their needs that are perceived as “secondary” are pushed aside.
What happens when more serious HR challenges arise
If a more threatening employee issue arises, such as a claim of workplace violence, wrongful termination, discrimination, sexual harassment, or so on, the primary full-time job gets neglected to quickly research and manage (perhaps with the help of an attorney) the more immediate need.
While this is a necessary shift of priorities, it is expensive and puts pressure on other employees to ensure deadlines are still met. Again, this takes a toll on employee morale.
How can a small business gain human resources help with limited resources?
The easiest, most cost-efficient solution to providing you with human resources support is to outsource your HR.
Outsourcing gives you an entire HR team
Outsourcing gives you access to HR managers who are certified experts. These unbiased experts assist and advise your internal contact who does not have time to research laws or know how to handle a delicate employee situation.
Outsourcing provides access to HR software
In addition, outsourcing HR allows you to leverage the latest HR technology and software platforms without the upfront investment. It also gives you access to professionals who can guide and direct you with questions about when and how to use the software.
Outsourcing is cost-effective
Perhaps the best and most surprising thing you may discover is how cost-effective it is to outsource HR. Outsourcing provides you access to an entire team of experts and a suite of HR software at a fraction of the price for an in-house HR manager.
Lack of Expertise
According to the survey, 47% of employees reported an unprofessional HR structure at their small business. From inconsistent policies and decisions to distrust about their data being protected, not having someone onsite who is or has access to HR expertise can lead to high turnover, poor morale, and employment lawsuits.
Lack of expertise makes it hard to handle these employment scenarios
Most owners of small businesses did not go into business to become HR experts; they went into business because their product or service was profitable. However, they oftentimes wear the HR hat due to limited resources (see above), despite having little-to-no working knowledge about employment laws, compliance requirements, payroll processing, and so on.
But if you are not a trained HR management expert:
Do you know which state and federal employment laws your company is subject to?
If an employee were fired, how quickly would you need to issue them their final paycheck?
When an employee gets hurt on the job, do you know how to manage the claim?
How do you ensure your data is secure and protected?
What steps do you take for leadership development?
Do you know the governing laws for sexual harassment trainings and other employee training requirements?
Are you and your managers familiar with legal vs. illegal questions you can ask in a job interview?
How would you handle an employee dispute, such as a subordinate claiming discrimination?
Those of us who work in HR know that laws and regulations change frequently, especially on a local and state level. And if your company is growing, it will become subject to even more laws as your employee headcount increases.
At the end of the day, developing an organized HR structure without access to human resource management expertise is a real challenge, especially with limited resources.
How can a small business counter lack of expertise?
The easiest, most cost-effective solution to providing you with human resources expertise is to outsource your HR to a Professional Employer Organization (PEO) like Stratus HR.
Outsourcing gets you access to certified HR professionals
Outsourcing provides access to a team of certified HR professionals who specialize in employment law and compliance, workers’ compensation, risk management, benefits administration, and tax and payroll administration. They bring a depth of expertise that will provide policies, procedures, knowledge, guidance, and organized structure to your team.
Outsourcing helps ensure HR processes are compliant
One of the key components of a PEO is to stay updated on changing regulations, which can ensure your company remains in compliance.
Outsourcing provides secure HR software
In addition, most PEOs provide HR technology that protects sensitive employee and HR data. This helps small business owners trust that sensitive employee information is being handled professionally and maintained confidentially.
At Stratus HR, our client information is protected with military-grade encryption. As an extra level of protection, our systems and controls are regularly audited by an independent firm to verify they are secure (SOC 1 Type 2-certified).
Final Thoughts
Small businesses do not have to accept they are at a disadvantage to large corporations. By outsourcing HR, they can regain their employees’ trust by having unbiased HR consulting, consistent policies and procedures, organized and secure data, and access to certified experts who can guide and assist with their company’s compliance.
If you would like a better way for your small business to handle its human resource management processes and improve employee retention, please book a free consultation and our team will contact you shortly.
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