7 Reasons HR is Challenging for Small Businesses

Oct 01, 2018
| Michael Altiero
7 Reasons HR Is Challenging for Small Business

Given the market conditions today, companies both large and small face countless difficulties. However, HR in particular has grown to become one of the biggest challenges – yet it is incredibly important to overall success.

But why has HR developed into one of the biggest problem areas for employers, especially small and medium-sized businesses (SMBs)?

Repeatedly, these 7 challenges tend to emerge as the biggest reasons why small businesses struggle with human resources.

1) HR and Employment Law Changes

It has been a hectic few years with HR-related legislation, and the impacts they have brought to employers. One of the biggest disruptions to businesses in many years was the passing of the Affordable Care Act (ACA) in 2010.

Then, just when employers were adjusting to the new healthcare law, efforts to undue and change the nation’s healthcare law began.

In addition to federal law updates, numerous state and local laws have been enacted that address employment concerns such as paid leave, workplace sexual harassment, and pay equity to name a few.

The challenge for employers becomes keeping up and maintaining compliance with all these changes. Failure to do so increases the risk of employment lawsuits and/or penalties from the government.

With more employment legislation on the way in 2018, 2019, and beyond, this HR challenge looks like it will only get more complicated moving forward.

2) The Time Required for HR Administration

Large employers generally have big HR departments with the necessary personnel and monetary resources required to accurately conduct HR tasks.

Many small employers, on the other hand, may have only one or two in-house HR employees (if they have any at all), which means that HR administration duties can fall on business owners and other leaders.

This burden can take a lot of time away from other core business objectives, especially if all HR administration falls on a business owner who lacks experience with these tasks.

With HR becoming more complex in recent years, the amount of time and resources needed to conduct HR administration, and ensure compliance while doing so, has increased significantly. This trend doesn’t appear to be ending anytime soon.

3) Employee Expectations

The workforce today is more generationally diverse than any time in recent memory. Baby boomers, millennials, Gen X, and Gen Z all now comprise workplaces across the world.

This has led to a major shift in the expectations of employees and job seekers, causing employers to have to keep up in order to keep current workers happy and engaged (or risk losing them).

Smaller employers in particular can face a significant challenge in keeping up with the demands of the modern workforce. However, failing to do so can negatively impact the employee experience and make recruiting top talent almost impossible.

Now, let’s discuss one example of rising employee expectations in more detail…

4) The Rise of Personalization in the Workplace

One of the most impactful trends of the Digital Age has been the rise of personalization. As this became a more prominent aspect of day-to-day life, it was only a matter of time before it impacted the workplace.

Now, employees expect their work experience to be tailored and personalized (to some degree) to fit their individual needs. Things like employee benefits, learning and development, office perks, and technology are just a few examples of where employers can – and should – explore ways to offer personalized options to their employees.

This expectation will likely only grow in importance given how personalized our digital world has become, presenting smaller employers with a unique challenge that is a result of the times we are living in.

5) Employee Benefits and Perks

Small businesses face mounting challenges when it comes to offering competitive benefits, especially with health insurance.

With some healthcare providers exiting the small group market, and rising health insurance premiums, this is often cited as the number one HR-related challenge facing small employers today.

With larger employers continuously adding to their employee benefit plans, often through voluntary benefits and other office perks, SMBs have had to keep pace or risk losing current employees and missing out on top talent.

Given the uncertainty of ACA legislation, and the expected continued rise in healthcare premiums in 2019, employee benefits will only continue to get harder for smaller employers.

6) Attracting Top Talent

We have already hinted at the difficulties associated with recruiting in 2018, and that’s because it’s an example of an HR challenge that both large and small employers share in common.

Employers are finding it to be increasingly more difficult to find qualified talent, and when they do, there is stiff competition. This has led many businesses to increase their compensation packages, add to their benefit plans, and enhance office perks as a way to lure talent.

These can be a significant challenge for small and medium-sized employers who lack the same resources as larger companies. However, smaller businesses are finding exciting, cost-effective ways to boost their ability to attract and recruit the best candidates.

With a talent shortage that’s expected to last at least another 10 years, recruiting is poised to get even more difficult than it is today.

7) Rising HR Costs

Perhaps the biggest issue facing small and medium-sized businesses with HR are the growing costs associated with administering it properly and in a manner that ensures compliance.

Whether its increasing insurance premiums, adopting new office perks, implementing modern HR technology, taking actions that ensure compliance with current legislation, – just to name a few – these all have costs that employers must take on.

Rising costs are also one of the main drivers for SMBs to consider outsourcing some or all of their HR needs. And with HR costs likely to rise even more moving forward, outsourcing is growing in popularity as a way to overcome this issue.

Don’t Let HR Challenges Hold Back Your Business

HR issues can prevent SMBs from reaching their full potential. While many of these challenges seem daunting, with proper planning and exploring strategic partnerships, small employers can overcome their HR problems.

Even employers who aren’t facing a lot of HR issues can benefit from exploring options to stay ahead of the competition, and plan for future HR challenges to come.

How can outsourcing help small and medium-sized businesses overcome 10 common HR symptoms? Our eBook explains these HR challenges, and how partnering with a PEO can help overcome them!

10 HR Symptoms That PEO Can Cure