10 Best HR Practices for Small Companies in 2025

HR management for small businesses is just as important as for big organizations, especially as the HR landscape changes. As your company continues to grow, adopting strong HR practices is key to building a healthy, productive workforce. In 2025, with shifting workplace trends, we have detailed the top HR practices to focus on.

Best HR Practices for Small Companies

1. Create a Strong Employee Retention Plan

Hiring the right talent isn’t where it stops. If you really want to be an employer of choice, you have to create the right atmosphere to retain the best talents. For instance, your organization must have a culture that appreciates great performance and provides opportunities for employee advancement. So, as you source for the best talents, be sure to have a workplace that allows them to do their best work and thrive.

Another area to pay attention to is employee onboarding experience. A smooth onboarding process helps new hires settle in quickly, increasing engagement and reducing turnover. It’s vital for small businesses to invest in making new employees feel welcome and prepared for their roles. Consider creating a structured orientation program that includes training sessions, cultural immersion, and clear role expectations.

2. Promote Diversity, Equity, and Inclusion (DEI)

Millennials today prefer to work with organizations that provide them with the best environment to thrive. This invariably includes working for multi-cultural and diverse organizations that are known for equity and inclusion. Diversity, equity, and inclusion constitute a major discussion point in the HR space today, and every organization looking to accelerate its growth - whether small or big - would want to take DEI seriously.

3. Ensure Compliance with Employment Laws

Every once in a while, the government updates employment laws - and it’s in your best interest to know and understand them. In case you’re starting your business, these regulations typically cover every aspect of employee management, including interviewing, hiring, training, retaining, and terminating employees. There are also regulations guiding employee benefits and pensions. Knowing them saves you a lot of trouble.

4. Offer the Best Employee Benefits

Prioritizing employee mental and physical health is crucial. No doubt about this one; your employees are at their best when they are best taken care of. The better the benefits your employees can have, the better your reputation, and of course, your business grows faster. Here are some more reasons why you should consider offering the best employee benefits to your workers.

5. Develop an Employee Handbook

It is a good HR practice to have an employee handbook. You may also call it a standard operating manual. Consider your company’s safe operation guidelines for everyone, including management staff. Ideally, your employee handbook should be updated at least once every year. In fact, it is standard HR practice to review and revise your employee handbook every year. You want to also make sure that any new hire joining the firm has a copy of the book.

6. Focus on Employee Performance

Honing in on employee management allows you to pinpoint the factors affecting employee performance and limiting your business’ growth. This is also a tactic for measuring employee performance and accurately addressing low-performing staff based on the metrics you’ve measured. However, you must have defined the metric upon which employee performance will be measured so that everyone runs with the vision. For further guidance, you can check out these top employee performance metrics.

7. Build a Positive Company Culture

Creating a culture that reflects your company’s values encourages loyalty, engagement, and productivity. Small companies should actively cultivate a positive, inclusive culture where employees feel respected, valued, and motivated to contribute.

Another concern facing small businesses is the issue of security in the workplace. We understand that today’s work environment has changed drastically, with way more people working remotely now than ever before. But that does not mean you shouldn't invest in creating a inclusive, safe, and secure work environment, where employees can work with confidence and do their best work.

8. Network with Other Small Businesses in Your Niche

You can also check other small businesses in your domain. Consider joining a professional organization or your chamber of commerce to connect with other small business owners. It‘s an opportunity to share knowledge and learn how to navigate common HR issues from other professionals in your industry.

9. Proper Payroll Management

Frankly speaking, many good companies have folded because of poor payroll management. Once your employees cannot trust you to handle payroll accurately, it can negatively affect the company's reputation and even land you in trouble with the IRS. Generally, you want to make sure to avoid these common HR issues.

Using affordable HR software to streamline administrative tasks like payroll, recruitment, and performance management saves time and improves efficiency. Tools that automate tasks can empower small businesses to more effectively manage day-to-day operations, including payroll.

10. Partner with a PEO Company

By far, this is your best bet when it comes to providing your employees with the best workers’ compensation and benefits plans, managing payroll, and other mundane HR administrative tasks. PEOs are professional HR outsourcing firms that take the majority of the HR burden off the shoulders of small businesses.

PEOs do this by providing you with a suite of custom services best suited to your industry and specific business needs at an affordable rate. Partnering with a PEO company allows you to enter a co-employment arrangement and enjoy the benefits of shared liability; you can grow your business without worrying about HR issues.

Have more questions, check out our resource that answers the most common questions: What is a PEO? 

Other Important Best Practices to Note:

1. Embrace Flexible Work Arrangements: The demand for flexible work models is on the rise. Offering remote, hybrid, or flexible hours not only attracts top talent but also boosts retention by allowing employees to maintain a better work-life balance.

2. Implement Continuous Performance Feedback: Rather than relying on annual reviews, adopt continuous feedback mechanisms. Frequent check-ins allow employees to receive real-time feedback, adjust their goals, and stay aligned with company expectations.

3. Maintain Clear Communication Channels: Establishing effective communication within your company is critical, especially for smaller teams. Regular team meetings, clear reporting structures, and open channels for employee feedback can reduce misunderstandings and foster a collaborative environment.

Over to You

Now that you know the best HR practices for small companies, it’s time to take action. You may already be on track with some of these tactics, but most likely, you need to buckle up in other areas in 2025. So, there you have it. If you’re hiring an in-house HR team, ensure that all operations are aligned in favor of our employees, your business growth, and compliance with regulations.

Need further help? Reach out to us today at Mission. The Mission is a leading partner in the PEO, HR, payroll, and benefits outsourcing marketplace. We provide a valuable service for small and medium-sized organizations and government contractors, serving as a trusted partner in integrated human resource (HR) compliance, risk management, employee benefits, employment practices liability insurance (EPLI), and payroll processing.