Updated: May 17, 2022
As we move into 2022, small businesses will face a number of challenges when it comes to human resources. Perhaps the most pressing issue will be hiring, as the economy continues to rebound and competition for talent increases.
Employee retention will also be a key concern, as workers have become more mobility in recent years. Additionally, small businesses will need to focus on workplace training and safety in order to attract and retain top talent. Finally, employee benefits will continue to be a critical part of the HR equation, as more workers seek comprehensive packages that include health insurance, retirement plans, and other perks. By addressing these challenges head-on, small businesses can position themselves for success in the coming year.
Managing human resources is one of the most significant challenges for any small business. Be that as it may, most of the responsibility often falls on a few people within the organization that already have other full-time obligations. Smaller organizations simply do not have the capacity or budget to deploy a full-time HR department, nor do they need full-time resources. However, the fact remains that managing these in-house creates a significant amount of challenges.
Small organization challenges
When you focus so much of your time on growing your organization or mission or improving your products and services, how are you able to find time to deploy the appropriate amount of resources to oversee HR? From talent acquisition and employee retention to compliance, payroll, and benefits, HR mustn't take a backseat in a small entity. Failures in the following areas could mean disaster and ultimately result in:
Loss of productivity
In this article, we've laid out the top HR challenges that small organizations will need a plan for as well as some strategies on how to overcome them.
Hiring new employees is a significant financial and time commitment for smaller organizations. So when the process doesn't go right or is mishandled, it only compounds the complexity of the process.
For example, on average, it takes more than 23 days to locate the right candidate, as per Glassdoor, often taking valuable time and resources away from critical projects. For specialized positions, the search process can be much longer. Besides, poorly written job postings will often attract applicants that are not the best fit and therefore clog up your process and negatively impact your ability to identify your best candidates.
Additionally, because of the tight labor market, many organizations will rush their hiring process, which results in bad hires that ultimately do more harm than good, especially when you consider the cost of a bad hire. According to Careerbuild.com, the price is significant.
"So, here are some hard cash figures for you. A CareerBuilder survey found a price tag of $25,000 or higher that is attributed to making a single bad hire by 41% of companies. In the same study, 25% of businesses placed a bad hire at the cost of $50,000 or higher."
While most small businesses depend on referrals with regard to hiring, interviews still need to be consistent and conducted in a manner that attracts quality candidates and outlines clear next steps for the applicants.
Today more than ever, it is pivotal that human resource disputes and engagements are handled with care. Unfortunately, in many cases, you often do not get a second chance to get things right, therefore, making it even more challenging for small businesses to retain high-quality employees.
As stated by the Society for Human Resource Management (SHRM), retention is a developing issue for most, with the average turnover rate sitting at an undesirable 18 percent. The reasons for this can range from poor hiring practices, rough on-boarding, lack of benefits, unresolved employee conflicts, and ineffective communication practices, employees are less inclined to remain with organizations that don't step up to the plate with regards to HR practices.
Workplace training and safety
When employees are brought into an organization, having the proper HR resources can be an extraordinary resource to avoid simple mistakes or more substantial and egregious oversights from happening. Be that as it may, many businesses don't have the time to properly train new employees, which most likely impact influences workplace safety.
As indicated by the National Safety Council, a laborer is injured every 7 seconds, and 25 percent of these injuries are caused by coming into contact with mishandled tools or equipment. Successful training programs have proven to prevent workplace injuries significantly while improving retention. Many organizations will take this a step further to implement safety incentives, such as catered lunches, prizes, or bonuses, to incentivize safety. This is because the cost of rewarding is far less costly than an injury that could have been avoided.
For companies to attract and retain top-caliber candidates, it's vital for small businesses to give deliberate attention to the quality of their employee benefits packages. The best employees will require a comprehensive package that is on par with or exceeds industry standards. In the case of small businesses, they may need to do a little extra to woo candidates away from larger, more established organizations.
A good program should incorporate everything from medical coverage to retirement plans to supplemental protection. In any case, many small firms find that it tends to be super expensive and time-consuming to sponsor and manage a robust package on their own, as compared with companies who have partnered with a PEO or group purchasing organizations.
Small organizations must stay compliant with local, state, and federal guidelines, and failures to comply often go hand in hand with expensive fines. Maybe the most well-known compliance issue for small businesses is employee misclassification. As indicated by the US Division of Labor (DOL), nearly 30 percent of companies that get audited had misclassified employees. The most common misclassification is when companies establish workers as contractors in error when they are acting as W2 employees. Knowing the difference is vital and often hard to distinguish. While the results are often contingent upon whether the DOL and IRS regard the misclassification as deliberate or accidental, it tends to be an expensive error either way.
It doesn't stop there; there are many laws that must be considered as your company grows and scales. Some of the requirements to be considered are the Fair Labor Standards Act (FLSA), the Equal Pay Act (EEOC), and the Americans with Disabilities Act (ADA), to give some examples. It's essential to remain on top of these federal guidelines to stay compliant and out of hot water.
When growing an organization, there is always a potential for conflict in any working environment, and overlooking it will cost your organization time and money. A study done by CPP, Inc. found that drama in the workplace costs companies $359 billion in paid hours totaling a price of 2.8 hours per week with US employees. That is a staggering amount of lost productivity. Not having an HR resource to influence positive conflict outcomes will waste valuable time, money, and emotional energy and ultimately negatively impact employee retention.
For small businesses, overseeing payroll and managing tax payments can be a time-consuming headache. On average Small and medium-sized organizations spend $2,000 per employee every year to deal with payroll, as indicated by research done by PricewaterhouseCoopers. The truth is, bookkeeping and tax filing are a considerable pain. Yet, they are a necessary evil for your entity with regards to maintaining a strategic approach to compliance issues. In an article written by AllBusiness.com, it was found that six common areas caused the biggest problems for employers. Tax penalties were typically charged on underpayments, failure to file or late filings, failure to pay, accuracy-related penalties, tax fraud, and trust fund recovery penalties. It's safe to say that most of these can and should be avoided by partnering with groups that understand and abide by the complexities of the tax code.
HR solutions you can rely on
How you are hiring, retaining, and managing your employees has a direct impact on productivity and engagement, and many areas often need improvement. Couple that with the time constraints that most face when it comes to the role of Human Resource Management, and you've got a recipe for disaster. Seeking the expertise of qualified professionals in the HR outsourcing realm can be an effective strategy to improve the employment experience and save valuable time, money, and resources.
For a first-class HR experience that will help you find the best solution for your needs, let's schedule some time to talk today.
About The 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.