You expect to go into large companies and international corporations and find dedicated HR departments. Not so for small business. According to the Society for Human Resource Management (SHRM), 54% of America's small businesses don't utilize professional HR function. Ownership handles employment issues on their own. Our experience suggests this is not good. But it gets worse.
The SHRM also says that 70% of small businesses that put HR responsibilities on the shoulders of non-HR personnel are relying on people who have no experience in handling employee-related issues. More than 80% of those individuals say they are not confident in their own HR skills.
Although BenefitMall only provides a limited menu of HR services, we work with HR and payroll departments around the country. We know all too well how much small businesses suffer when they do not have their HR houses in order. That's why we think it's important for small businesses to intentionally develop HR function.
Legal Compliance is Complicated
The small business owner looking for good reasons to begin establishing HR function would do well to start looking at legal compliance. Needless to say, compliance is a complicated matter these days. It is only getting more complicated as time marches on. Between sexual harassment laws, discrimination laws, and the evolving landscape that is subcontracting, there is just too much to keep up with for employees who are not professional HR managers.
The unfortunate part of this particular aspect is that a company can get itself into real trouble long before it knows that compliance is an issue. By then, it is too late. Wouldn't it be better to avoid the risks of a lack of compliance by staying ahead of things with a fully trained and knowledgeable HR staff?
The largest companies in the world have separate HR and payroll departments for efficiency's sake. However, we get the fact that small businesses may not have the financial resources to establish both. In such cases, payroll can be incorporated into HR function until growth facilitates separating the two.
We mention this for the simple fact that small business owners tend to be only slightly more knowledgeable about payroll than they are employment issues. So even though payroll could be kept separate from HR, it might be beneficial to incorporate the two as a company intentionally develops HR function. Combining payroll with HR would alleviate ownership from those responsibilities altogether.
Hiring and Firing
Another valid reason for developing HR function is to create a formal framework for hiring and firing. When hiring and firing are left to ownership directly, there tends to be a haphazard approach in place. Why? Because ownership has so many things on its plate that hiring and firing are handled on-the-fly.
Trained HR personnel know how to create policies and procedures that yield good results. They know how to go out and recruit new employees. They know how to find the best talent, get them on board, and get them trained. They even know the pitfalls that come with employee dismissal. Trained HR professionals can handle dismissals more professionally and in a way that protects a company against claims.
There are more reasons small businesses should intentionally develop HR function. The three presented here are a starting point only. Our hope in presenting them is to help you understand that HR only becomes more complicated as a business grows. If your small business is still addressing HR function via people who are not trained in HR, you are missing it. It is time to rethink how you are doing things.