The human resources department is undoubtedly the most important asset of an organization. For smaller businesses, having an entire designated HR department can be out of reach and all HR compliance may depend on a less experienced employee or the business owners themselves. Without solid HR expertise, many small businesses struggle to keep up with the complex HR landscape. Below are five big challenges faced by small HR departments.

  1. Insufficient Hiring and Onboarding

One of the most challenging facets of HR is hiring and retaining talented workers. Small businesses are especially impacted by retention struggles. The current skills gap in the United States – a result of historically low unemployment paired with a plethora of open positions for skilled workers – means small businesses are competing against larger corporations to recruit employees from a very small pool of skilled workers.

Keeping new hires can be just as difficult as finding them, and the first few weeks of employment are crucial for establishing new-hire engagement. HR Industry studies show that up to 20% of employee turnover occurs within the first 45 days of employment. The main culprit for early turnover is inadequate onboarding, and small businesses often struggle to find the proper balance of information, training, administration and compliance for their onboarding program. 

  1. Out-of-date Handbook Policies and Information

The employee handbook serves as a compass that employees can use to navigate all of an organization’s policies and procedures. Having an out-of-date handbook, however, can create a huge liability for the employer. An employee handbook should reflect the most current employment laws, regulations and trends, and with those changing so frequently in California, the handbook should be updated yearly to avoid potential liability issues. 

  1. Substandard Training Programs

When employers are unable to invest a lot of time and money into training their employees, they are missing out on a prime opportunity to further build their talent base. Well-trained employees are more productive, are promoted faster, are more engaged and offer better customer service. Training and development is a valuable tool for employee retention, but it is also an essential part of risk management. Adequately training employees helps reduce the chance of employee injuries, client injuries and disputes, and workplace harassment and discrimination. 

  1. Misclassified Employees

Misclassification is one of the most costly mistakes a small business can make. As courts in California continue to change and clarify the legislation surrounding employee classification, it’s more important than ever to ensure workers are properly classified. Employers can face both state and federal penalties for misclassification of workers – and in extreme cases, jail time. 

  1. Lack of Attractive Benefits or Incentives

Small business owners know that benefits and incentives help appeal to potential candidates as well as increase engagement and morale within the organization, but they often struggle to provide benefits and incentives at the same level as larger companies. As employer-provided health care premiums continue to rise, small businesses are having to reduce the amount of benefits they offer. Incentive programs are often overlooked completely because administration and compliance take precedence. While not essential, incentives can boost morale and productivity among employees, and increase engagement and retention. For small businesses, being able to provide competitive benefits and enticing incentives can really help increase employee performance and allow the company to grow faster. 

When building an HR department seems unattainable, small business owners can solve many of their HR challenges by partnering with a Professional Employer Organization (PEO). When employing a PEO, an employer can outsource a wealth of HR tasks – including administration, recruiting and training, risk/safety management, worker’s compensation, compliance with local and federal employment laws, tax administration and more – without having to hire an entire HR department.

About Emplicity:
Since 1995, Emplicity has provided a smarter, more secure, and integrated platform of employer services to its 300 business clients and their 8,500 employees. As a Professional Employer Organization, or PEO, the California-based HR outsourcing firm simplifies the compliance, administration, and support businesses need in the areas of employee benefits, payroll, and human resources technology.

For more information about us, visit or call us at (877) 476-2339. We’d love to make your employee management more simple—and secure.

NOTICE: Emplicity provides HR advice and recommendations. Information provided by Emplicity is not intended as a substitute for employment law counsel. At no time will Emplicity have the authority or right to make decisions on behalf of its clients.

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