The Most Common HR Issues for Small Businesses and How to Tackle Them

As a consultant dedicated to helping small and medium-sized businesses (SMBs) thrive, I often see owners and solo HR managers struggle with numerous people-related issues. Though HR challenges in larger corporations grab headlines, they plague small companies too.

In this article, we will learn the most common HR issues SMBs face and how to resolve them. Let‘s take a look.

Attracting and Hiring Qualified Talent

A recent Paychex survey found that 82% of SMB leaders say hiring and retention is their top challenge. With limited budgets, small companies can‘t compete with big brand names and high salaries in the job market. As a result, critical roles stay vacant for too long.

Real-World Example:
As a manufacturing firm‘s solo HR manager, you‘ve posted an opening for a critical automation engineer role. However, due to low pay and location limitations, just a handful of underqualified candidates have applied after several weeks. Production lags without this expertise, and the CEO pressures you to fill the role quickly.

Solution: Get creative with job posting locations and incentives beyond compensation. For example:

  • Offer remote or hybrid work options to expand candidate location reach
  • Highlight culture perks like professional development reimbursement
  • Leverage niche job boards in the specific industry/function
  • Promote referral bonuses for employees who recommend candidates that get hired

I once assisted an SMB machine shop owner struggling for months to hire a quality master machinist. By getting the word out at local trade schools and offering a $500 employee referral bonus, they filled the role in just three weeks!

Smoothly Integrating New Hires

According to recent data, 32% of new hires quit within their first six months on the job. And a shocking 25% resign in just 45 days!

Real-World Example: Your small software firm finally hired a Sales Director to drive revenue growth after nine months of searching. However, she quits unexpectedly after just five weeks due to extreme frustrations with your complex internal systems.

Solution: Structure a thorough yet welcoming onboarding process. This should span from pre-hire to six months out. Critical actions include:

  • Send welcome gifts or cards to new hires‘ homes before their start dates
  • Schedule at least weekly check-ins with new hires and their managers during their first month
  • Create 30/60/90 day goals and extended onboarding plans
  • Assign peer buddies to help navigate internal tools and processes
  • Maintain an open door policy to quickly address any new hire concerns

Strong onboarding integration dramatically reduces early turnover risk while accelerating new hire productivity.

Developing and Retaining Top Existing Talent

The 2022 median employee tenure is just 4.1 years, and the yearly industry turnover rate averages around 57%. Costly turnover results from poor engagement, lack of development, and weak retirement planning.

Real Example: Your family-owned restaurant‘s head chef resigned unexpectedly after 15 loyal years. She cited pay and schedule inflexibility issues making her feel undervalued despite no other major concerns.

Solution: Prevent turnover by showing existing employees their value and career growth opportunities. For example:

  • Conduct stay interviews to understand individual needs
  • Offer benefits like flexible scheduling, family leave, and remote work perks
  • Provide clear promotion paths and support earning more certifications/education
  • Set up 401(k) matching and give long-tenure awards
  • Encourage open dialogues with leadership about improvements

Proactively developing and engaging teams leads to an average of 21% higher profitability and 41% lower absenteeism, based on Gallup.

While certainly not exhaustive, focusing on attracting, integrating, and retaining top talent resolves some of the most universal HR issues facing SMBs. With constrained resources, getting creative and doubling down on engagement best fuels sustainable growth. Reach out if you need any assistance tackling these people-centric hurdles in your own small business!