Small Business HR Issues

by Neil Kokemuller

Small businesses face human resources challenges distinct from those large companies often experience. The way in which a small business develops and managers its HR system affects the quality of work and retention of employees. Employees have to weigh the HR issues against the approaches companies take to resolve or combat them.


Small businesses sometimes struggle keeping up with the compensation packages larger competitors offer. Their budgets for competitive salaries may be tight. Additionally, rising costs of health and dental coverage and other insurances makes it difficult to provide full premium payments for employees. Thus, employees are sometimes asked to cover partial insurance premiums on their own. While some companies accept and accommodate budget constraints, others take a more aggressive approach and compete on compensation with the belief that stronger talent produces better returns. Flexible work schedules, bonuses for performance and employee discount programs are other relatively affordable ways to enhance employee compensation by tying it to productivity.

Legal Competence

The breadth and depth of human resources expertise is sometimes limited in a small business. Large corporations often have full staffs of HR generalists and specialists whose expertise covers every aspect of legal requirements, compensation, benefits and motivation. In a single unit business, the owner or manager usually oversees all aspects of operation, including HR. HR laws constantly evolve, as regulations are put into place to protect worker rights. Whereas HR professionals are required to keep up with continuing education, small business operators may not have as much familiarity with employee legal and ethical rights. Small business leaders must commit to understanding the legal environment of employment and communicate effectively with supervisors and employees.

Safety and Protection

Implementing safe workplace policies and procedures is an HR function. In physical production workplaces, procedures usually include coverage on proper gear, work processes and equipment use. Small companies may not spend as much time developing and reviewing safety procedures. Additionally, HR oversees emotional safety through policies on workplace violence, abuse and harassment. Lack of policies or oversight on these issues can lead to abusive working relationships, even between managers and workers in a small business.


Small businesses have an advantage in developing a motivated culture so that the chain of command is usually less cumbersome. Plus, a smaller workforce allows leaders to exert more cultural influence. But, small business leaders are often not as familiar with current motivational theories and systems that lead to a positive culture and motivated workforce. They also have less tendency to research employee motivation through feedback and evaluations that include employee input. Ample time in training and development is also necessary to motivate employees with career development and growth opportunities.

About the Author

Neil Kokemuller has been an active business, finance and education writer and content media website developer since 2007. He has been a college marketing professor since 2004. Kokemuller has additional professional experience in marketing, retail and small business. He holds a Master of Business Administration from Iowa State University.

Photo Credits

  • Images