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Smart ways for SMEs to handle HR activities

22 min read

Small businesses face a unique set of challenges when it comes to managing their human resources. Limited resources, including financial constraints and a smaller workforce, can make it difficult to establish robust HR practices. The absence of dedicated HR personnel or departments means that business owners or managers often have to take on multiple roles, including handling HR responsibilities.

Balancing the need for cost-effective HR solutions with the desire to create a positive work environment and support employee growth can be a significant challenge. Despite these challenges, small businesses can overcome them by implementing strategic HR approaches tailored to their specific needs and leveraging technology to streamline processes and maximize efficiency.

HR simplifies challenges for small businesses by ensuring compliance with labor laws, streamlining recruitment processes, facilitating effective onboarding, and promoting employee training and development. With their expertise and guidance, HR professionals enable small businesses to navigate HR complexities efficiently, creating a productive and engaged workforce that contributes to long-term success.

The Role and key functions of Human Resources in Small and Medium Enterprises

Human resources (HR) holds a pivotal role in the success of small and medium enterprises (SMEs). The importance of human resource functions in small and medium enterprises (SMEs) cannot be understated. HR functions play a critical role in enabling SMEs to effectively manage their most valuable asset—their employees. Let’s delve deeper into the vital role Human Resources plays in SMEs:

  1. Strategic Workforce Planning: HR in SMEs takes a proactive approach to align the organization’s human capital with its strategic objectives. By understanding the business goals and objectives, HR assesses the workforce requirements, identifies skill gaps, and devises effective recruitment and retention strategies. This ensures that the right talent is acquired and retained to drive the company’s growth.
  2. Talent Acquisition and Recruitment: HR is responsible for attracting and selecting top talent for SMEs. They craft compelling job descriptions, utilize various recruitment channels, and implement efficient selection processes to identify candidates who possess the necessary skills and cultural fit. This ensures that SMEs have a capable workforce to fulfill their objectives.
  3. Onboarding and Talent Integration: Once new employees are hired, HR plays a crucial role in facilitating their smooth integration into the organization. HR conducts comprehensive onboarding programs that introduce employees to the company culture, policies, procedures, and their specific roles and responsibilities. By ensuring a positive onboarding experience, HR promotes higher employee engagement and reduces turnover.
  4. Learning and Development: HR recognizes the importance of continuous learning and development in SMEs. They identify skill gaps, design training programs, and facilitate professional development opportunities for employees. This includes workshops, seminars, mentoring programs, and access to online learning platforms. By investing in employee growth, HR enhances the skills and capabilities within the organization, contributing to its long-term success.
  5. Performance Management: HR establishes robust performance management systems in SMEs. They collaborate with managers to set clear performance expectations, provide regular feedback, and conduct fair performance evaluations. HR ensures that performance appraisals are tied to goal attainment and skill development, promoting a culture of accountability and continuous improvement.
  6. Total Rewards and Compensation: HR designs competitive compensation and benefits packages in line with the organization’s financial capabilities and industry standards. They conduct salary benchmarking exercises, administer payroll processes, and manage employee benefits such as health insurance, retirement plans, and leave policies. HR ensures that SMEs attract and retain top talent by offering fair and attractive reward programs.
  7. Employee Relations and Engagement: HR fosters positive employee relations within SMEs. They act as a trusted resource for employees, addressing their concerns, grievances, and conflicts. HR promotes open communication, mediates disputes, and implements employee engagement initiatives such as team-building activities, recognition programs, and work-life balance initiatives. By nurturing a supportive and engaging work environment, HR enhances employee satisfaction and productivity.
  8. Compliance and Risk Management: HR ensures that SMEs adhere to relevant employment laws and regulations. They stay updated on legal requirements, establish policies and procedures to ensure compliance, and maintain accurate employee records. HR safeguards the organization against potential legal risks by implementing fair employment practices, promoting workplace safety, and managing contractual obligations.
  9. Succession Planning and Talent Management: HR plays a crucial role in identifying high-potential employees within SMEs. They develop succession plans to ensure a smooth transition of key roles in the organization. HR implements talent management strategies, including mentoring, career development plans, and leadership programs, to nurture the growth and retention of top performers.
  10. HR Metrics and Analytics: HR leverages data and analytics to drive informed decision-making within SMEs. They analyze HR metrics such as turnover rates, employee satisfaction, training effectiveness, and recruitment costs to identify areas for improvement and guide strategic HR initiatives. By utilizing data-driven insights, HR contributes to the overall performance and competitiveness of SMEs.

By strategically managing the organization’s human capital, HR ensures the acquisition, development, and retention of talent, fostering a high-performing workforce that drives the growth and success of SMEs.

What are the important/smart HR activities for small businesses?

Effective HR activities play a pivotal role in small businesses, influencing employee performance, commitment, and loyalty, and ultimately contributing to the achievement of business objectives and mission. Several HR activities are crucial for small businesses to effectively manage their workforce and achieve their goals. Here are some of the important HR activities for small businesses:

1. Recruitment and Hiring:

Effective recruitment and hiring practices are essential for small businesses to attract and select qualified candidates who fit the organization’s culture and contribute to its growth. HR professionals develop job descriptions, advertise vacancies, screen resumes, conduct interviews, and assess candidates’ qualifications. By employing robust recruitment strategies, HR ensures that small businesses have access to a pool of talented individuals. This increases the likelihood of hiring the right candidates who can drive the business forward and meet its objectives.

2. Compliance and Legal Requirements:

Staying compliant with labor laws and regulations is crucial for small businesses to avoid legal risks and penalties. HR professionals ensure that the organization follows applicable laws related to employment, safety, and other regulatory requirements. They develop and implement policies and procedures to maintain compliance, mitigating potential legal issues and protecting the business’s reputation.

3. Onboarding:

Onboarding is a critical HR activity that sets the foundation for a positive employee experience and successful integration into the organization. HR professionals design and implement onboarding programs that introduce new hires to the company’s culture, values, policies, and procedures. By providing the necessary information and resources, HR facilitates a smooth transition for new employees, enabling them to quickly acclimate to their roles and become productive contributors. Effective onboarding increases employee engagement, reduces turnover, and sets the stage for long-term success within the organization.

4. Employee Relations and Conflict Resolution:

HR plays a critical role in managing employee relations and addressing conflicts or disputes that may arise. HR professionals serve as a resource for employees, providing guidance, mediation, and fair resolution of workplace issues. Building positive employee relations and effectively managing conflicts contribute to a harmonious work environment and promote productivity and employee satisfaction.

5. Performance Management:

Managing employee performance is vital for small businesses to optimize productivity and achieve organizational goals. HR professionals collaborate with managers to establish performance expectations, set goals, provide regular feedback, and conduct performance evaluations. By implementing performance management systems, HR ensures clarity in performance standards and helps employees understand how their contributions align with business objectives. Effective performance management fosters employee growth, identifies development opportunities, and strengthens overall organizational performance.

How Do HR activities Differ in Small and Medium Companies?

Whether in a small business or a large corporation, HR departments play a significant role in driving organizational success. However, it is essential for HR departments in small businesses to understand and adapt to the unique factors that differentiate them from larger companies. These factors include size, responsibilities, resources, and recruitment methods. Small businesses must recognize that their HR approach needs to be tailored to their specific needs and circumstances in order to achieve their mission effectively.

1. Size of the organization:

The size of a business is a noticeable differentiating factor between small and large companies. Small businesses typically have limited office space, a smaller number of employees, and a narrower customer base compared to larger corporations. This difference is also evident in the human resources (HR) department. In small businesses, the HR team is typically smaller, often consisting of only a few employees. Due to resource constraints, HR professionals in small businesses often have additional responsibilities beyond their HR role, requiring them to wear multiple hats to manage various HR functions effectively.

Large companies, in contrast, have a hierarchical structure with multiple management levels. They have the capacity to allocate specialized HR roles across different levels, such as HR managers overseeing a team of HR assistants. With a larger workforce, large companies can delegate specific HR tasks to specialized HR professionals. However, in small businesses, where the employee pool is smaller, HR professionals are typically involved in a wider range of responsibilities. This could include recruitment, employee relations, payroll, benefits administration, and other administrative tasks. The diverse range of responsibilities in small business HR reflects the need for efficiency and adaptability in managing HR operations.

The differences in size between small and large businesses also influence the level of responsibility assigned to employees. In small businesses, employees at various levels often assume multiple roles and responsibilities. This means that HR professionals in small businesses may be involved in different aspects of HR, necessitating a comprehensive skill set. On the other hand, large companies can afford to have employees specialize in specific HR functions, allowing for more focused expertise. The broader range of responsibilities in small business HR highlights the importance of flexibility and multitasking skills for HR professionals in effectively managing HR activities within the unique context of a small business.

2. Responsibilities:

HR professionals in small organizations often find themselves taking on multiple roles to fulfill the HR needs of the company. For example, an HR manager in a small business may also handle tasks such as assisting the managing director, managing payroll, or even performing accounting functions. Due to the constraints of a small team or even a single person, HR units in small businesses may adopt a more reactive approach, focusing on addressing immediate HR needs rather than proactive strategic planning.

Large organizations typically have dedicated HR departments to handle the diverse range of HR responsibilities. With specialized teams for payroll, benefits, policies, procedures, and talent development, large companies are able to distribute the workload across different experts. While small businesses require HR professionals to take on multiple responsibilities, large businesses can delegate tasks to specialized teams, allowing for more focused expertise and support. Understanding these differences is crucial for HR professionals working in small or large businesses, as it shapes their approach to managing HR activities and influences the level of support and resources available to them.

3. Resources:

Small businesses typically operate on limited budgets, which affects the resources allocated to the HR department. While small businesses acknowledge the importance of areas such as employee training, team building, and policy development, they may need to adopt alternative approaches to address these needs effectively.

One strategy is to leverage the expertise of mentors who can support the business at a low cost or on a voluntary basis. Mentors are professionals in the industry who provide guidance and advice to employees on business operations and sales improvement. Small businesses find that mentoring programs contribute significantly to upward mobility and growth within their organizations. The resource disparity between small and large businesses affects the HR capabilities and approaches. While small businesses may have constraints in terms of financial resources, they can overcome these limitations by adopting innovative solutions like mentorship programs and cost-effective training alternatives. By thinking outside the box and making the most of available resources, HR professionals in small businesses can still facilitate employee growth, engagement, and the achievement of business objectives.

4. Recruitment methods:

Recruitment practices in small businesses differ from those in large companies due to resource limitations. Small businesses often rely on streamlined approaches, such as social media searches, reference checks, and final interviews, to assess potential candidates. Internal job postings, cost-effective advertising methods, and employee referrals are commonly used to optimize recruitment efforts. These strategies help small businesses make the most of their limited resources while still attracting and retaining skilled employees.

In small businesses, where employee turnover can have a significant impact on the bottom line and reputation, effective recruitment practices are crucial. While large companies may have more extensive hiring processes, small businesses prioritize efficiency and cost-effectiveness. By focusing on targeted methods and leveraging existing networks, small businesses can overcome resource constraints and successfully attract the talent they need to thrive.

Significant HR challenges for SMEs and Startups

Small businesses and startups often face unique HR challenges that can impact their growth and success. Some common HR challenges for small businesses and startups include:

1. Developing a Strong Company Culture: 

Establishing a robust company culture can be a significant challenge for small businesses and startups. Limited resources and a fast-paced environment make it difficult to create a cohesive culture that aligns with the organization’s values and objectives. Overcoming this challenge requires intentional efforts to define and communicate the desired culture, foster employee engagement, encourage open communication, and provide opportunities for team-building activities. 

2. Recruiting Senior Positions: 

Recruiting for senior roles in small businesses and startups presents unique challenges. Limited brand recognition, competition with larger organizations, and the need for specialized expertise make it challenging to attract experienced professionals. To address this, it is crucial to highlight the organization’s growth potential, unique opportunities, and the ability to make a significant impact. Utilizing industry connections, networking, partnering with executive search firms, and effectively communicating the company’s mission and vision can help attract top talent to fill senior positions. 

3. Attracting and Retaining Talent: 

Attracting and retaining talented individuals is a common challenge for small businesses and startups, as they often compete with larger companies that have more established reputations and resources. To overcome this, it is important to showcase the organization’s compelling attributes such as a dynamic work environment, growth opportunities, and a supportive culture. Leveraging online platforms, social media, employee referrals, and networking events can enhance visibility and attract top talent to the organization. 

4. Developing Effective HR Policies: 

Developing comprehensive HR policies can be challenging for small businesses and startups, particularly in the absence of dedicated HR expertise. It is essential to ensure that HR policies align with legal requirements, industry standards, and the organization’s values. Seeking guidance from HR consultants or legal professionals can help in creating clear and compliant policies that address key areas such as employee conduct, leave, performance management, and benefits. 

 5. Implementing Effective Employee Training Programs: 

Implementing effective training programs for employees can be challenging for small businesses and startups due to limited resources and time constraints. Prioritizing training needs, utilizing online learning platforms, offering on-the-job training, and encouraging knowledge sharing among employees can help overcome these challenges. Investing in employee training enhances performance, increases job satisfaction, and contributes to long-term business growth. 

6. Creating a Feedback Culture:

Obtaining and acting upon employee feedback can be challenging for small businesses and startups without established feedback mechanisms. However, feedback is essential for fostering a positive work environment, addressing concerns, and promoting employee engagement. Establishing channels for anonymous feedback, conducting regular employee surveys, and implementing open-door policies facilitate honest and constructive feedback. Active listening, addressing employee concerns, and implementing appropriate changes based on feedback contribute to a culture of trust and continuous improvement within the organization.

How to Tackle the Situation?

To tackle such situations, business owners can start using HR and payroll system right from the start. It’s as simple as maintaining a Facebook account. Few clicks here and there and you are set. 

Few advantages: 

Automated payroll software. So don’t have to break your heads calculating numbers and avoid errors. 

Timesheets will help you allocate and review individual performance in a team and suggest/train for betterment. 

Can plan your projects better with leave and resource management. 

Clients would be happy to see super professional documentations exported from the tool. 

And many more… 

You can start with a free trail and see for yourself. 

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    Meet the author


    Content Writer

    Bhagyashree Shreenath is a full-time Content Writer at Keka Technologies. She is very passionate about writing and loves to write about the gaps in organization & human resource management strategies to handle the related concerns. When she isn’t writing, you will find her reading a book, or exploring new places.


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