The 5 Biggest HR Challenges for Small Businesses and How to Overcome Them

Running a small business means wearing many hats, often pushing HR issues to the back burner while you juggle daily operations. Costume changes, juggling - it makes running a business sound like a circus. Unfortunately, you can’t run away from challenges like high turnover, legal headaches, and diminished employee morale. Instead, these HR issues must be tamed.  

1. Talent Acquisition and Retention 

The Problem: Competing with big companies for skilled workers is tough enough when you're working with a smaller budget and less name recognition. When someone leaves, it hurts—replacing a salaried employee costs 33% to four times their yearly pay, while finding a new hourly worker takes 41 days and over $4,000. This is exacerbated by a global hiring shortage, where 74% of employers can’t find the talent they need. 

Your Game Plan: 

• Pay competitively: A Harvard Business Review study showed that bumping base pay by 10% increases retention odds by 1.5%. Health benefits and retirement contributions matter too. 

• Embrace flexibility: Over 80% of hourly workers want control over their schedules. Remote work and flexible hours show you value work-life balance. 

• Build your brand: Create a workplace culture people actually want to join. When your "company culture hat" fits well, quality candidates notice. 

• Nail the onboarding: Structured onboarding boosts retention by 82% and productivity by 70%. Make new hires feel welcome from day one. 

2. Staying Compliant 

The Problem: Employment laws shift constantly, making compliance a moving target. Small businesses lose about $10,000 yearly to HR non-compliance. That’s a major hit for companies that might have small margins for error. 

Your Solution: 

• Automate the heavy lifting: HR compliance software tracks law changes and handles routine tasks. Future Systems' Advanced HR solutions is one example of a central hub that allows employers to track all of their crucial data in one streamlined location. 

• Get expert help: If you’re going the non-technical route, onsider delegating compliance to a PEO (Professional Employer Organization) within the US or an EOR (Employer of Record) internationally, so you have trusted experts monitoring adherence to relevant tax and employment laws 

• Document everything: Clear guidelines and detailed records protect you. Create an employee handbook that covers your bases. 

• Secure your data: Use encrypted HR software that meets GDPR and CCPA standards. These two sets of business regulations are among the most stringent, and must be followed if you engage with European customers or customers in California. 

3. Keeping Employees Engaged 

The Problem: 52% of employees aren't engaged, and 17% are actively checked out. Disengaged workers miss more work, produce less, and hurt profitability. With an overwhelming majority of employees showing burnout warning signs, this "employee engagement hat" needs immediate attention. 

How to Fix It: 

• Support mental health: Open conversations about well-being and flexible work options reduce burnout. 

• Invest in wellness: Every dollar spent on wellness programs saves $5.82 in reduced absenteeism. 

• Recognize good work: Both formal and informal recognition boost morale significantly. 

• Communicate clearly: Regular check-ins and feedback sessions catch problems before they escalate. 

4. Streamlining HR Processes 

The Problem: 45% of HR leaders spend over half their time on paperwork. And so much of that time is lost navigating between spreadsheets, hunting through digital folders, and managing paper records. These "Frankensystems"—messy combinations of unreliable tools—waste time and create errors.  

The Fix: 

• Automate routine tasks: HR software cuts administrative costs by 30% for professionals and 49% for employers. Platforms like Future Systems’ Advanced HR automate payroll, attendance, and benefits enrollment. 

• Centralize everything: One system for all employee information saves time and prevents mistakes. 

• Enable self-service: Employee portals let staff access paystubs and PTO info without bugging HR. 

5. Training and Skills Development 

The Problem: A lack of training drives 40% of employees away within their first year. Employees yearn for opportunities to change hats - to grow. If your company structure doesn’t provide those opportunities, employees will find them elsewhere. 

Your Approach: 

• Use smart training tools: Learning management systems deliver customized training efficiently. 70% of employees prefer online or self-paced learning. 

• Create mentorship programs: Peer learning builds connections and develops skills organically. 

• Map career paths: Clear advancement opportunities keep talent from looking elsewhere. 

• Develop leaders: Strong managers inspire teams and identify individual strengths. 

Need More Help Navigating HR?

At Future Systems, tackling these challenges isn't just good business—it's essential for survival. While you're busy wearing all those different hats, let our HR solutions handle the heavy lifting so you can focus on growth. 

Ready to get started? Call us at 800-453-5809 or request a quote. We're here to help you succeed.