Your One-Stop Guide for Human Resources for Small Businesses

by Derek Jones, · 9 minutes

Your One-Stop Guide for Human Resources for Small Businesses

As a small business owner, one of your main priorities is to manage your workforce and keep your employees happy. Your employees are among your most valuable resources and are a crucial aspect of your company’s growth. Whether your business is just getting started, or you have been in business for a while, it’s important to have a thorough knowledge of human resources for small businesses.

It’s also important to have thorough knowledge in how to optimize your employee scheduling procedures so you aren’t spending hours on out each week building schedules when you should be focused on bettering your business. To help you out, click on the link below to start your free trial of Deputy.

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What is human resources?

According to the online Business Dictionary, human resources is defined as:

“The division of a company that is focused on the activities relating to employees. These activities normally include recruiting and hiring of new employees, orientation and training of current employees, employee benefits and retention. Formerly called Personnel.”

Your One-Stop Guide for Human Resources for Small Businesses

All the human resources functions above must be addressed in your small businesses for two main reasons. First, you need to be legally compliant when dealing with your employees. Furthermore, you should aim to encourage a happy and productive workforce. These elements help to enhance the profitability of your business.

The functions of a human resources department may be managed by a sole proprietor or partners in a very small or fledgling establishment, such as a retail store or coffee shop.


HR for small businesses

In relation to what’s considered a small business, the United States Small Business Administration’s blog, advises that mining or manufacturing companies with 500 or fewer employees qualify as a small business. Non-manufacturing industry standards for a small business include companies earning $7.5 million or less, in average annual receipts. Different industries have different criteria in relation to the number of employees that make up a small business.

As a small business owner, the following human resources tips will help you operate a legal and productive business:

  • Know the law

It is important for human resources staff to be very familiar with all laws regarding a variety of issues affecting small business employees. The Federal Employee Handbook provides you with some legal knowledge to stay on the right side of the law when dealing with employees. Some basic issues you must be aware of include hiring practices, pay and benefit requirements, safety standards and work schedules along with vacation and leave time regulations.

An important piece of legislation that you should be aware of, especially if you own a retail or a fast-food business, is predictive scheduling. This legislation places obligations on you when scheduling your hourly employees.

Download our free e-book below to find out whether your business is affected by predictive scheduling legislation and how you can become compliant.

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  • Keep appropriate employee records

You should ensure that you maintain employee records in a safe and secure way. Ideally, your records system should be digitized with the functionality to integrate with different systems. For example, Deputy serves as a communication hub and stores the communication between you and your employees. Additionally, Deputy also integrates with key software, like payroll, for easy access to all the data that relates to your employees.

The benefits of digitizing your employees’ data include:

  1. Preparation for future company growth.
  2. Consistency of performance reviews.
  3. Streamline of the recruitment process.
  4. Easier analysis of HR data.
  • Be aware of employee engagement

Successful onboarding and an organized training schedule help your small business employees to feel engaged with your business. Engaged employees may be more loyal and are more likely to remain with your business. Therefore, paying attention to employee engagement in your HR strategy could save you money by lowering employee turnover rates.

Encourage your employees to buy-in to your small business culture by training management to communicate your vision and goals. Adopt a leadership style that facilitates making your employees feel like they’re part of achieving the vision of your small business.

You should take into account the following when dealing with human resources for your small business:

  1. Be aware of and adhere to all laws in relation to your employees.
  2. Establish a healthy feedback process.
  3. Encourage new hires to find longer-term employees for support during the first few months of employment.
  4. Consider using the services of an HR consultant.
  5. When recruiting employees, use personality tests to make sure new employees will fit in well with your company and the job they’ll be doing.
  6. Clearly establish an anti-harassment policy for protection against complaints of a hostile work environment.
  7. Employ the most current HR technology that caters to employee needs.
  8. Ask simple and insightful interview questions.
  • Employ the right number of staff

Being understaffed can have a negative impact on your small business. This is the case for permanent staff and hourly employees. Although budgets are usually tight when starting a small business, it’s important for you to accurately forecast the number of employees your business will need to operate effectively. When starting out, you can create an organizational chart to outline all the job functions that are necessary for your business to run smoothly.

Your One-Stop Guide for Human Resources for Small Businesses

Another aspect of staffing your business adequately is to ensure your hourly employees are scheduled at the right time. Failing to schedule your hourly employees effectively means you could be overstaffed in quiet periods and understaffed when it gets busy.

Make sure your small business has just the right amount of staff cover by using Deputy. Features like auto-scheduling allow you to create schedules with one click and you can get an accurate estimation of the number of people who are required for different shifts with the use of various demand signs.

Click the link below for a free trial to find out how Deputy can streamline your staff scheduling as well as finding out why it’s trusted by brands like Nike, Amazon, and Ace Hardware.

A free trial of the employee scheduling software Nike, Amazon Pop-up and Ace Hardware use

As your small business grows, it’s important to keep an eye out for signs that insufficient staffing is negatively affecting your reputation and bottom line.

These indicators may include:

  • Excessive overtime.
  • Employee burnout.
  • More customer complaints.
  • New orders not filled in a timely manner.
  • Frequent customer service failures.

The following are ways to manage expansion while your small business is experiencing growth:

  • Technology and automation tools (like Deputy) – These tools can make your current employees more efficient and reduce costs.

  • Evaluate your business needs – For example, you may need more staff to work on a joint venture.

If you operate a seasonal business or are taking on a new project that will require more workers, you could use the services of temporary staffing agencies to fulfill any temporary human resource needs.

Your One-Stop Guide for Human Resources for Small Businesses

Here are some advantages of using a temporary staffing agency when dealing with a brief increase in work requirements:

  • You have the flexibility to add more workers when needed without the long-term commitment to keep them employed.

  • Staffing agencies can provide high-quality workers very quickly.

  • You can get workers experienced in job roles you need filled without a long recruitment process.

  • Temporary staffing agencies usually serve as the employers to the workers they send out, so they handle all the human resource issues such as payroll, benefits, and employment tax requirements.

  • Temporary staffing agencies usually do all the upfront human resource work such as background checks, reference checks, and drug screening.

Another option is to outsource some of your company’s needs to specialized professionals. For example, a Certified Public Accountant can handle your bookkeeping and other financial requirements.

You can also hire the services of a marketing expert to market your small business. If you are unsure about whether you can afford a full-time marketing manager, there are many companies that provide highly skilled marketers on a contractual basis.


Human resources help

You may want to enlist the services of a human resources consultant, especially if you are new to hiring for your small business. The following are advantages and disadvantages of using a human resources consultant for your small business:


Benefits of using a human resources consultant

  • Cost-effectiveness – Your small business has valuable access to highly knowledgeable and experienced HR professionals. The use of HR consultants can work better, in terms of efficiency, rather than building an in-house human resources department.

  • Employee development – Small businesses may benefit from a consultant’s guidance in the area of employee performance and development. Outsourced HR professionals can monitor your employees’ performance and share findings with management. This can relieve managers of some of their administrative workload.

  • More focus on your primary business targets (i.e. making more profit) rather than dealing with day-to-day personnel issues.

  • Saving time – As a busy small business owner, you can be relieved of the hassles of creating essential documents, such as employee handbooks. The handbooks can provide the information employees need to know, such as vacation scheduling, company rules, and safety procedures.

  • Happier employees and decreased turnover – Your small business can reap the benefits of an HR consultant who speaks honestly with employees about their jobs and enacts beneficial changes. In this case, the work of an HR consultant can result in a happier and more productive workforce.

Your One-Stop Guide for Human Resources for Small Businesses

  • Risk management – Employment law is constantly evolving, and company leaders may feel that they are on a never-ending treadmill trying to keep up with the constant changes.

The downsides of a human resources consultant

  • Low morale – While bringing in a HR consultant can result in employees being happier if done right, this action can also be interpreted in a negative way. The timing of introducing an HR consultant to your new business is very important. For instance, if you start your business with the assistance of an HR consultant, you will have the advantage of your new hires only being familiar with that type of HR assistance. However, bringing in such a consultant later could arouse your employees’ suspicions in terms of job losses or pay cuts. You need to bring in an HR consultant that’s ready to win your employees’ support.

  • Steep learning curve for HR consultants – With an outside HR consultant coming into your company, he or she will have to become familiar with your uniqueness as a small business. So it’s essential that any consultant you choose fully understands your company and its values before recommending and enacting any changes.

Your One-Stop Guide for Human Resources for Small Businesses

  • Confidentiality – A truly knowledgeable HR consultant will insist upon entering into a confidentiality agreement with you. The function of an HR consultant naturally involves detailed knowledge of personal employee information. So, insist that your human resources data remains safe. You should not enter into a contract with a HR consultant without an appropriate confidentiality agreement in place. You can hire the services of a labor lawyer to review your agreement with the HR consultant to be certain that you and your business are legally protected.

  • Absence of human interaction – If you choose to outsource your small business HR function to a company that provides over the phone services, your employees could feel that this doesn’t provide them with adequate support. Where your employees are dealing with challenging and sensitive issues like, mental health or reporting a conflict of interest, they may be more comfortable speaking with someone face-to-face. Although outsourcing your HR function may be more cost-effective for your small business, it may discourage your employees from engaging in open dialogue about issues of concern.


Regardless of whether you provide HR services in-house or you outsource this function, you need factual, effective and employee-centered human resource management.

Ensuring your employees are paid on time and accurately is a must when running your small business. Deputy integrates with the most popular payroll software to provide you with the confidence that your hourly employees’ pay is accurate each & every time.

Sign up for a free trial of Deputy (no credit card required) to find out why we are trusted by more than 90,000 businesses and are the highest rated workforce management app on G2 Crowd.

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