Running a small business means juggling countless responsibilities, but HR is one area that demands your attention. From ensuring compliance to fostering a positive workplace culture, HR plays a pivotal role in your business’s success.
HR isn’t just for large corporations. No matter the size of your business, HR ensures your team is managed effectively, compliance is maintained, and your company culture thrives. For small businesses, HR is particularly crucial as it helps streamline essential processes like hiring, onboarding, and performance management, freeing up time and resources to focus on growth.
- Key HR Functions
- Best practices for small business HR
- Outsourcing HR: Is it right for your small business?
- The best HR software for small businesses
Key HR Functions
Below, we’ve combined and expanded on the core HR functions and responsibilities to give you a clear, actionable roadmap for managing your people effectively.
1. Ensuring legal compliance and risk management
Compliance is the cornerstone of HR. Your business must adhere to labour laws, regulations, and industry standards to avoid costly penalties and legal disputes. HR ensures that every aspect of your operations—from hiring practices to benefits administration—aligns with the law.
Key actions:
- Conduct regular audits to identify and address compliance gaps.
- Stay updated on changes to employment laws, such as minimum wage adjustments or new parental leave policies.
- Implement clear policies on discrimination, harassment, and workplace safety.
Pro tip: Use a free HR compliance checklist to simplify this process and ensure nothing slips through the cracks.
2. Mastering recruitment and onboarding
Hiring the right people is critical to your business’s growth. HR manages the entire recruitment process, ensuring it’s efficient, equitable, and aligned with your company’s values.
Key actions:
- Write clear, inclusive job descriptions that attract diverse talent.
- Streamline the hiring process with structured interviews and background checks.
- Create a seamless onboarding experience that helps new hires feel welcomed and prepared.
Why it matters: A strong onboarding process sets the tone for employee success, improving retention and engagement from day one.
3. Managing payroll and benefits effectively
Timely and accurate payroll processing is non-negotiable. HR ensures your employees are paid correctly and on time, while also managing benefits administration.
Key actions:
- Develop a competitive compensation strategy that includes salary, bonuses, and perks.
- Use payroll software to automate calculations and reduce errors.
- Regularly review benefits packages to ensure they meet employee needs and align with your budget.
Why it matters: A robust compensation strategy boosts morale, productivity, and retention.
4. Fostering employee development and growth
Investing in your team’s development is a win-win. HR plans and implements training programs, mentorship opportunities, and individual development plans (IDPs) to help employees grow.
Key actions:
- Identify skill gaps and provide targeted training programs.
- Encourage mentorship and peer learning to build a culture of continuous improvement.
- Set clear career progression paths to motivate employees and reduce turnover.
Why it matters: Employees who feel supported in their growth are more engaged, productive, and likely to stay with your company.
5. Supporting performance management
Regular performance reviews are essential for employee development and organisational success. HR ensures these reviews are fair, consistent, and aligned with your business goals.
Key actions:
- Use performance management software to streamline reviews and track progress.
- Provide constructive feedback and set measurable goals for employees.
- Recognise achievements and address areas for improvement promptly.
Why it matters: Effective performance management drives productivity, improves morale, and helps employees reach their full potential.
6. Building a thriving company culture
Your company culture is the heartbeat of your business. HR plays a key role in fostering a positive, inclusive, and collaborative environment.
Key actions:
- Organise team-building activities to strengthen relationships.
- Promote diversity, equity, and inclusion (DEI) initiatives.
- Implement recognition programs to celebrate employee achievements.
Why it matters: A strong culture attracts top talent, boosts engagement, and drives innovation.
7. Handling employee relations and conduct
Clear policies and procedures are essential for managing employee behaviour and resolving conflicts. HR ensures that expectations are communicated and enforced fairly.
Key actions:
- Develop an employee handbook outlining conduct expectations, disciplinary procedures, and grievance policies.
- Address issues promptly and consistently to maintain trust and fairness.
- Provide training on workplace ethics and conflict resolution.
Why it matters: Clear guidelines and fair enforcement create a respectful and harmonious workplace.
8. Managing absences and leave
Absences are inevitable, but they can be managed effectively with clear policies and procedures. HR ensures that your business complies with laws on sick leave, parental leave, and other types of time off.
Key actions:
- Implement policies for sick pay, compassionate leave, and return-to-work procedures.
- Keep accurate records of absences and conduct return-to-work meetings.
- Stay informed about legal entitlements, such as maternity, paternity, and adoption leave.
Why it matters: Clear absence management policies reduce disruptions and support employee wellbeing.
9. Prioritising health and safety
A safe workplace is a productive workplace. HR ensures that your business complies with health and safety regulations and protects your employees from harm.
Key actions:
- Conduct regular risk assessments and address potential hazards.
- Provide training on workplace safety and emergency procedures.
- Ensure employees have the necessary equipment and resources to work safely.
Why it matters: A safe workplace not only complies with the law but also boosts employee morale and productivity.
10. Navigating employee exits and dismissals
Employee departures, whether voluntary or involuntary, must be handled with care. HR ensures that exits are managed professionally and in compliance with the law.
Key actions:
- Follow a clear disciplinary procedure for dismissals, as outlined in your employee handbook.
- Conduct exit interviews to gather feedback and identify areas for improvement.
- Provide support for employees transitioning out of the business, such as outplacement services.
Why it matters: Professional handling of exits protects your business from legal risks and maintains your reputation as a fair employer.
Best practices for small business HR
- Align HR with Business Goals
Define your HR needs by evaluating compensation, benefits, compliance, and culture. Involve stakeholders early to build a strong foundation. - Streamline Hiring and Onboarding
Implement structured recruitment and onboarding processes to ensure compliance, inclusivity, and smooth transitions for new hires. - Classify Employees with Precision
Proper employee classification (full-time, part-time, contractor) ensures accurate payroll, benefits, and compliance with labor laws. - Navigate Employment Laws with Confidence
Stay informed about labor regulations like FLSA and local laws. Regular legal checkups help avoid compliance risks. - Build a Transparent Workplace with Policies
A well-crafted employee handbook provides clarity on attendance, payroll, and company expectations, fostering consistency. - Design a Competitive Compensation Package
Develop a balanced strategy that attracts top talent while maintaining financial sustainability, covering salary, perks, and benefits. - Ensure Payroll Runs Like Clockwork
Use payroll software to automate payments, minimize errors, and maintain timely compensation for employees. - Keep HR Processes Well-Documented
Maintain clear records of policies, incidents, and workflows to enhance transparency and internal communication. - Supercharge HR with Tech Solutions
Leverage HR software for payroll, attendance tracking, and workforce management to boost efficiency and accuracy.
Outsourcing HR: Is it right for your small business?
Outsourcing HR can be a cost-effective solution for small businesses. It saves time, ensures compliance, and provides access to expert advice. Consider outsourcing if:
- You lack the resources to manage HR in-house
- You need specialised support for payroll, compliance, or recruitment
- You want to focus on core business activities
Benefits of outsourcing HR:
- Access to CIPD-accredited professionals
- Tailored packages to suit your needs
- Cost savings compared to hiring a full-time HR manager
- Staying updated on legislative changes
Cons of outsourcing HR:
- Less control over processes and outcomes
- HR strategy is usually standardised rather than being tailored to the unique needs of your business
- Risks to employee confidentiality and data security
The best HR software for small businesses
Sage HR
A modular, mobile-ready HR software for businesses with up to 250 employees. It streamlines HR tasks like leave management, performance tracking, and payroll integration. Offers a 30-day free trial.
Breathe HR
A cloud-based HR platform for small and medium-sized businesses, automating leave management, recruitment, and performance tracking. Provides a 14-day free trial with flexible subscription plans.
BrightHR
An all-in-one HR, health & safety, and people management platform with cloud storage, payroll integration, and 24/7 employment law advice. Trusted by 100,000+ businesses.
Deel HR
A global HR solution designed for international hiring and compliance, offering automated onboarding, payroll, and legal compliance in 150+ countries. Ideal for businesses scaling globally.
Moorepay HR
A comprehensive HR and payroll solution that automates workflows, enhances compliance, and provides mobile accessibility for employee management and reporting.
Check out our full list of the best HR software for small businesses.
Final thoughts
HR is more than just payroll and paperwork—it’s about creating a workplace where your team feels valued, motivated, and empowered to succeed. By investing in HR processes and prioritising your people, you can build a thriving business that attracts top talent, maintains compliance, and fosters a positive company culture.
Whether you manage HR in-house or outsource it, the key is to stay proactive, informed, and people-focused. With the right strategies and tools, your small business can achieve long-term success and become a workplace where innovation and loyalty go hand in hand.
