A Guide to HR for Small Businesses in 2023

February 1, 2023
minute read

As a small business owner, you oversee critical aspects of your company. You’re involved in everyday tasks, especially when it comes to human resources. HR includes a lot of paperwork and administration.  

That said, HR functions can be extremely time consuming, even for small businesses. With so much on their plate already, it’s difficult to manage HR functions without additional guidance.  

What is HR?

HR, or human resources, is defined as “the process of managing an organization’s employees… to effectively meet an organization’s goals”, according to The Society of Human Resource Management (SHRM).  

Every company’s HR team is responsible for the employee experience in its entirety, including:

  • Employee engagement
  • Recruitment and retention
  • Company culture
  • Labor law compliance
  • Payroll
  • Employee recognition  

When you can count the number of employees in your company on one hand, it’s easier to manage HR tasks. However, as your business grows, these responsibilities will become overwhelming to handle on your own.  

For small businesses, there are a few primary HR functions. Let’s examine why they’re crucial for your business.  


HR determines a company’s compensation strategy and pay structure. When creating a pay structure, you need to be cognizant of any statutory minimum wages. Additionally, you should have an idea as to what your competitors are offering candidates.  

Employee benefits are a significant part of your company’s compensation package. This includes paid leave, health insurance, employee wellness programs, and commissions.  

Employees would rather work for an organization that provides additional benefits. That said, salary is an important aspect, however, the majority of employees favor a company that supplies benefits.

As a small business owner, you have to identify any benefits you wish to provide by law. In most cases, they depend on your company’s location and often include benefits like paid time off and workers’ compensation.


To conclude, a crucial aspect of compensation is taxes and payroll. Regardless of a company’s size, these processes will eventually prove to be time-consuming and complex in nature. Each day period, payroll can take up to five hours to complete.


Recruitment and Retention

One of the most crucial HR functions for small businesses includes attracting and retaining the most talented candidates. Both recruitment and retention practices are time consuming and quite costly to develop.  

The recruitment process requires employers to prepare job descriptions, manage and organize the interview process, create a framework for hiring decisions, and completing compliance paperwork.  

DEI, or diversity, equity, and inclusion, is a crucial part of recruitment for any business. DEI is one of the leading ways to attract top talent to your organization. Nearly 80% of employees prefer working for a company that values DEI.  

Besides attracting new candidates, HR is also responsible for retention practices and policies. More specifically, strategies that intend to increase employee engagement and satisfaction are an excellent way to enhance employee retention.


Employee Training

To maintain a successful work environment, you have to offer professional development opportunities to your team. It can increase their engagement levels, which can positively affect their daily motivation.  

To help your employees perform to the best of their ability, offer formal workplace training and professional development. Formulate a training and development program that’s well-designed and effective.


A constructive program will fully prepare employees for internal promotions, ultimately saving your company the cost of external recruiting.


Labor Law Compliance  

There are various labor laws and regulations that strictly govern employee interactions within an organization. A primary function of HR involves tracking any developments in labor laws and regulations.  

Your company should be 100% compliant with all of them. It’s your responsibility to keep a close eye on potential developments over time. Small businesses in America must consider their obligations under a string of federal laws including:

  • Title VII of the Civil Rights Act of 1964
  • The Family and Medical Leave Act
  • The National Labor Relations Act
  • The Occupational Safety and Health Act of 1970
  • The Age Discrimination in Employment Act of 1967
  • The Fair Labor Standards Act
  • Titles I and V of the Americans with Disabilities Act of 1990

Regular non-compliance with these federal laws could result in fairly high costs, leading to large fines or other penalties. Not only this, but your company could face reputational damage.


Employee Engagement

Employee engagement plays an important role in a company’s overall success rate. The concept can be simplified as the connection an employee has to the organization they work for, along with its objectives.  

In fact, employee engagement can affect your company’s profitability. Employees that are engaged are more productive and have fewer absences from work.  

Consider this: around 74% of disengaged employees are on the hunt for other work opportunities. HR is responsible for the design of the strategies involved in addressing any problems affecting employee engagement.  

One way they can do this is by boosting employee morale. This tactic has been found to improve retention amongst employees.


Why Delegate HR?

Regardless of its size, an effective HR department influences a company’s success. It impacts your company culture and determines the nature of your business’ internal communication. Keep in mind that your employees, your team, are your company’s most valuable asset.

It’s important to prioritize their well-being, and you can do so through HR policies and procedures.  

A Management Software for Small Businesses    

HR is an important part of every company, big or small. With this in mind, it can be extremely time-consuming and complex. There’s a way to manage it successfully while having the time and energy for other responsibilities.  

FRIDAY is a software that was created for to revolutionize team management for small businesses. When it comes to managing, tracking, and paying your employees, additional help goes a long way.  

FRIDAY is the simplest software created to help small businesses manage, track, and pay their team without any paperwork involved.  FRIDAY is an easy to use, yet powerful payroll and team management solution.