Human resources is one of the most important components of managing your business. Despite the importance, employers of all sizes face struggles with managing their employees effectively. They also face challenges with complying with the current UK employment legislation. SME owners face even more barriers. They don’t usually have a designated HR team and other resources larger organisations tend to have.

As an SME owner, you may be wondering how you’re supposed to find the resources to manage HR. This is particularly challenging if you’re devoting your time to grow your business and improve your products and services. From recruitment to payroll and benefits, it’s important to ensure that your business should take these into account. Otherwise, deficiencies in any of these areas could result in a lack of talented employees. There may also be fines for non-compliance with employment law, and a lack of productivity.

Below are the most common HR challenges faced by SME owners:

1. Recruiting new candidates

One of the most important aspects of HR is recruiting talented individuals. However, the recruitment process is a major time and financial commitment for SMEs. This means that when the job posts and interviews are improperly handled, the process can be extremely time-consuming. Recruitment after the global pandemic has been even more challenging for SMEs. They’ve struggled to hire people. Moreover, recruitment can add extra pressure to ensure that your business is hiring the best candidate. There is also the risk of losing a new person within a few months because of the flawed screening process.

Tip: SME employers should develop and implement an effective hiring plan to help attract strong candidates. Prior to the recruitment process, it’s best to establish a job-related criteria to make hiring decisions. Once you have established the criteria, you should develop an effective screening and selection process. Apply this consistently to all candidates. This will help you to filter out unqualified candidates and choose the best candidate for the job. Alternatively, if your business doesn’t have a designated HR department, which is common for many SMEs, you could outsource your HR functions to a HR consultant to facilitate the recruitment process.

2. Keeping up with the SME HR legislation

It’s extremely challenging for SMEs to stay up-to-date with all the recent changes to employment law as it is constantly changing. The laws are becoming more complex. Unlike larger organisations, SMEs don’t have a designated legal department that can advise on current employment law matters. For example, one of the most common compliance mistakes made by SMEs includes understanding the difference between employees, workers and self-employed. Therefore, they may make wrong classifications. This can lead to making mistakes in matters such as overtime, wage and regulations and benefits.

Tip: If you’re unsure about the difference between employees, workers and self-employed, you should seek legal advice. You can also speak to a HR consultant about your staff’s employment rights. Although seeking professional advice is costly, you’re less likely to face legal actions. In the long term, your business will likely save more costs. You should always seek professional advice if there’s anything you’re unclear about. By doing so, you’re likely to avoid fines for non-compliance.

3. Payroll management

Managing employee payroll and taxes can be extremely challenging and tedious for SMEs. There’s a lot of paperwork to go through. Any errors in the payroll process would damage the trust your employees have in your organisation. This could also lead to fines. For SMEs, this could impact the reputation, as well as having to deal with unnecessary costs. Proper payroll reporting and tax filing can be daunting. However, they must be done correctly and should be handled with the utmost care.

Tip: To avoid any fines or legal actions, SMEs must keep a proper record of their payroll reports. It is also crucial to stay updated on tax filing. As this can be extremely time consuming, you may wish to implement a payroll software or hire a payroll outsourcing provider. These solutions can help you provide accurate payroll reports. This will ensure that your staff are receiving proper payment and avoid unnecessary fines.

4. Not having an employee handbook

Some SMEs either have an outdated employee handbook or does not have one at all. This may cause an increase in employee violations of company policies. Having a handbook allows your organisation to successfully communicate work-related policies to your employees. It’s vital that the policies are updated and that all employees are informed of the changes.

Tip: When drafting your handbook, you should take into account your company culture and consider employee issues. This allows you to address them proactively. Once your handbook is distributed to the employees, it’s worth obtaining their acknowledgment of receipt of the handbook. You should also review it regularly to determine if updates are required due to changes in legislation or company practices. Alternatively, if you’re unsure about dealing with your handbook, our team at Farringford Legal can assist you.

5. Dealing with employee relations issues within a small team

Many SME employees have a close working relationship with their colleagues. They are exposed to each other on a daily basis. Despite the family-like work environment, there may be times where the team enters into disagreements over work-related issues. As an employer, you may rather not be involved in the disagreements. This avoidance could create an extremely uncomfortable situation, not just for you but also for the other employees.

Tip: Where you recognise that the working relationship starts to fall apart due to disagreements, it would be best to hire an external HR consultant. They can objectively assess and address the issues upfront and provide support on these matters. Without the consultant’s support, it may be difficult for your business to continue building solid working relationships.

While SMEs face a number of HR challenges, there are ways to solve these issues. If you run into any HR problems, you’re more than welcome to contact our team at Farringford Legal.