6 essential HR tools for small business owners

When you hear the phrase, “HR for small business” do you suddenly break out in hives, a cold sweat, or maybe just… leave the room entirely? We get it. As a small business owner, the thought of dealing with anything HR-related can feel overwhelming. We’ve all heard the tropes of endless paperwork and legal jargon when all you want to do is focus on scaling your business.

Let’s be honest, as a small business, hiring a full-fledged HR department might be out of the question. But with the right HR tools and processes in place, you can still have a solid HR presence in your company.

What is HR? 

HR— aka Human Resources—is the business function that’s responsible for all things related to your people and employees. HR makes managing your employees easier and more efficient.

In larger companies, HR is often a dedicated role or even a full department. But for smaller businesses, it’s usually a series of tasks related to your employees that falls on a manager or even you as the business owner.

But no matter the size of your business, HR can carry a lot of weight. HR responsibilities often include:

• Employee termination and offboarding
• Employment law compliance
• Employee engagement and retention
• Hiring and onboarding
• Training and development
• Employee payroll, compensation, and benefits

Of course, HR is vital when it comes to managing large teams. But let’s not overlook the benefits of HR for smaller teams and shift workers. 

What’s the role of HR in a small business? 

There’s a common misconception that companies need to be of a certain size before they need HR. But this simply isn’t true. As long as you have humans on your team—aka your employees—you need HR.

From the moment you hire your first employee, HR is an important part of keeping your team happy and safe. 

Now, you don’t need to go out immediately and hire an HR specialist. But that doesn’t mean HR shouldn’t play an important role in your day-to-day operations. This includes employee development, labor law compliance, employee happiness, employee compensation, and so much more.

Of course, HR for a team of 10 will look vastly different from a team of 1,000. 

As a smaller business, you may not need overly robust employee appreciation programs (but some employee appreciation definitely goes a long way). However, since you should still have a formal training program, understand shift laws if applicable, and implement policies like sexual harassment and absenteeism, HR practices should still be implemented, just on a slightly smaller scale.

Even if you’re a lean team, there should always be someone on your team who is the HR go-to. This is the person responsible for HR tasks, including managing concerns and creating employee policies. They’re also the person who your team can approach with any HR-related issues.

Why is HR important in a business?

HR isn’t something you should avoid. In fact, you should embrace it. 

It’s time to dispel the myth that HR is a role for paper pushers. It’s so much more than just creating policies or filing employee documents. In fact, HR might be one of the most important functions in the modern workplace. The goal of HR is to protect one of your most important assets—your employees.

It’s no surprise that businesses are continuing to invest in HR as a function, with 5 of the 25 fastest-growing roles in the U.S. belonging to HR.

HR plays a major role in creating better work environments and supporting your long-term business goals. With the right HR strategies in place, you’ll have better employee engagement, better productivity, and overall happier employees.

Then, of course, there’s all the legal compliance stuff, offering the added benefit of not having the Department Of Labor on your back.

Let’s take a deeper look at why HR plays such a crucial role in businesses of all sizes.

Legal compliance

When it comes to the law, HR is your best friend. Keeping your company compliant with labor law requirements is a large part of the HR function.

Once you have employees on your payroll, there are many tax requirements and employee rights that you need to follow, including, but not limited to:

• The Fair Labor Standards Act
• The Occupational Safety and Health Act
• The Equal Employment Opportunity Commission
• The National Labor Relations Act
• The Family and Medical Leave Act

These are just a small fraction of the regulations that exist for employers. Individual states may also have additional laws in place. In general, these regulations cover things like employees’ right to minimum wage, overtime pay, workplace safety, medical leave, and equal opportunity.

Even if you have your employees’ best interest at heart, without the full picture of your responsibilities as an employer, you’re opening yourself up to liability. If an employee or a third party feels that you’ve violated workplace rights, they have the right to report you to a regulatory body—and no one wants that.

Remember that labor laws can also evolve over time, so it’s important to stay up to date on the latest legislation in your region.

Employee management and experience

Yes, HR takes care of a lot of the legal side of things, but it’s not just about following the rules. The truth is, complying with legal requirements is just the bare minimum when it comes to keeping your employees happy at work.

HR includes a lot of operational tasks that help employees succeed in their roles, like creating policies, scheduling performance reviews, and managing internal communication. 

But HR best practices can help take your employee experience a step further by implementing strategies to create a place where your employees actually want to work. And we’re not talking about that once-a-year staff pizza party.

HR looks at metrics like employee engagement, happiness, and turnover. It doesn’t stop there though, addressing the pain points and concerns to help design a workplace where employees feel valued and motivated. A Gallup report shows that companies with engaged employees have 21% higher profitability.

HR means better management of your people and better employee retention, both of which can have a big impact on your business’s bottom line. 

Hiring and onboarding new employees

The role of HR starts long before an employee’s first day. Talent acquisition is one of the most important functions of HR. It’s such a big piece of the puzzle that larger organizations often have several individuals responsible for recruiting new employees.

From putting out job postings to screening candidates, HR helps create a hiring strategy that gets the right folks on your team. Finally, once you’ve found your perfect new hire, HR will take steps toward making sure that your employees are successfully onboarded.

Employee training and development

Your employees want to continue to improve on the job—whether it’s to perform better in an existing role or take the next step in their career. HR is responsible for carving pathways for employee training and development.

Upskilling your employees is an easy way to boost your overall productivity. But investing in your employees’ development can also increase engagement and employee loyalty. According to a 2019 Workplace Learning Report from LinkedIn, 94% of employees would stay at a company longer if it invested in their learning and development.

Employee compensation and benefits

Let’s face it, most employees come to work to earn a living. So compensation matters.

With nearly 47% of small businesses struggling to fill open roles, competitive compensation can make a huge difference in attracting and retaining quality employees.

Part of the HR function is evaluating your company’s compensation structure to make sure that it meets labor law requirements. HR should also take on market research to better understand what compensation structures are competitive and how your business can stand out from the crowd.

This might mean adjusting employee perks or even paying above minimum wage to attract more and better candidates. Even many big-box retailers have been forced to rethink their compensation strategy among labor shortages. 

The risks of not prioritizing HR 

As a small business owner, it’s easy for certain HR tasks to fall down on your list of priorities. You’re not alone. This is super common among business owners who have to wear many hats.

But when you only have a handful of employees, every employee has a significant impact on your business—making good HR practices even more important.

If you don’t stay on top of HR, it can impact your long-term business success. Here are some of the risks of not including core HR functions in your daily operations:

• Lower employee morale: HR as a function is meant to support your employees’ well-being. It should be a safe space where employees can bring concerns without fear of repercussions. If employees don’t know where to turn, it can create a sense of isolation and reduce employee morale.
• Inefficient operations: Without HR, you may lack standardized processes around employee management. From training and development to employee engagement, HR implements strategies that help make your employees better and more productive. 
• Higher employee turnover: When HR slips between the cracks, it often sends a message to your employees that their safety and satisfaction aren’t a priority. And without HR to foster growth opportunities and employee engagement, it’s easy for employees to look for employment elsewhere.
• Hiring challenges: HR is typically responsible for putting plans in place for effective hiring. Without these processes in place, your business can struggle to fill key roles. These challenges can be magnified when combined with higher rates of employee turnover.
• Limited long-term business growth: HR also includes a lot of behind-the-scenes work to help align your employees with your business goals. If you never dedicate time to building a team that meets business needs, you could be putting your business success in jeopardy.
• Legal and compliance risks: One of the biggest concerns with neglecting HR is that you’re exposing your business to legal risks. Even the smallest mistake or oversight can result in costly fines and even tarnish your business’s reputation.

It’s clear that not prioritizing HR isn’t an option. The good news? As a small business, you can still get out ahead of these issues—without having a designated HR person. 

Essential HR policies for small businesses 

It’s easy to grimace at the word policy. We get it: policies can feel scary and all too serious—like you’re putting your team under a microscope.

But putting clear policies in place is one of the best ways to take care of and protect your employees. Even if you don’t have a full HR department, you still need employee policies.

Here are some policies that your small business needs to have in place before you even hire your first employee.

Health and safety

It might sound obvious, but no one wants to feel like they’re at risk when they come to work. So as a business owner, your employees’ wellness should be your top priority. 

It might not be as flashy as some other acts of employee appreciation, but putting employee safety first with health and safety policies is the easiest way to show your team that they matter. Not only will it keep them safe, but workplace safety can build employee satisfaction and improve employee morale.

Health and safety policies also benefit your business by reducing absenteeism, improving productivity, and minimizing your liability around work-related illnesses.

Your policy should be tailored to your business. But in general, health and safety policies should include elements such as, but not limited to:

• Your commitment to the health and safety of your employees
• How your policy complies with legislation, such as the Occupational Health and Safety Act
• A list of risks and hazards applicable to your workplace
• Preventive measures to protect employees from the risks and hazards
• Employee training opportunities and procedures
• Emergency management for things like fire, medical emergencies, and other unexpected situations
• Guidelines around health screenings and coming to work sick

Your customers should also play a role in your health and safety policies. For example, if you operate a restaurant, you may want a policy about not allowing customers into the commercial kitchen.

Bullying, harassment, and discrimination 

It sounds obvious—no one wants to see bullying, harassment, or discrimination in the workplace. But unfortunately, it still happens. Sometimes it’s intentional, other times it’s simply a lack of awareness between employees. 

As an employer, it’s your responsibility to put policies in place that prevent these instances from happening. Your harassment policies should address the definitions of bullying, harassment, and discrimination, and clearly outline unacceptable behavior.

It should also include a clear and transparent process for how to submit and document complaints to avoid creating a toxic workplace.

Code of conduct

It’s always important to set expectations for your team. A code of conduct is a more formal way to tell your employees how they are expected to behave at work. It outlines important values and rules that help your team successfully work toward your company goals.

Your code of conduct can include things like:

• Dress code: Are there uniform requirements? Do you have a closed-toed shoe policy?
• Personal device use: Are employees allowed to use personal devices and cell phones while on shift?
• Use of company resources: Are employees allowed to use company resources for personal matters? Can company property be taken from the workplace?
• Timesheets and time tracking: How should employees clock in and out of their shifts?
• Engaging with customers: How should employees handle tricky situations? At what point should employees escalate situations to a manager?
• Company values: How should employees treat each other and customers?

As a business owner, codes of conduct also help you manage disruptions and address concerns with employees. It’s much easier to simply point toward your code of conduct if team members are behaving outside of the guidelines. 

Formalizing and communicating expectations is the best way to avoid any confusion or misunderstanding. By being proactive, you can stay ahead and avoid constantly putting out avoidable fires.

Sick days and time off policies:

Having a leaner team means that if one employee takes time off, it can be difficult to cover their shift. Having policies in place regarding time off can be valuable in making sure your business has enough coverage.

Your leave policies should include:

• Limitations around paid time off: Is there paid time off and when is it appropriate to use those days?
• Blackout dates and periods: Are there times of the year when vacation and time off requests are not permitted? For example, some retailers have blackout periods around the holidays when they expect a high volume of customers.
• Time off requests: How should employees go about requesting time off?
• Sick days and unexpected time off requests: How should employees get in touch if there’s a last-minute reason they can’t come to work? For example, if they’re sick or have a family emergency.

When it comes to creating policies, it can be easy to sit around trying to perfect them. But your policies don’t have to be set in stone. You can always update them as your business grows and evolves. Just remember to give your team a heads-up whenever policies are updated, so they can review them and stay up to date.

Critical HR tools for small businesses 

As a small business owner, you don’t always have endless hours to dedicate to HR—we get it. That’s why one of the first steps in establishing HR in your small business is having the right tools and technology in place. They all work in tandem to make the different parts of HR as simple as possible.

Here are some of the most important tools and software you should have in place when it comes to HR.

A tool to manage your people

When it comes to employees, there’s a lot to keep track of—especially as your team grows. It’s important to keep your team roster and paperwork up-to-date and easily accessible. 

We all love a good old spreadsheet. But from employee schedules to tax forms, you need a better solution for keeping all that information organized. This is more formally known as a Human Resource Information System or HRIS, but at the core, it’s a system that helps you  manage employee data and information.

When choosing an HRIS, look for modern solutions that are easy to use and integrate with other tools you use within your small business. 

You should be able to easily add new employees and update information as needed. If it can keep track of things like employee certifications and store employee documents, even better!

A tool to keep track of employee hours and schedules

While HR may not be directly responsible for scheduling your employees, your team’s working hours and output are important for compliance and employee productivity.

Having a simple platform in place to handle employee schedules and timesheets can make a huge difference. By getting this information at-a-glance, you’re able to easily track labor costs and make sure you’re adhering to payroll compliance for things like overtime.

If your goal is to reduce overtime costs, you can even set up notifications so you get a heads up when an employee is about to hit overtime.

A time-tracking app also provides a clear picture of how well you’re managing labor costs and employee behavior. For instance, if you notice employees are consistently clocking in early, you can establish new policies to keep everyone on track. Or, if you’re noticing a trend of absenteeism, you can strategize ways to increase engagement and attendance. By comparing labor costs with sales forecasts, you can also ensure that your workforce is always properly optimized.

Even a free time clock app can go a long way in helping you stay on top of employee hours.

A place for team communication

Communication is critical for successful teams. But when you have hourly workers that aren’t always working at the same time, it can be challenging to get everyone on the same page. Of course, we have emails and phones. But when every message is a one-off, it can be tricky to keep track.

The solution? Streamlining your team communication in one app or platform. 

A team communication app makes it easier to send everything from 1-1 messages to team-wide announcements. Plus, creating a direct line of communication between all your employees can build a sense of camaraderie and belonging within your team.

Whether it’s sending policy updates or just a heads up about a schedule change, using a team communication tool means your team will never miss a beat. 

A way to easily collect employee feedback

When trying to get a pulse on how your employees are feeling, it’s always best to go straight to the source. A big part of HR is helping create a better employee experience so teams are happier and work better.

Create a better place to work by collecting feedback from your employees. Whether it’s monthly or at the end of every shift, getting automated reports on employee sentiment makes it easier to understand if your team culture is headed in the right direction.

A way to hire new folks

Bringing on new employees to your team is super exciting. But from collecting applications and resumes to interviews, and finally onboarding your new hire, hiring is a whole to-do.

There are a wide range of applicant tracking systems and talent acquisition tools available. However, small businesses can benefit from an all-in-one hiring and onboarding software. Instead of manually posting to job boards and flipping aimlessly through 100 resumes. You’ll reach more (and better) candidates and free up more time to set your new hire up for success.

An easy-to-use software to pay your team

Payday is exciting, but prepping for payroll can be overwhelming—especially as a smaller business. 

Truthfully, payroll isn’t always considered a function of HR. But since HR is responsible for things like employee benefits and compensation, it’s closely intertwined. This is especially true for small businesses, where managers and owners may take on several different key roles.

Plus, payroll delays or errors can easily put you in the world of labor law compliance.

So when thinking about tools that can help streamline your HR processes, payroll is a natural extension. Make payroll painless with a payroll management system built specifically for hourly teams.

Looking to level up your HR?

From payroll to compliance, get all the HR tools you need in one app with Homebase. Get started for free.

HR for small business FAQ

What is HR?

HR (or Human Resources) is responsible for everything related to the people in your business. This includes everything from hiring, onboarding, payroll, employee experience, and more.

In larger organizations, HR may require a dedicated role or an entire department. However, on smaller teams, a manager or business owner may be responsible for HR-related tasks.

Why is HR important for small businesses?

HR is important for small businesses because it helps you manage employees, comply with employment law, and build an overall better workplace for your team. From hiring to creating employee policies, these essential HR functions are key to creating a positive company culture.

Making HR a part of your daily business operations can also help optimize the efficiency of your team and improve everything from employee engagement to overall productivity. So no matter how small your business is, as long as you have employees you need HR.

Even if your business isn’t able to sustain an entire HR department, it’s still important to prioritize HR-related tasks as your company grows.

What are some essential HR policies for small businesses?

Implementing HR policies can help keep employees on the same page regarding what’s expected of them and what you’re doing to keep them safe. Some essential HR policies for small businesses include (but aren’t limited to):

• Health and safety policies
• Codes of conduct
• Discrimination, bullying, and harassment in the workplace
• Leave policies, including sick days and time-off requests

What are some critical HR tools for small businesses?

Some critical HR tools for your small business include:

• A Human Resource Information System (HRIS) to help you manage employee data and information
• An employee communication platform to streamline interactions between your team
• A time tracking and scheduling tool to track employee hours and compliance
• An employee feedback and satisfaction survey tool to boost employee engagement
• A payroll management system that ties to your HRIS

These tools are all designed to help streamline your small business’s HR tasks. They help you manage your people, keep them safe, and stay compliant with labor laws. Implementing the right tools can make HR easier, so you can focus your time and energy on building your business.