Small Business HR – Everything You Need To Know

Hire your first employee The turning point for any small business is to hire your first staff member, this is where HR first enters your bu

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Hire your first employee

The turning point for any small business is to hire your first staff member, this is where HR first enters your business life.

Even if you have only one staff member, you need to be mindful of HR protocols and procedures – otherwise you could find yourself in front of a service tribunal defending you against one aggrieved employee.

At its most basic, HR involves telling your employee what is expected of them, hours to be worked and where, vacation claim, payment procedure and sickness policy. It can be written down in either an employment contract or a staff handbook.

The truth is that many business owners are afraid to hire because of the potential risks, but if done right, hiring staff will take your business from survival to prosperity.

Top 10 HR Tips

HR specialist Donna Obstfeld wrote exclusively for Small business about the top 10 things to be aware of in the successful management of employees in your business.

Top 10 HR Tips

How to decide on an HR policy for your small business

Having an HR policy for a micro-business may sound great, but writing down your HR policy gives you the opportunity to articulate the purpose of your business – to staff, even if it’s only a handful people, about making the vision for your business enthusiastic. What is the journey you are on?

A human resource policy goes hand in hand with your marketing strategy and financial policies when it comes to day-to-day operations. But it’s so much more than just a set of rules and regulations, it’s a document that defines who you are, your core values.

How to decide on an HR policy for your small business

A guide to outsourcing HR

Outsourcing HR makes sense for businesses that are too small to have their own internal manager. Businesses with less than 50 employees rarely have an HR team. Instead, a senior manager who may have had some HR experience in the dull and distant past was seconded to the role. This not only leaves your small business vulnerable to legal challenges when HR procedures are not strictly followed, but doubling up like this takes time away from his or her day job.

Or, if you manage HR yourself, it’s taking time away from running your business and eating into your own productivity – one of the biggest challenges facing any small business.

With the ongoing cost-of-living crisis, rising inflation and rising wage bills, companies will seek to save money where they can.

Outsourcing of HR to internal HR management

Outsourcing all or part of the HR function can be a cost-effective way to reduce overhead while benefiting from expert skills.

However, you need to be clear about what you need when approaching an outsourced HR company from the start to avoid a one-size-fits-all approach.

Whether this is achieved by an in-house team or outsourcing depends on your business’s priorities.

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How to choose an outsourcing HR provider

Start with their experience (and in what sectors their customers are). You will know that you are a winner if they have had numerous previous customers in your industry, with extra points if they are bigger and better known.

Likewise, having proof of qualifications assures you of their competence and what they can offer you.

Think about how their services align with your business growth strategies and growth forecast for next year.

Next, look for any hidden fees. Do they ask for extra or do they set up financial penalties for leaving the contract early? The firm may seem cheaper up front, but, like the worst budget airlines, they can really give you a quick kick with those rogue charges.

While you are there, check the clarity of the payment and contract terms. Flexible payment must be available (paid as a one-off or on a container). It’s all the better if they can offer you a free trial – for example, to work on a smaller project.

Even if they are not known as the money maker, you need to have a return on investment from your HR. It will also not necessarily be in monetary terms – think of increased productivity, lower turnover and reduced absenteeism. Ask what ambitions your HR provider has and how long they need to establish them.

It is even more important that they understand your company culture. If they do not, they run the risk of making the wrong decisions on your behalf. Or worse, they hire the wrong staff, causing you all kinds of long-term problems. Again, a free trial is beneficial here.

7 of the best HR consulting companies in the UK

Want to outsource your HR but do not know who to go to? We have a summary of some of the best HR consulting companies in the UK.

It’s all good to decide that you should outsource your HR, but for what consultation should you plump?

With such a wide range of companies offering largely similar products, it can be difficult to know exactly which one to choose.

We have profiled 7 of the best HR consulting companies in the UK to inform you of your decision, with the key features of each provider.

citrus HR
Workplace HR
HR solutions
Advisor Plus

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Lastly, remember to take professional referrals from your chosen provider – two or three are ideal. Once you have agreed to work together, be clear about what is included in your agreement and that it can be changed at a later stage to suit the needs of your business.

6 HR software tools that you can use for small businesses

It may be that you do not want to outsource your HR, but want to take a more do-it-yourself approach using online HR software.

The case for HR software tools has grown as more businesses switch to a hybrid or remote work model.

Plus having HR software in place can help increase productivity, provide job insights, more benefits for employees.

An HR tool – also known as HR management tool – can mean an entire platform or it can be one component such as recruitment or absence management software.

Every small business has different needs. We have listed some of the best HR software tools below, giving you a complete set of key features and integrations that can work with your existing software.

6 HR software tools that you can use for small businesses

HR is an opportunity for your small business

Remember, HR starts for any small business as soon as you hire your first employee. Whether you set out your statutory obligations in an employment contract or take the time to write a staff handbook depends on you.

As you grow, you might think the most cost-effective solution would be to outsource your HR to an external vendor, instead of hiring a full-time HR director.

Or you can take a hybrid approach and do most of the HR paperwork for small businesses yourself, but use HR software to ease the workload.

Either way, think of HR as helping you define the purpose of your small business, not just a burden, and one of the boards that executes your strategy along with finance and marketing.

More about HR for small businesses

A guide to outsourcing HR


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