There are many challenges that come with owning a small business, and as a small business owner, it can feel like you’re juggling a million different tasks. Running a business is not for the faint of heart as entrepreneurship is inherently risky.  

According to the U.S. Bureau of Labor Statistics (BLS), approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to the 15 years or more mark. 

The BLS statistic highlights the chance of success in owning and operating a business, but the numbers aren’t all doom and gloom for business owners. Investopedia lists four of the most common reasons that new businesses fail, and two of those reasons are because they 1) lack proper management, and 2) have ineffective business planning.  

This is where you can attempt to beat the BLS statistic by getting ahead of the curve. Preparing your small business for the challenges that lie ahead of it can be a great way to form a more effective business plan. Human resources are one of the biggest areas that small businesses struggle in and can improve on by understanding the challenges that face them. 


This week we wanted to talk about five of the biggest challenges that small businesses face in HR and give some solutions on how we think you could overcome these challenges. 

1) Recruitment  

Hiring new employees is always a difficult task for businesses of any size. Hiring the right employees is critical to the productivity and morale of your business, not to mention that hiring the right employee saves you time, money, and headaches from having to replace a bad candidate.  

Small businesses recruiting can often be a big hurdle when it comes to the growth of their business, as recruiting can take up large amounts of time and resources that small businesses can’t really afford to spend. 

This issue can be tackled by small businesses though. Developing job-related criteria prior to recruiting can inform the hiring decision, making it easier to find the right candidate for the position. Developing an effective recruiting strategy can be difficult, but when it’s established it can be used for future candidates in other positions that need to be filled. 


2) Benefits 

Providing comprehensive benefits packages can be costly for employers with the BLS stating that benefits account for about 32% of employer costs of compensation in 2018. For a larger business these numbers are no problem, but for smaller businesses that 32% number is quite large. This creates a disparity between large and small businesses as larger businesses can offer competitive benefits packages to employees while small businesses struggle to keep up. 

Employers should weigh their options when it comes to obtaining health coverage. Competitive plans can be purchased through the Affordable Care Act’s (ACA) SHOP Marketplace. The SHOP Marketplace gives small businesses some of the advantages that larger employers have historically held like greater purchasing power, the ability to pool risk, and more choice among health plans. 

Other options for small businesses is to offer unconventional benefits like unlimited PTO, flexible work schedules, or employee recognition programs. These benefits aren’t traditional benefits like health coverage or retirement plans but can still be enticing for potential employees and not cost nearly as much as traditional benefits. 


3) Establishing Company Policies  

Every company needs its own rules and procedures to operate to help ensure that employees understand important information about company guidelines, procedures, and benefits. Small businesses can struggle with establishing company policies which can end up slowing growth.  

Small businesses can get around the issue of company policy by writing their company policies on paper in the form of an employee handbook. Employee handbooks allow new and old employees to understand their responsibilities to the company and the company’s responsibility to them. 

When creating and maintaining company policies it’s also important to understand the impact of federal, state, and local employment laws. Depending on where you conduct business in the U.S., labor laws can affect what policies you can enact and how you are supposed to inform your employees on certain responsibilities. 


4) Compliance  

Compliance with employment laws is another big HR challenge that small businesses can stumble on, and as we stated in the last section, it’s important to know your federal, state, and local laws to understand the obligations of your business.  

Wage and hour violations are one of the most typical compliance violations that small businesses face and it’s usually because of the misclassification of employees. Properly ensuring that all your workers are classified correctly under federal and state law is the only way to properly avoid this type of violation. 

Another common compliance issue that small businesses struggle with is recordkeeping. Many employment laws require that employers keep meticulous records of the business to stay compliant with laws, and when operating a small business it can seem like too much of a hassle to file away every piece of information about an employee. But recordkeeping is important to keep clear of potential litigation or violations of labor laws. 


5) Employee Productivity 

Small businesses’ workforce tends to run lean, so it can often be a struggle to keep employees productive in order to stay competitive. Lack of productivity in the workplace can stem from many issues like lack of motivation, training, or capacity to do tasks.  

 To stay ahead of the game it’s best to consult with your team to see where the gap in productivity is in your business. Then work with supervisors to try and create strategies that can be implemented to increase productivity.  

You should also pay mind to your employees’ morale and take into consideration if that is the reason there is a shortfall in productivity. Setting company goals, reducing employee stress, and keeping your employees engaged are all valid strategies to try and increase productivity.  


It can be difficult running a small business, but it doesn’t have to be. By understanding the problem areas of your business and taking a proactive approach to planning around them is what can separate your business from the competition. 


Are you struggling with managing your human resource needs??SolveHR?offers several transactional and strategic HR services to help your business. Contact us today to find the right solution for you, so you can focus on what matters—growing your business 


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Written by: Matthew Muriel

Meet Matthew! Matthew is our content writer and has been working with us for a year. He enjoys working for SolveHR because it allows him to practice his copywriting and allows him to build experience in his fledgling career. Matthew studied at the University of Texas at San Antonio and earned his degree in English with a concentration in Professional Writing. He values learning new processes in the HR industry and then conveying those ideas to the company’s clients. When he isn’t working, he enjoys reading nonfiction, with his favorite book that he recently read being The Gene by Siddhartha Mukherjee. If he could go anywhere in the world he would travel across the United States and visit all of the national parks.

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