How is small business HR different to large business HR?

It’s the role of human resources in large and small businesses to lead in the identification, recruitment, training, and management of employees. This, in turn, boosts productivity, innovation, and competitiveness.

With that said, there are some major differences in the HR functions in small and large businesses. Let's explore these differences and what they might mean for you.

Large business HR

If you own a large company, you’ll usually have a much wider range of resources for allocation to HR.

Such businesses are also more likely to maintain formal and defined hierarchies. The HR function, in these environments, can be seen as one of many cogs contributing to the wider success of your business.

Advantages of the scale of large businesses

The scale of a large business can be both a benefit and a drawback.

On the positive side, the greater availability of resources can give bigger businesses a better chance of long-term sustainability. They have a better advantage when it comes to navigating economic challenges and they can usually avoid the impacts these challenges may have on staff and headcount.

With more established HR departments, they can also minimise the need for multitasking and assigning heavy workloads.

A large business HR professional may enjoy:

• Access to a greater range of resources and tools for decision-making support
• Higher levels of compensation and benefits
• Opportunities to build knowledge through exposure to diverse HR cultures and practices
• Greater levels of job stability and security

What are the challenges of big business HR

The size and structured nature of a large business can make for a lack of agility and flexibility.

As such, HR processes can become more complex and time-consuming. In some instances, it may take many months or years to succeed in making any drastic changes to the HR processes of a large company. There’s also a challenge when it comes to establishing the impact HR decisions can have on wider business success.

It’s common for big businesses to have dedicated HR departments, with staff members assigned specific areas of responsibility.

This can allow multiple HR initiatives to be run at any one time. It also enables HR staff to develop highly specialised skills, boosting the value they bring to your business.

Small business HR

If you own a small business, human resources present unique challenges and opportunities. Typically, small businesses have fewer resources than their larger counterparts.

According to the Society for Human Resource Management (SHRM), business owners often make HR decisions themselves because employee wages can be the largest cost to small businesses.

Whether or not you recognise yourself in this role, you have ultimate authority over all HR-related decisions. Given that most business owners won’t have undertaken HR training or be confident in their HR skills—the risks of making mistakes are real.

If HR staff are brought on board, the lack of resources may make it more difficult for smaller companies to attract and retain quality HR staff. Those who do choose to work in small businesses often find themselves spinning plates. A single HR manager may be expected to handle recruitment, onboarding, and benefits administration.

Overcoming small business HR challenges

Given the resource shortage, small business owners often have to find creative ways of solving challenges.

For example, they may turn to the support of experienced HR experts to check whether their policies align with company goals and industry regulations. They may also use HR software to help manage their HR processes and staff.

In small businesses, the owner or HR professional often acts as a "firefighter," addressing immediate issues rather than focusing on long-term planning. This means the close relationships they build with senior staff can lead to greater involvement in key business decisions.

HR in a small business allows for:

• A greater sense of community and involvement in the business
• Increased recognition and appreciation for their work
• More freedom for the implementation of fresh ideas, initiatives, and policies
• Greater involvement in strategic decision-making

Common human resources practices for small businesses

Smaller businesses tend to take a relatively informal and flexible approach to HR practices.

The verbal agreement of policies and common-sense management of HR issues is more common in small companies. And while this makes for greater flexibility and agility, such an approach can cause confusion, inconsistency, and non-compliance risks.

The limited availability of HR support tends to increase the small business focus on compliance-related issues such as payroll, benefits, and employment relations obligations. After all, the penalties for legal breaches can be severe.

In response, many small businesses are choosing to turn to software solutions to help them manage and run their HR processes.

Effective human resource strategies for small businesses

Training should be seen as a means of enhancing employee knowledge and skills, with additional benefits in terms of worker satisfaction and reduced turnover.

Ideally, such training will be aligned with your company’s goals, with regular reviews to identify the potential for better results.

Other HR best practices include:

• Setting up structured performance management systems, with regular staff reviews and feedback
• Offering competitive levels of pay, with added benefits such as flexible working arrangements and opportunities for professional development
• Developing and communicating clear policies and procedures for the handling of HR issues. This will support the compliance of your small business and help with your record-keeping obligations
• Making use of affordable HR software for the streamlining of processes, improvement of efficiency, and better employee experiences.

The right software can also help slash the number of hours you spend on HR administrative tasks and other manual processes that can be easily digitalised.

Regular reviews of your HR processes should also be conducted to ensure that they’re working for your company.

Adapting HR practices to business size

There are various HR lessons and best practices that should be applied to your business, no matter the size of your HR department or the availability of resources.

This begins with prioritising compliance. You can minimise the risk of breaches by making sure your HR expert is on top of regulations or has access to employment relations advice whenever they need it.

It’s vital to ensure the compliance of your employee contracts, accounting for essential details such as your sick leave policy, working hours, and benefits. Policies specific to employee health and safety, disciplinaries, redundancies, and grievances also carry risks and must be correct and up to date.

Get help with your HR no matter your business size from BrightHR

Large businesses may have an HR department, while smaller companies tend to have smaller HR departments or none at all. Regardless of your business's size, the stress and time taken up by HR tasks is all too real—that’s where HR software comes in.

At BrightHR, we specialise in simplifying the people management transformation for businesses.

From shift planning to logging staff sickness and lateness, HR software can actively add value to your business. Book a free demo with our specialists and explore all the ways BrightHR can support your business growth!