Top Reasons Why Small Businesses Need HR

Human Resources - Complete Controller

Usually, the human resources (HR) department serves as the backbone of companies and operates behind the scenes. It helps in streamlining all business operations, paving the way for long-lasting success. HR oversees all employee-related activities, including recruiting and training new workers, tracking employee performances, etc. A well-experienced HR manager help workers in building careers.

HR also tracks accurate time-in and time-out to mark the correct attendance of all employees as per their departments. In addition, it eradicates all communication gaps between company management and staff to establish meaningful interaction. According to, around 45% of companies with small businesses manage all tasks by themselves due to budget constraints. However, it is not always a choice – companies having as many as 14 employees need to comply with standard regulations like the Equal Pay Act, the Immigration Reform & Control Act, and Fair Labor Standards Act (FLSA). Apart from legal compliance, HR ensures compliance with workplace policies and protects your business from staff-related issues. Check out America's Best Bookkeepers

Many companies often resort to hiring a single person in the HR department to cater to all the needs; however, it often requires teamwork and diversified skills. Let us learn why small businesses must have HR.    

Handling compensation and benefits

Whenever new hires join the company, there are many questions regarding things like salary, benefits, and annual leaves. In addition, various companies offer numerous facilities to their employees, from insurance to security and transport. Lots of things that employees need to learn about. Here, the need for HR in businesses comes in.

Business owners cannot finalize policies with brokers/service providers, enroll employees for benefits, and decide insurance policies alone. They must handle other activities, like meeting deadlines, improving tasks as per the client’s feedback, providing quality products/services, etc. So, the addition of the HR department in the company becomes necessary.

This way, business operations would divide and manage all tasks that would no longer be difficult for small businesses. Whenever employees have any queries or issues, they will directly contact HR rather than the employer. Check out America's Best Bookkeepers

Manage administrative requirements

HR is primarily involved in payroll activities, recruiting operations, workplace security, onboarding, regulatory compliance, employee training, and development.

On-time salary transactions, proper employee training, and unsanitary working conditions are vital tasks that the company cannot overlook. Small businesses depend on HR for these tasks as non-compliance may cause losses and penalties. According to Inc., the Internal Revenue Service (IRS) has penalized over 33% of all business owners because of payroll errors. The automated monitoring and checking of employee-related activities pave to more recruitments. As the number of hires increases, the HR software automatically integrates them into the system. The digital record of HR will protect small businesses from the Fair Labor Standards Act (FLSA) complaints.

Effective workload management

Every small business aims to grow, and that requires endless hours of dedicated work on business development. They hardly get time to monitor each activity, including administrative tasks, HR issues, meeting deadlines, and finalizing contracts. These activities divide their attention from the matters of sales, marketing, and clients. As a result, it can drastically impact growth and success. Therefore, it is better and often more profitable to integrate HR into your business rather than avoiding sickness policies, recruitments, and daily operations. 

Maintain office environment

HR system plays a pivotal role in influencing the organizational culture. It involves merging values, company visions, beliefs, traditions, and working rules that the company has adopted with time. Apart from work and recruitment management, HR also manages the workplace environment, ethics, culture, dress code, and shift rotations. Check out America's Best Bookkeepers  

They help in tracking employee’s performance and maintaining discipline among the employees. For example, taking care of punctuality to improve time management skills. It may also develop other flexible HR-related policies that allow employees to manage their tasks and schedules.

Supports business growth

HR helps businesses in making strategic decisions regarding company growth.

You can grow your business when you know your employee’s capabilities, their way of respecting their jobs, challenges, and opportunities. So, HR help you in getting this knowledge to make staffing decisions. It also supports business growth.

  • Making succession plans and discussing employee talent reviews.
  • Using workforce planning software to develop long-range staffing and reorganization strategies.


Every small business must have an HR department to cater to an organization’s various administrative and compliance needs. HR professionals serve as a mediator between company management and all workers. You can improve your employees’ business efficiency and productivity by using web-based software tools to streamline HR-related tasks.

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