What Is HR’s Role in a Small Business?

In small organizations, HR staff wear a variety of hats: payroll specialist, training manager, benefits administrator, legal compliance officer, hiring professional, and even therapist at times. The human resources function focuses first on the pressing issues required by applicable state and federal laws and then moves to ancillary items like payroll, recruiting, interviewing, and creating and enforcing company policies and benefits. From there, the role takes many other items, like training and development and positive culture and morale, and becomes a valuable partner in making strategic, data-driven decisions.

But what happens before you’re able to hire an HR professional?

HR Tasks Owners Should Prioritize

You can’t do it all. Let’s identify the areas that demand your attention first: compliance, hiring, and the employee life cycle.


Compliance encompasses a broad spectrum of items for your business. If your workforce is in-office and you don’t have the appropriate labor law posters hung up, the penalties involved could be a financial blow to your company. If you don’t administer a final paycheck to a terminated employee on time, that could turn into a lawsuit. Prioritizing compliance means you are protecting your organization from unnecessary penalties, lawsuits, and fines.

Here are some basic resources for learning about compliance.

  • On the federal level, the Department of Labor gets you started here.
  • The Department of Labor also steers you towards your state’s requirements here.

Pay and Benefits

This task should be prioritized because without adequate and timely compensation and competitive benefits, you won’t have an organization, product, or service. When your employees lose faith that you can pay them on time or that your benefits package is competitive, they will start to look elsewhere. Establishing competitive pay and benefits solutions that work for your company gives you the cutting edge you need.

Some basic topics in this area (with links to articles in our HR encyclopedia) include:

From Hiring to Firing

Finding the right people and keeping them is key to your survival.

Best Practices for Owner-Led HR Management in Small Businesses

Having to deal with HR issues as well as the other demands of your business can feel like being thrown into the fire. Let’s look at where to begin as we review the best practices below.

Establish or Maintain an Employee Handbook

As you work through HR issues, begin creating policies and procedures and collecting them into an employee handbook. While it may just seem like an electronic bundle of information that employees sign every year, it’s actually a wealth of information for your team to refer back to when issues arise. It provides your organization with clear and effective communication on the easy stuff, like when paydays are and what your organization recognizes as a holiday, but also rules and policies that are required by your company and federal and state law and the behaviors you expect. This will protect your organization from confusion moving forward and should be updated and maintained carefully.

Stay Up to Date on Changes

Ensure you’re staying up to date on changes that require HR action. Subscribe to newsletters from federal and state compliance-oriented agencies and follow HR-oriented organizations on social networking platforms. Consider outsourcing this awareness.

Evaluate Outsourcing or Hiring

Create the benchmarks you need to meet before you can consider getting HR help. There are two main options here: outsourcing and hiring.

Outsourcing and Software

You can outsource anything from specific tasks—like payroll, benefits, hiring, or compliance—to an entire HR department. What would you most like help with? How will you know when you can afford it?

There are many, many options available. If outsourcing HR tasks to a person or agency is too expensive, consider getting started with an HR software like Eddy, which automates processes and helps you stay compliant.


At what point will it be more beneficial to invest in an in-house HR professional? How will you decide?