Small businesses struggle to cope with HR duties

Workers receive ‘makeshift HR’ from small business bosses as workforce and legal pressures mount

Smaller businesses are struggling to cope with the ever-increasing challenges of managing employees, according to a survey released today by the Institute of Directors and Adecco, the global leader in HR solutions. The ‘Small Business Recruitment and Retention Survey’ found that 64 per cent of businesses were reticent to give up HR control. Despite this, 88 per cent admitted that finding the right staff was a challenge and keeping up with legislative changes in the workplace was often difficult.

The ‘Small Business Recruitment and Retention’ survey, conducted in April 2005, examined the pressures, and problems faced by smaller businesses when undertaking their own HR procedures. The survey found that 55 per cent of MDs were acting as makeshift HR directors and struggling to manage the HR burden of those employed by small businesses in the UK. The key findings were:

• HR from the top – In 55 per cent of businesses, MDs are managing the HR process directly, spending up to one day per week resolving HR issues
• Managing the legal burden – 90 per cent of businesses had to reform their HR policy due to legislative change in the past 12 months – 64 per cent in the last six months. 73 per cent believe existing legislation unfairly favours the employee
• Finders, keepers – 67 per cent cite ‘keeping staff happy’ as their number one HR priority with 53 per cent finding this the hardest part of the job. Diminishing employee loyalty is considered a major problem by 60 per cent of respondents
• Provision paranoia – 64 per cent of smaller businesses prefer to keep HR and recruitment in-house, but 88 per cent see recruitment as a major challenge

“It’s little wonder that managing HR is a continual pressure on SME management given that 46 per cent of company turnover goes on wages,” said Richard Macmillan, Managing Director of Adecco UK and Ireland. “Finding and keeping the right staff in line with legislation is a massive task for all modern day businesses, but for small businesses it tends to fall to the MD to do ‘on the side’”

Whilst 64 per cent of businesses prefer to keep HR in-house, 1 in 5 admitted that they don’t invest enough money in managing the process. The research also highlighted gaps in HR processes. Although most companies believe their HR policies are clear, 41 per cent admit to not having a formal recruitment policy in place to find the right staff.

Richard Wilson, Head of Business Policy, IoD, said: “HR issues take a significant portion of directors’ time but it’s typically done on a reactive basis. Small businesses also struggle to keep up with the increasing amount of legislative red tape which, if not properly administered, can end up costing businesses a lot of money.”

There is discontent among the small business community regarding employment legislation. 79 per cent of companies think there should be a fair balance between employee and employer rights and 73 per cent believe the law unfairly treats employers. However, despite strong opinions, only 6 per cent see ‘implementing new employment policies’ as a priority for their HR and are reacting to this situation.

Macmillan continued, “There is a danger of ‘procedure burn-out’ for small companies. Access to the right advice from HR specialists should not be the preserve of multinationals, as it is often the smaller companies who have most to lose from the range of HR issues, from having the right recruitment process to being sued for unfair dismissal”

The Small Business Recruitment and Retention Survey, published by the Institute of Directors and sponsored by Adecco is available from today. To obtain a copy of the full report either click on the link www.iod.com/presoffice or visit www.adecco.co.uk.