Less than a third of small businesses have even a single employee dedicated exclusively to HR.

Human resources management has never been more important, or complicated. Change in the HR field happens quickly. Healthcare policy debates at the national and state levels are one example, and other recent and upcoming changes could impact minimum wage, payroll taxes, overtime pay, employee benefits and more. Managing human resources at a small business can be particularly challenging, since many smaller companies don't have a dedicated HR expert on staff, let alone an HR department.

A study conducted by ADP illuminates the widespread nature of this challenge. The study found that 70 percent of small businesses with 5-49 employees are handling critical HR tasks in an informal, ad hoc way. Typically, a small business owner will assume the role of ad hoc HR manager (aHRM) or ask another employee (for example, another executive, an accountant or someone in finance) to do so as a secondary function. This can result in employees managing HR-related tasks on top of their existing workload without the training necessary to be successful.

What Tasks Do aHRMs Perform?

Payroll administration and HR compliance are at the top of the ad hoc HR manager's task list. That said, according to ADP's study, only 23 percent of aHRMs believe they have the necessary tools and resources to perform HR tasks well, while only 19 percent of aHRMs are fully confident in their abilities to handle HR tasks without making mistakes. In fact, small businesses generally track employee data in Excel and on paper — a manual process that can be highly inefficient. When they need HR expertise, such as information about employee classifications, the aHRM may have to search the internet to get answers. Small businesses often do not have an up-to-date employee handbook that explains its benefits and policies. This failure can create major HR problems.

What Is the Cost to Your Business?

The majority of ad hoc HR managers (64 percent) happen to be business owners, or the president of the company, according to the ADP survey. ADP found that 20 percent of aHRMs' time was devoted to performing HR functions. Spending so much time on HR tasks can mean that small business owners have less time to devote to critical primary duties, such as developing growth strategies.

Less than a third of small businesses have even a single employee dedicated exclusively to HR, according to ADP's survey. And only 10 percent of aHRMs enjoy performing HR tasks. The tasks themselves are difficult, and employees are seldom given the training and tools they need to perform them well. This can lead to frustration and stress.

The ADP survey indicates that only one in four aHRMs is fully confident that they're keeping up-to-date on HR-related compliance regulations. This can lead to costly compliance oversights.

It's not hard to see, then, how an ad hoc HR approach can negatively impact your bottom line, causing owner and employee stress, distracting workers from their core functions, even prompting employee turnover.

In the second part of the Ad Hoc HR series, we look at how to acquire tools and expertise to help aHRMs manage your HR effectively, including partnering with a trusted HR provider.

The ADP Ad Hoc Human Resource Management Study was a blind online study among 1,054 businesses with 5-49 employees (December 2016).

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