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

Human resources 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. It is therefore surprising that 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 or ask another employee (for example, another executive, an accountant or someone in finance) to do so as a secondary function. However, 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 Ad Hoc HR Managers 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 ad hoc HR managers believe they have the necessary tools and resources to perform HR tasks well, while only 19 percent of ad hoc HR managers are fully confident in their abilities to handle HR tasks without making mistakes. In fact, small businesses generally track employee data on spreadsheets and paper — a manual process that can be highly inefficient. When they need HR expertise, such as information about employee classifications, the ad hoc HR manager 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) are business owners, or the president of the company, according to the ADP survey. ADP found that 20 percent of ad hoc HR managers' time was devoted to performing HR functions. Do you really want to spend 20% of your time on HR, or would it be better for your business to look for an alternative?

Fewer than a third of small businesses have even a single employee dedicated exclusively to HR, according to ADP's survey. Whether you've taken on the HR function yourself, or assigned it to one of your other executives or employees, that's likely not what excites anyone about coming to work. Only 10 percent of ad hoc HR managers enjoy performing HR tasks, and employees are seldom given the training and tools they need to perform them well.

The ADP survey indicates that only one in four ad hoc HR managers is fully confident that they're keeping up-to-date on HR-related compliance regulations. One in 10 small businesses will face an employment lawsuit. If only 25% are confident that they are fully compliant, that means most companies are carrying serious risk.

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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