The field of human resources has never been more important or complicated than it is today. Changes in HR are happening so fast now — the policy debates around health care at the national and state levels are just one obvious example, but other big HR-related changes could impact the minimum wage, payroll taxes, overtime pay, employee benefits and more. Managing human resources for small business can be particularly challenging as many smaller companies are operating without a dedicated HR representative, let alone an actual HR department.
A recent study conducted by ADP®throws the widespread nature of this challenge into stark relief. 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) themselves 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 do so successfully.
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 ability to handle HR tasks without making mistakes. In fact, small businesses generally use paper and Excel spreadsheets to track employee data — a manual process that's highly inefficient. When they need HR-related expertise, such as information about employee classifications, the aHRM may conduct an internet search. The small business may not even have an up-to-date employee manual or handbook that explains its benefits and policies. This failure can create big HR problems.
The Truth About Human Resources for Small Business
It will come as no surprise to most business owners that the majority of ad hoc HR managers (64 percent) also happen to be the business owners themselves or the president of the company, according to the ADP survey. ADP found that 20 percent of the aHRM's time was devoted to performing HR functions. While managing HR well is absolutely essential to the health and growth of any business, large or small, 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.
So, if you're a small business owner, an office manager, a bookkeeper or anyone else who's been asked to be an aHRM, you're not alone. Fewer than a third of small businesses have even a single employee dedicated exclusively to HR, according to ADP's survey. In part two of this four-part series, we'll explore the costs and consequences of this ad hoc approach to HR.
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Read the rest of the series:
Part Three: The Ad hoc HR Manager: The Potential Risks
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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