POSTED: December 19 2022
The Definitive Guide to Human Resources for SMEs

The Definitive Guide to Human Resources for SMEs | advo

At the point when you first decided to undertake a business venture it’s likely that your vision was solely limited to the product or service you wanted to offer the market, whatever your targeted industry, and how you were going to achieve it. However, when you establish yourself as either a small or medium-sized enterprise, it quickly becomes apparent that there are certain underlying facets which must first be addressed in order to fulfil the overall aim.

The foundation of any business, whether small or large, is people. Your employees are your biggest asset. As a collective, they are responsible for your organisation’s success. Ultimately meaning, that if both you and your business are to thrive, then there is a requirement to manage and protect your staff accordingly. This practice is what’s known as human resource management (HRM), or more commonly, human resources (HR).

HR functions are a core part of running an SME, however, they comprise some of the most complex features therein. Of which, the scope is singularly vast, hence why the overriding majority of business owners choose to outsource HR responsibilities. Namely, because performing the leadership role is demanding enough itself without spending numerous hours on filling out paperwork & completing essential administrative duties.

It’s for this reason why we’ve put together our guide to HR for SMEs. By reading it, we ensure that you will dispel any confounding sense of feeling overwhelmed so that, in the long-term, you can dedicate your time more productively on strategic oversight for your business. We will cover:

  • What is HR?
  • What does HR do?
  • What is HR Technology?
  • Why is HR Important?

What is HR?

To provide some context, the term ‘HR’ began its life in the 20th century, where the effective management of individuals within a business was taught in an array of academic & vocational settings. It arose out of necessity, due to a need to adapt to the ever-changing economic climate & technological landscape of the time.

Simply defined, HRM refers to the process of effectively and efficiently managing a workforce so that their business maintains a comprehensive advantage over rival organisations. It typifies a strategic and refined approach to business, one that works from the inside to maximise the performance of employees, and therefore the brand that they represent.

Considering the level of competitiveness among organisations today, especially given that over 99% of all businesses are SMEs, the principles underpinning HR’s history still hold up in the current situation. I.e., the fact that businesses are facing constant pressure to keep up-to-date with law & government legislation, alongside the force of various influential social factors. For instance, the widespread discussion concerning the validity of the four-day working week is a pressing matter which is currently garnering a lot of traction and, as such, cannot be ignored.

What does HR do?

The need for HR begins at a business’s genesis and remains relevant throughout its entire life cycle. Followingly, its functions pertain to every component that makes sure procedures flow smoothly, all while promoting a positive working environment by removing hindrances. To break down what is involved specifically, HR regards:

  • Recruitment

One of the primary goals in any given business, especially one that has just found its footing, is growth. This is, evidently, because an increase in growth equates to an increase in revenue. The most direct way to achieve growth is by interviewing, and subsequently recruiting more staff. After all, having a relatively substantial worker base means that you can achieve more in a shorter space of time.

But, recruitment is not so straightforward as it may initially appear, you have to be very discerning during the selection process. If you aren’t, and consequently choose people who aren’t suited to your organisation, then you lose out on valuable time and money. Chiefly, due to new hires requiring an, often lengthy, onboarding mechanism to be properly integrated. Again, a lot of time is intrinsic here, as well as paperwork. Job descriptions must be written with attracting a wide range of qualified applicants in mind. Likewise, they must embrace the diversity, equality, and inclusion (DEI) initiative to ensure that your business respects fair treatment and opportunity for all. Moreover, this also includes putting together compliant employee contracts, handbooks, and the distribution of each so that role preparation is adequately met.

  • Time & Attendance

The higher your employee base, the trickier monitoring and managing attendance becomes. And, if you are to get the best out of your workforce, then having a coherent rota system in place is vital. It is a basic requirement to know who is working what shift, and when.

Having said this, it obviously isn’t just about the time your staff spend at work, you must also take into account the various reasons which imply absence. Namely, paid time off such as holidays, parental leave, a flexible working dynamic, bereavement, and both short & long-term sickness. Similarly, you’re obligated to handle persistent absenteeism and lateness appropriately. It’s very easy to see how effectively managing all of this for an SME can get confusing. Nonetheless, improperly addressing time and attendance within your business manifests quite adversely, even leading to disciplinary action if you aren’t complying with employment law.

  • Health & Safety

Health & safety in the workplace is paramount. This is true for every job on the spectrum, whether this refers to a building site or an office. It’s rather visible that if your employees put themselves at any risk while at work, it is the business, and therefore you as the owner, who is at fault. The UK Government regulates satisfactory health and safety measures via an independent Health and Safety Executive (HSE), and so it’s salient that you abide by standard practice.

This means enforcing that your staff take compulsory breaks during their shift, and that you conduct regular risk assessments, protect them from any hazards, and have the correct insurance. The physical health of your employees is regarded here, but it isn’t the complete picture. Especially in recent years, the employment industry has continued to recognise the benefits, and the serious negative effects of one’s mental health, depending on the degree of its quality. As such, you must cater to the overall wellbeing of your employees, as opposed to a singular portion. This involves assessing the welfare of each individual within a workforce, and arranging counselling for those who are struggling, as a result of work or otherwise.

  • Payroll

Inherent within the latter point is financial health. As an employer, it shouldn’t be gauche for you to discuss the monetary affairs of your employees. I.e., do they think their employment terms are sufficiently meeting their needs, and is there anything that you can realistically do to support them in this area? After all, one of the primary fundamental elements to employment is a salary.

The way you distribute employees’ salaries & wages is through payroll. If you run an SME, then it is mandatory for you to put every single one of your employees on payroll. For those taking on UK hires, whether or not your organisation is based elsewhere, you have to conform to the PAYE (Pay As You Earn) system. PAYE is how HMRC collects taxes, National Insurance (NI), and student loan repayment contributions from employees’ wages. All deductions are required to be accurate, and be perceptible on each payslip that is created for your members of staff. This also includes specific adjustments for variable absences, as well as contract terminations. As with all HR operations, the complexity of payroll increases as your business grows, but there remains no room for error here. In the case of significant errors, just consequences naturally follow.

  • Pensions & Auto-enrolment

In addition to payroll, pensions are another financial obligation for business owners to satisfy. Pensions represent an investment spanning an individual’s entire working life. A contribution to their pension fund comes out of their wages every month, to which their employer makes a corresponding further contribution, relative to their contractual terms.

The UK Government has strict rules in place regarding pensions. Foremostly, that any employee who meets the eligible criteria, must be automatically enrolled onto a workplace pension scheme. This has been the case since the Pensions Act of 2008 was introduced. Of course, an employee can opt out of this if they wish, but there are a set of guidelines as to what employers are allowed to do in this area. For more detailed information on your pension duties as an employer, you can head over to the Government’s web page for Workplace Pensions.

  • Employee Benefits

The market for top talent is merciless, and will stay in this state for the foreseeable, if not continue to rise exponentially. The workers of today, both those who are currently in employment and those searching prospectively, have demands which go beyond standard financial opportunity. Extra incentives are necessary if you’re to compete with rival SMEs for the best employees, as chiefly symbolised by employee benefits.

This same goes for if you want to hold on to your current workforce, employees need to feel appreciated. Offering an enticing set of benefits is a tried and tested way of displaying your appreciation. Benefits come in many forms, for instance, free lunches, healthcare support, fitness schemes, staff discounts, flexible working hours, remote working capabilities, and paths for career & skills development. Not to mention, there are those mandatory employee benefits in the UK which we have already discussed, such as, statutory sick pay, paternity pay, maternity pay, holiday pay, alongside a workplace pension. However, we do recommend that you go further than usual benefits compliance if you want to get the best out of your employees. It’s almost essential to define a clear employee benefits strategy for your SME.

As you can tell, HR incorporates a litany of individual responsibilities, each having an expansive set of innate intricacies. This is why HR generally refers to HR departments, a division within a business which consists of multiple teams working on the extant separated components. It is not feasible for one single body to fulfil all of the tasks that make up HR, particularly not one that is leading a business.


What is HR Technology?

On the surface, technology appears to be the antithesis of HR because of how HR attends to the human aspect of an SME. Rather contrarily, there are certain technologies which are adapted to streamline the functions of HR departments, owing to the scale of the overall operations.

In particular, software and cloud-based systems that integrate everything HR does, like monitoring leave requests & recording attendance, ensuring HMRC compliance as well as managing payroll & employee benefits etc. Furthermore, it can allow administrative tasks to be automated so that time can be freed up, while simultaneously improving the accuracy & security necessary for tasks involving sensitive databases.

Here at advo we are committed to staying ahead of HR technology trends so that we can deliver the best service to our clients. This is summed up by our advo-one platform which is expertly designed to bring all of HRM’s responsibilities under one roof, giving you the control and peace of mind you need as a business owner.


Why is HR Important?

HR is important because, in essence, businesses could not sustainably operate without its utility. That is, if your organisation does not remain compliant, then it’s only a matter of time before it dissolves. HR is categorically geared towards preventing this from happening.

What’s more, HR consultants afford advice that is integral to keeping employees satisfied, healthy, and therefore productive. The end result being, that your SME establishes a thriving working culture, one that is rich with diverse talent.

HR is the key to any successful business by how it lessens the burden of the employer, all while improving the quality of the organisation’s total output. If you’re interested in implementing a solution that enables your SME to reap the comprehensive benefits to be had, then feel free to get in touch today and our team will be with you in no time! Thank you for reading this guide to human resources for small and medium-sized businesses, for further related content, be sure to visit our news page which we regularly update with equally useful information.