Introduction

It is estimated that about 35.98% of India's total manufacturing output is generated by small businesses or MSMEs (Micro, small, and medium enterprises). These businesses are a key driver of economic activity in our country.

However, the journey of these enterprises is not easy, just as in any other part of the world. They must operate with minimal resources and face tough competition from various multinational companies. Amidst their desperate efforts to keep daily operations running and focus on growth strategies, they let human resource management take a backseat.

Ask anyone holding a managerial role in a small business about how they handle HR management. You will be surprised to learn that for most of them, it merely means talent acquisition, and they pay little attention to it beyond that. This belief comes from the idea that HR management is only for large companies.

Small businesses need efficient HR management just as much as large businesses do. But the biggest challenge is how to handle it within constrained budgets. This is where HR software for small businesses. This blog discusses:

• The unique nature of HR challenges faced by small businesses
• What is HR software for small businesses and how it helps
• Available options and key features to look for

Types of HR Challenges Faced By Small Businesses

HR professionals in small businesses are forced to walk a tightrope between scaling their business to generate more revenue and keeping all their employees motivated, focused, and productive at the same time. Often, the latter takes a backseat because companies either do not realise the importance of investing in human resources, prefer other investments instead, or have no resources to bother with.

Here are some of the common challenges which at least 90% of businesses in MSMEs are likely to face.

Limited Resources

Smaller businesses have constrained budgets. Even though they wish to have a dedicated HR team to keenly address their employees' basic work-related needs, they can't maintain one. Their focus, at least during the initial phases of their existence, is to bootstrap all resources to increase productivity and revenue. As a result, most of the HR-related efforts that should be put into recruitment, training, and employee management and development are repurposed for non-employee-related projects.

Compliance Risks

Operating a business in any area involves following many legal rules. Obtaining local permits, state approvals, meeting specific industry standards, etc. Small businesses, which are new to the scene, may find navigating through this legal journey quite complicated. For manufacturers, there are even more laws to comply with.

A recent report found that about 36% of small drug manufacturers in India had to close because they didn’t meet certain regulations.

Employee Management

Just because they are working in a small business firm, the issues employees face and the challenges in HR management software are no different from those in large businesses. The only thing is that the context is different.

But when employee concerns are left unaddressed by the HR team, no investment is made in their training and development, basic workforce management needs are unmet, and recognition and appreciation remain just in records, these employees easily start to experience burnout and toxic workplace culture begins to form.

What is HR Software for Small Businesses and Why Consider It?

Ever wondered what HR software for small businesses actually is and if it's worth investing in one? Ever wondered what HR software for small businesses actually is and whether it's worth investing in? You’ll get a clearer picture by comparing it with the HR systems that larger corporations typically use.

Large corporations usually opt for enterprise-level HR software solutions because they need to process a huge variety of tasks daily – from handling thousands of employees to managing multiple departments and organizing complicated workflows. As a small business owner, you don't need such a sophisticated system though.

Payroll and HR software for small businesses is designed with your unique needs in mind - much like a tailored suit rather than a one-size-fits-all approach. These solutions are designed to understand and cater to your HR needs, understanding how focused and straightforward they are, without overwhelming you with features you'll never use.

Common HR Solutions Small Businesses Require

Small businesses are a microcosm of larger corporations. With a few exceptions, like fewer specialized HR roles and simpler organizational structures, they have more or less similar HR processes. However, the key difference between HR software for them and HR software for larger businesses is the pricing model and volume. Here are some of the common HR solutions small businesses typically need to use in their day-to-day operations:

Time and Attendance Management : Keeps accurate records of how many hours employees work and their daily attendance.

Leave Management : Involves implementing leave policies while maintaining thorough records of employee leave requests, approvals, and leave balances.

Shift Management : Helps in arranging employee work schedules as per business needs without causing conflicts, overstaffing or understaffing.

Employee Onboarding : Simplifies the onboarding process for the employees by letting the HR team gather necessary documents, execute timely training, and help new hires adjust to the company culture.

Core HR : Centralizes important HR information, such as employee details, job roles, and company policies, to make basic HR tasks more efficient.

Payroll : Manages the complete payroll process - from calculating salaries and deducting taxes to distributing payslips and ensuring timely salary deposits.

Document Management : Organizes and stores important HR documents like contracts and policies - safe and easily accessible meeting legal requirements.

Important Aspects to Consider While Choosing HR Software for Small Businesses

Simple and User-friendly Interface :

A simple and user-friendly interface will make your HR software equally attractive to all employees and stakeholders regardless of their technical expertise. Moreover, if the navigation options and clean and straightforward, you won’t have to invest too much time in training the employees about the use cases.

Cloud-Based Access :

In modern times, choosing a cloud-based HR management system is necessary. Most businesses now operate in hybrid mode, offering flexible work options for employees across multiple locations. Adding to this is the need to cater to field employees' needs. Only cloud-based HR software for small businesses can address these demands.

Employee Self-Service Portal :

Modern small business HR software solutions are designed with employee engagement as a priority. By adding features like employee self-service, these solutions empower staff to manage most of their information on their own without needing HR's involvement in everything. For instance, updating personal information like address changes or bank details, placing leave requests, and marking attendance.

Integration Capabilities :

After investing in HR software, relying on manual processes would go against the entire purpose of the solution. Integration capabilities prevent such setbacks. With human resource management software that is compatible with your existing systems, like spreadsheets or payroll software, you can easily export or import your data, which saves your time and eliminates the need for manual interventions.

Affordable Pricing Models :

For small businesses, the affordability of HR software is a major factor in determining its long-term benefits. A pay-as-you-go model is a great option since it gives you better control over spending - you only pay for the employees you've added to the system. It's also wise to check if the software offers a free trial period. This way, you can test the features and make sure the cost fits your budget before committing.

Scalability Demands :

As your small business grows, you'll need to hire new employees. In a few years, you might have twice as many employees as you do now. Your HR software needs to handle this growth smoothly. Switching to a new system later can be complicated - it disrupts processes and requires additional training. You can avoid these challenges by choosing scalable HR software for small businesses right from the start.

Top Benefits of Implementing HR Software for Small Business

Saves Time with Automation :

HR software helps automate all of your routine tasks like attendance management, shift planning, leave management etc. So your HR professionals can keep their attention on other important work.

Maintain Accurate Data :

Since HR software automates data management after initial setup, you can expect it to maintain accurate records of all HR tasks. You won't have to worry about falling behind on compliance requirements.

Cuts Costs :

Good HR software lowers expenses by reducing the need for multiple HR staff members and resources. For a small business, this is a great advantage as they operate on a very restricted budget.

Encourage Employee Involvement :

The self-service option, which is a key feature of the best hr software for small businesses lets employees manage their own info. It pushes them to stay more connected with their responsibilities.

Easier Compliance :

After you configure the HR software with the right information, it will keep notifying you if anything is missing, such as required documents or incomplete employee profiles. Consequently, nothing important is overlooked and full compliance is achieved.

Smarter decisions :

Your HR software designed for small businesses can give you quick access to important data insights, such as weekly attendance patterns, leave policy adherence, shift choices of employees, and more. These are all valuable insights that can make your decisions smarter.

All HR Records in One Place :

Modern HR solutions, especially those designed for small and medium enterprises, combine multiple features. From attendance and payroll to shift management, these systems handle multiple functions and maintain all HR records in a single place for your quick access, importing, exporting, and other needs.

When to Consider Implementing HR Software for Small Business?

Here are some typical scenarios showing whether it is high time you considered HR software.

• Your employee turnover rates exceed industry benchmarks.
• HR spends hours on manual payroll processing weekly.
• Tracking employee documents becomes chaotic and disorganized.
• Compliance audits reveal multiple lapses and violations.
• Generating reports takes days instead of minutes.
• Administrative costs spike due to inefficient processes.
• Team communication lacks clarity and timely updates.
• Employee surveys show low engagement and satisfaction scores.
• Job postings and applicant tracking lack coordination.
• HR spends excessive time processing employee information requests.

Bottom line

For smaller enterprises, it’s essential to tackle HR challenges promptly and affordably to optimize resource use, particularly human resources. By choosing and implementing the best HR software for small businesses, a great deal of day-to-day HR challenges become easier to address. We hope the information provided in this blog can help you decide on the right payroll and HR software for small businesses that your company truly needs.

Mewurk, one of the best HR software for small businesses in India, is available for a free trial of up to a year. We offer this with our proprietary face recognition attendance kiosk. Our no-commitment trial gives you enough time to use it for your organizational needs and get convinced. Cost-effective, futuristic, and all-inclusive for a greater HR experience.