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SMEs will have to adopt HR best practices in order to grow. It is the entrepreneurs who will have to take his/her employees along and make them an integral part of the enterprise through such best practices.”  Arvind Joshi, president – human resource, Dishman Pharmaceuticals & Chemicals Ltd.

Small to medium businesses are the back bone of any economy because they contribute to the national income, employment and innovative activities. Despite playing a vital role, it is disheartening to know that very little attention is given to the HR practices to the research literature of human resource management (HRM) in small and medium enterprises (SMEs).

You need to understand that the difference between SMEs and large enterprises is the head count of its employees. A large corporation has over 1000 employees while the SMEs have less than that. Therefore, the HR practices of small businesses will be different from that of the larger firms. However, many SMBs are ignoring the concept of HR management due to lack of funds. In the past, small/medium enterprises employed very few employees. Hence, they hardly paid any attention to the HR practices such as effective recruitment, selection process and training.

Today, though many SMEs are adopting HR strategies, owners of smaller firms are focusing more on the fast and aggressive growth of business than on the HR practices. “As a result, they don’t expect much from their human resource, as long as the HR professional can take care of the basic administrative routine like payroll, benefits and attendance records,” opines Arthur Yeung, Philips Chair professor of human resource management and associate dean of China Europe International Business School.

SMBs have become aware of the fact that HR management plays a vital role in increasing the productivity of the existing employees and also in the field of recruitment. If they are unable to employee a full time HR manager, they are opting for outsourcing the HR practices to HRM firms. There are some SMBs who take a step forward and implement hosted HR application on cloud.

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Hosted HR Solutions

Hosted HR solutions are web-based software applications which can be bought from a SaaS vendor. You can either pick the application from the shelf or ask your vendor to customize the HR application to suit the needs of your firm. SMBs are opting for HR application on the cloud because there is no concept of software implementation on the local server, the data can be accessed anytime anywhere. Hosted HR solutions are more cost effective because they are billed as per usage either monthly, quarterly or yearly. The pricing policies of these HR practices depend on the vendors, therefore you can even negotiate.

Along with the benefits there are demerits too. You have to discuss the factor of data storage, backup and security with your vendor. Remember, data theft is a common cyber crime. The software functionality has limited options and is dependent on the policies of the vendor. You need to look into the above mentioned points before deciding on the vendor.

HR Outsourcing – A Growing Trend

Many SMEs are making a smart move by outsourcing some or all HR services. Though outsourcing the HR practices has potential advantages, you have to be careful while choosing the provider. A bad service provider can cause damage and create problems for you. Some of the benefits of HR outsourcing include:

  • Outsourcing firms are experienced and they know how to handle bad situations quickly and at a minimum cost. These firms also help the client address issues such as payroll and other employment benefits keeping in mind the welfare of both the client and his staff.
  • Many of the HR outsourcing firms has various top-notch technical tools that can be customized to provide best service to their clients. Their level of expertise is high and this helps them to gain an insight into the problems face by their SMB clients.
  • Professional HR outsourcers would use the best industry practices to gain maximum efficiency. The best service providers work as per the client requirements and in accordance with the state and federal government regulations.

However, you have to find a provider whose services suit your business model. Before outsourcing the HR practice checkout the credibility of the provider. When you outsource the HR work to the provider on the other side of the globe who has no clue about your work culture, it can lead to numerous misunderstandings and this in turn can affect the overall quality of the work. So choose a provider within your vicinity. Finally, the most challenging factor while outsourcing the HR practices is the ‘trust’. Remember that you are off-loading the company’s critical data to an outsider. Before outsourcing, it is wise to talk to the provider’s current and past clients.

To sum up, SMBs have to implement modern HR practices if they intend to succeed in the competitive environment that is prevalent nowadays.

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