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HR Software for Small Businesses

As a small business grows and the work load increases, an owner finds the need to employ more staff to cope with the daily demands of the business. Doing so usually enables the business to grow even faster and soon the owner is thinking of hiring more people. At the outset when only a few employees are taken on board the owner conducts most of the human resources tasks himself or with the assistance of an accountant. But soon administering human resources becomes more than just accounting procedures. Maintaining employee files, dealing with employee complaints, attracting new employees and creating a culture that is conducive to productive work all start to emerge as issues that need attention.

Clearly a business owner cannot afford to spend time on all these issues. After all, the owner has a business to run. And not all business owners have the talent to handle human resources issues; their expertise lies in the type of business they have created and ensuring the business is achieving its goals.

Need for full-time management grows

At this stage, because the owner cannot afford to appoint a full-time human resources manager, these tasks usually are handed to the office manager who has been appointed to help the owner cope with the day-to-day tasks of running a business.

But at some point the need for the full-time management of human resources becomes clear. With new labor regulations rearing their heads, healthcare reform becoming more complex, and grievances or disciplinary action necessary in some cases, the demands on the office manager's time increase until human resources issues demand a big chunk of the day. After all, the company cannot afford to face fines and lawsuits, let alone mistakes and delays, that are caused by a lack of knowledge of compliance requirements.

Employees can be lost

In addition, unless attention is paid to reasonable compensation and working conditions, employees can be lost to competitors. Recent surveys indicate that half of all employees are actively seeking a position at another company or are ready to hear about openings that might occur. Unless a company is investing in its employees and creating an appealing work culture, it stands to lose its top people.

Indeed, recent studies have shown that the top challenges human resources departments will face in the next decade involve obtaining, keeping and rewarding the best employees. More than ever, the people who work for the company and the way they are treated are key to running a successful business.

Employee performance

At the other end of the scale, attention needs to be paid to employee performance or else productivity will suffer. Small businesses are more dependent on their employees performing at their best levels than large companies where the impact of one inadequate employee is less noticeable.

Even in a small business, therefore, the need for improved management of talent becomes more and more crucial as the company grows.

Another factor is that errors can creep in when humans are involved in such activities as crunching the numbers or assessing an employee's potential based on factors such as output. Figures need to be checked and re-checked, all of which can take additional time.

How software can help

There is a way out.

Increasingly, software programs are becoming available to help small business owners in the human resources field. This small business HR software can be used to automate tasks, keep records and assure that compliance requirements are met. Programs are being written for mobile access, internal cooperation, employee self-service and integration from start to finish. Most are cloud-based systems that can be accessed from anywhere there is an Internet service and ensure that information is safe and secure.

Business owners should take a close look at what is available and chances are they will find software that not only suits their requirements, but also is available at an affordable price — in some cases even free. The use of such programs might eliminate the need to hire additional staff to manage human resources.

At the same time, the software should incorporate the newest applications and users should be able to operate it intuitively without having to undergo a long and strenuous learning process.

Look for these features

Among the features for which the small business owner should look include:


  • A database: A complete list of all employees and the information relevant to each is an essential element of all human resources software. Information that would previously have been in an employee file kept in a drawer in the office will now be included in the software. It should be cloud-based to avoid accidental deletion or loss resulting from a catastrophic event such as a fire or earthquake. The database can be amended, or added to, when needed. Controls to prevent malevolent manipulation should be in place.
  • Payroll and benefits administration: The software should include the basic payroll functions, such as required deductions including taxes, medical and retirement contributions. In addition, an owner might want to consider software that permits the tracking of time and attendance, if this is an important feature of their employees' work.
  • Employee self-service: Software that includes the ability of employees to handle aspects of their own benefits package is a valuable contribution.
  • Performance monitoring: A small business owner should consider software that permits the tracking of staff performance through a simple scoring system.
  • Management of talent: Some human resources software will assist a small business owner in recruiting new employees, training, development and succession planning. The owner should consider whether it is worth purchasing such software additions if the cost is considerably more than software that handles basic human resources management. Additions can sometimes be bought as modules, enabling them to be bought should the need arise.


Small business owners might want to consider starting out with a service that offers free no-frills software for companies with a small number of employees. Among them are Zenefits and WebHR.

Paid services typically charge a basic amount for each employee, ranging from $1.25 to $12, but modules for hiring, payroll and so on, may cost more.

Leading companies

Among leading small business HR software companies are:

  • Zenefits: A free service that offers payroll and benefits, time tracking, compensation and compliance.
  • BambooHR: This company offers a flexible core system and pricing that can adapt to a company's changing needs. It includes centralized employee information, time-off tracking and integration with payroll services.
  • Namely: Offerings include payroll, benefits administration, performance reviews, time tracking, goals, team planning and reporting.

SuccessFactors Perform and Reward for Small Businesses

This software offers employee profiles, an organizational chart, goal and performance management and incentive alignment.