Why do SME businesses need human resource (HR) services?

In the same way that all business owners are in the business of sales and marketing – all business owners with staff are in the business of human resources (HR).

Why do we say that?

  • It can cost up to 50% of a team member’s salary to replace them if you don’t recruit the right person first time around – yep, that’s $35,000 for someone on $70,000
  • Wages are the single most reported cost pressure for WA businesses – so getting maximum value out of the investment in staff is critical for business success
  • Good HR systems can impact positively on work satisfaction and work engagement 
  • If you plan to step away from your business at some point, who will you be relying on to run the business in your absence?

Here are three ways HR support can save you time, money and stress in your business:

1. Your team is your business – recruit well first time and save money

For businesses that rely on someone other than the business owner to deliver a product or a service, those people are your business.

The cost of hiring the wrong person can mount up:

  • If it takes three months to work out that someone isn’t the right fit for your business, that’s three months of wasted money which you’ll spend again getting their replacement up to speed. (And it can take a lot longer than three months if the business doesn’t have a clear probation program in place – and one that is actively managed.)
  • While you’re working out if they’re right, you’ll be investing in training them to do the job you’ve hired them for.
  • There’s the management time spent managing the recruitment process, inducting, training and coaching the new team member, and managing the dismissal process
  • And don’t forget to consider the impact on other staff – underperformance by one team member can undermine the productivity of their teammates.

2. Ducking difficult conversations has a cost too – tackle underperformance early

At RAW Human Resources, we believe that most people come to work to do a good job. But we also know that underperformance is a common issue in businesses of all sizes. Often underperformance is not tackled because business owners and managers don’t want (or don’t know how) to have difficult conversations with the person in question. We’re often called on to coach a manager or business owner to prepare for a tough conversation.

In our experience, when someone isn’t performing as expected in a role it can be for a number of reasons:

  • They simply don’t know what’s expected – there’s no written job description, no clear goals or KPIs for the position, and no regular meetings with their manager
  • They have issues going on at home or outside work that are interfering with their ability to do the role – this can be managed but there are legal issues to consider in some cases
  • They’ve taken on a new role or task and need some additional support until they learn the ropes – this can take about three months when moving to a more senior role, or taking on a new role in the team. Extra support could mean training, but it could also just be regular time with a supportive manager who can help them learn on the job.

Either way, not tackling this can be costly – at a rough estimate, it could cost you between $14,000 – $52,500 a year in lost productivity for one underperforming staff member. With around a further $25,000 in lost productivity in other team members and management time spent dealing with the issue!

3. Getting the pay right – “it’s complicated”

When the President of the Fair Work Commission agrees that the Australian award system is too complicated, it’s fair to say – it’s complicated!

  1. In WA, businesses need to first work out if they fall under the national or the state system of awards and agreements.
  2. You need to work out if there’s more than one award (if any) that covers your business – and whether there’s one that covers specific roles within the business. For example, a public practice accountant may be award free but the practice’s administration officer is likely covered under the Clerks – Private Sector Award 2010.
  3. Once you’re clear on the award, you need to ensure your bookkeeper or payroll system applies the correct rates for hours worked, penalty rates (if they apply), leave and any other allowances – such as uniforms.
  4. Make sure you review these regularly to stay up to date. Fixing underpayments later on can be costly and time consuming – not to mention potentially damaging to your reputation and your relationship with your staff.

And if you’re still not convinced you need HR let’s talk about:

  • clear HR policies – on things like social media, use of equipment, or code of conduct – so your staff know what they can and can’t do in your business and you don’t have to spend time deciding on a case by case basis
  • clear HR procedures and systems – to save you and your team time when doing things they do regularly
  • integrating staff management and internal communications so everyone is on board with building a high performing team – important as you grow and you can’t all fit around 1 table
  • implementing improvements in your business without damaging performance

And so much more…

Business owners can turn to a range of people for support with HR – there are lots of resources available online, including free resources from Government sources. (Links to a few we like and recommend regularly are below.) If you’re turning to your accountant, or other business adviser, be sure to ask them about the specific implications of your business decisions on your staff or employment obligations.

And if you’re ready to add a professional HR adviser to your team – get in touch. We’d love to help.

Western Australian Department of Mines, Industry Regulation and Safety
National Fair Work Ombudsman
WorkCover WA
WA Small Business Development Corporation
National Government Business.gov.au

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