Small business employs half the workforce in Australia – but they often do it without the resources of large corporations. We look at four HR solutions available when scale is a factor.

Australia is a country characterised by its scale of entrepreneurs. Small business makes a very significant contribution to the economy, collectively employing half the Australian workforce and accounting for one fifth of Australia’s gross domestic product. And, for the second year in a row, the number of new businesses in Australia has grown, according to the Australian Bureau of Statistics.

What these small businesses have in common is the challenge of dealing with the myriad people issues from recruitment and retention, to diversity and inclusion, health and wellbeing and more. What are the different solutions that small businesses are adopting around their people functions, and how is it changing?

Sourcing suitable staff with the right qualifications was the main problem for the 1,000 small and medium businesses (SMBs) surveyed nationally in the Sensis Business Index June 2016. Recruiting and retaining staff ranked a close second.

Add to that the daily challenge of administration and compliance issues, and it is little wonder that a whole host of businesses are spruiking solutions to small business owners to make employing and managing people easier.

Most small businesses grow organically, without internal systems in place for either accounting or human resources, says Andrew Ferguson, principal of MJ Consulting, itself a small Sydney-based accounting firm with clients who operate small businesses.

“HR is given a very low priority,” he says. “You can look back in hindsight and say it was silly not to have it at the time, but in reality the business was so busy chasing the next sale or paying the next invoice. Most of my clients could use a lot of help with HR.”

Ready to step in is the Australian Human Resources Institute, says CEO Lyn Goodear. She advises small businesses that don’t have access to a certified HR practitioner to partner with AHRI.

“Then they can access resources such as AHRI:ASSIST, an online portal that provides an exhaustive source of templates, FAQs and a help line. HRMonthly also provides information on contemporary and future trends in people management,” says Goodear.

As well as the transactional aspects of HR, many small businesses struggle with managing interpersonal staff issues. They often only focus on human resources when they are in danger of losing a valuable staff member, says Harriet Stacey, a former Australian Federal Police officer. Now, she is the founder and CEO of Wise Workplace, a consultancy that helps to mediate workplace behavioural issues for small businesses nationally.

“Most people who set up small business are not trained in HR. They are not trained in managing workplace conflict and when they face bullying, harassment or discrimination in their office, they don’t know what to do and it can get out of hand,” she says.

In a small team, if managers don’t respond promptly to staffing issues, they can become serious and expensive problems later on, says Stacey. As a result of a simple incident, an employee might take sick leave or stress leave and another might have to be suspended or fired. “It can escalate from something as small as stealing someone’s sandwich as a joke.”

Making strategic alliances

While small business employers struggle to understand their compliance obligations in an increasingly regulated environment, many employees are well-versed on their employment rights by gleaning information from the internet, says Nick Tindley, executive manager of HR Consulting at FCB, a Melbourne-based legal and human resources services firm.

“It’s the perfect storm of circumstances,” he says. “And then what do you do?” Lawyers and HR consultants are much too expensive for most small businesses, so they are at a significant disadvantage.

FCB decided to see if there was a way for them to offer the quality advice small businesses needed. In response, they developed HR Assured, a suite of online software tools for small business employers with the transactional aspects of HR, including recruitment, onboarding, payroll systems and performance management, among other things. FCB also operates a 24/7 telephone support line, staffed by people in Tindley’s team, to talk small business owners through best practice HR issues.

One of their clients is Charles D’Abico, general manager of Casa D’Abruzzo Club, a social, sports and gaming venue in Melbourne with 90 employees. D’Abico has used HR Assured’s services for the past six months. “We previously had access to HR consultants through our associations but they were very expensive,” he says.

“Some small businesses shoot from the hip and make rash decisions, but I see HR Assured as preventive management, like getting your car serviced, so we are behaving in a way to prevent problems happening in the first place.”

D’Abico also likes the fact that he can access around-the-clock HR support. “We operate seven days a week. Staff issues come up anytime and you want to deal with them when they are fresh.”

He used HR Assured recently when he sent a formal discipline warning to a staff member. “I sent HR Assured the letter first. They changed a few phrases and I felt quite comfortable sending it off to the employee, knowing that I had done the right thing and there would be no comeback,” he says.

Melissa Behrndt, who owns and runs HR OnCall, another online HR consultancy for small business, says that, unfortunately, many clients contact her for the first time after they’ve received a Fair Work notification for unfair dismissal.

But in the last 12-18 months she has seen a lot more small business owners behaving proactively on HR. “I think that’s due to all the bad media attention that 7-Eleven got for underpaying its workers,” she says.

While Behrndt’s service offers online advice, her consultants will travel to a business for face-to-face consultations.

Taking the DIY approach

Rather than hire a consultant – virtual or otherwise – some small business owners might choose to take a DIY approach to HR instead. But where is the best place to get information and help with compliance and other HR issues? 

Peter Strong, CEO of the Council of Small Business Australia (COSBOA), the national peak body for small businesses, suggests small business owners contact the Commonwealth’s Fair Work Ombudsman online or by phone. COSBOA successfully lobbied the Ombudsman to introduce a dedicated small business employer hotline.

“It’s such a good change because now the plumber or bookshop owner doesn’t have to trawl through the Ombudsman website; they can just get their exact question answered right away,” Strong says.

For those small business owners with less urgent needs, the Ombudsman site offers a wealth of resources, including webinars on small business best practice and free online courses (that take 20-40 minutes to complete) on hiring employees, managing performance, diversity and discrimination. They also offer pay and leave calculators and other HR tools.

Strong also recommends small business owners seek HR and industrial relations (IR) advice from their industry associations and local Chamber of Commerce.

Take hair salons, for example. Sandy Chong, a hairdresser for 35 years who owns and runs her own salon with 20 employees in Newcastle, is also CEO of the Australian Hairdressing Council, the industry’s peak body with more than 600 members.

“Issues about human resources are always among the top complaints of our members,” she says. “Every hairdresser wants to do the right thing, yet they feel threatened because they find the modern awards so complicated to understand. They can’t afford an HR professional, and are just too busy and don’t know where to get the right information.”

Chong has actively tried to address that situation with the Australian Hairdressing Council’s website, where salon owners can go to the IR work hub to access information from a resource library. Members also are entitled to five free six-minute IR consultations over the phone every year from the council’s lawyers.

Opting for outsourcing

Small business owners in the are US spending up to 25 per cent of their time handling payroll, taxes, benefits and workers’ compensation and other HR matters, according to the US Small Business Administration. Given that, it’s not surprising there has been a huge growth in outsourcing these tasks.

Whereas it used to be that only large organisations could afford to outsource, digital delivery means that many HR solutions can be administered remotely and accessed quickly and easily by one end user, and also allows solutions to be scaled easily to suit the size and style of a business.

Flare HR is a new, small Australian business offering HR software and benefits packages to other small businesses, with the enticement that it’s totally free. The company earns its revenue from the delivery of financial services and products.

Jan Pacas, Flare HR managing director, says that he established the company with two colleagues because they thought many HR processes could be computerised.

“For 80 per cent of the transactional tasks you don’t need an employee – an application can take care of those. We are trying to do for HR in small business what Xero did for accounting – to make life simpler for the business owner.”

The tasks Flare HR software handles include a fully digital on-boarding process, employment contracts signed online, rostering, payroll, performance reviews, leave applications, training records, an internal social network. They plan to add staff education and financial services as their client base grows.

The freelance economy

The idea of buying, selling and swapping resources is taking hold among small businesses. Digital marketplace and small business hub Proquo offers small business owners and industry experts access to a range of services from other providers. Users can create briefs for the work they need, provide quotes, manage payments and publish reviews, on the online platform.

Some of the services offered under the business support umbrella include business coaching/mentoring, professional development, HR and start-up advice.

“We encourage the Australian small business community and business support experts to register for free and explore the essential business services available, to help them get ahead with the expertise and customers they need,” says Co-CEO Carl Spurling.

Small business bartering is no secret and Proquo’s members also have the option to buy, sell or pay the difference should a trade-off not match the cost of a service. A dedicated team and a robust briefing and quoting process are in place to make sure members have the right person for the job and both parties are on the same page about what’s being delivered. When a payment is involved, Proquo holds a 50 per cent deposit in its secure vault, assuring members their money will only be released when the job is delivered successfully.