How HR in Small Business Differs from HR in Larger Organisations

The differences that small business owners and HR managers face

In the UK there were, according to the Federation of Small Business, 5.5 million small businesses at the start of 2022. Yet many small businesses have owners, leaders and managers who at one time may have worked in much larger organisations.

Whilst there are many clear advantages to having a business leadership in place by those who have operated in larger structures. There are specific challenges that smaller businesses face that require a different approach to be taken, particularly so in the realm of Human Resources Management. 

With there being no legal requirement for companies of any size to have a dedicated HR department. The management of HR can fall to a business owner directly or to another appointed employee with a non-HR background. 

In this article, Sage HR will set out the key differences between HR in small business compared to large business, to help businesses navigate the complexities of getting the people piece operating successfully. 

How does HR in Small and Large Businesses Differ?

HR management is seldom straightforward, no matter the size of the organisation. Yet in larger businesses where bigger budgets and greater resources exist, this combination can result in HR offering a more holistic and people centred, strategic approach to people management. Conversely however, HR Management in organisations that are smaller, whilst largely focused on operations and people management, does not focus on this alone. 

Whilst it is typical for smaller organisations HR to focus on the day to day challenges of personnel management and HR operations. Large organisational HR typically has to respond to the needs of the business and become more proactive and transformative. The pace of change is arguably no slower in smaller organisations,  yet this change is more focused, turnover and growth oriented. 

SMEs account for three-fifths of the employment and around half of turnover in the UK private sector

For small business HR, there are also notably different priorities, with the accompanying resources that are available being smaller and less consistent than those found in larger companies. Yet despite these resource and practice differences, these differences do not limit the volume or value of HR opportunities available to explore. 

Essentially, the fundamentals of HR management in practice are the same, irrespective of the organisation’s size. Yet, the advantages available within smaller organisations to business owners or those appointed to manage HR as practitioners in smaller operations. Are well positioned to deliver HR management to the employee base in addition to overseeing their business leadership responsibilities.

The Key Differences in small business HR Practice

1️⃣ Resources

Perhaps the most notable difference between small and larger scale business HR, is that smaller organisations do have more limited resources than larger organisations.  Whilst this can lead to smaller organisations being more restricted on the choices of systems & software they can utilise for HR Management. Business owners and HR practitioners alike in smaller companies do have the opportunity to operate creatively with their HR responsibilities. 

In response to the demands of small business HR needs, Sage HR offers effortless HR employee management.  Enabling small businesses to attract, engage, and nurture the best talent all from one place. The strengths of Sage HR is that from one place, you are able to effortlessly support the creativity and agility of a small business. Whilst ensuring the more rigorous aspects of HR management are managed in the way they should be. 

2️⃣ The Battle For Top Talent

Small business owners, in contrast to larger and perhaps more well known organisations. Can fall victim to thinking they don’t have the impact of employer brand awareness and employee branding power to attract and recruit the market’s top available talent. 

Yet despite the battle for top talent being a key challenge for organisations of all sizes. There are still a multitude of possibilities for smaller companies to stand out to the top talent who are more often than not, passive in their next steps career search. 

Both smaller and larger companies alike, recruitment is some of the most time consuming and costly activities that the organisation can undertake. The outcomes however for smaller companies hold far greater weight, given the business impact hiring the wrong person can have. 

The competitive advantage that smaller companies have is their nimbleness and pace of their hiring process. Whilst many large companies leverage third party hiring partners, in tandem to their internal recruitment team. The combination can lead to a time consuming and sometimes overly bureaucratic process and an extended candidate feedback loop. 

Smaller company HR and recruitment moves faster, resulting in a candidate experience that is often preferred by top talent. Furthermore, the negotiation stage and offer management process can be smoother and swifter. With candidates moving through the latter stages of the hiring process with ease, speed and with it, a greater sense of candidate engagement. 

Lastly, the agility of smaller companies with senior management having a direct level of involvement with the offer process, can prove highly attractive to candidates in process with larger corporations and their cumbersome, lengthy processes. 

3️⃣ HR Structure & Organisational Design

The organisational design of Human Resources in larger companies is often reflective of the larger company size and structure. Yet there are variables in the design of the HR function that can alter in accordance with the company’s needs and complexity. 

Functional HR structures are those most typical within larger companies. These structures enable each aspect of the HR life cycle to be managed independently of each other. 

The core aspects of HR are therefore broken down into central functions, which oftentimes include recruitment & onboarding, learning and development, payroll processing, reward & benefits, HR compliance, employee relations, organisational design, strategic business partnering and, HR operations, and interdependent with IT, Human Resources Information Systems (HRIS). 

Conversely, in smaller organisations there is still a clear need to have a presence and focus for these facets of HR. Smaller organisations will inevitably have one, or perhaps a handful or individuals managing these combined areas on a much smaller scale. 

Business owners and HR professionals in smaller organisations are oftentimes multitasking, covering off a variety of HR related tasks and activities that might lack the cohesion of a formal HR strategy. More tactical in their nature, HR matters will be more responsive than proactive in nature.

Bringing together the advice on HR for small business

Many of the key aspects of HR remain the same irrespective of the business size. Yet for some of the more nuanced and strategic aspects of HR, there are significant and notable differences. 

The most important considerations for business owners and HR practitioners within small businesses is how to adopt the aspects of strategy that add value in smaller organisations. Whilst also focusing on how to effectively deliver the core aspects of HR management that are both legally required, but also allow for a more bespoke experience for those employed and prospective candidates for smaller organisations. 

A good business strategy is informed by people factors

The significant difference in small to large organisational HR practice begins to bridge as the organisation grows. As such there remains the scope for business owners to contemplate what the potential and forecasted needs for the business will become over time. 

While small businesses do, without question, have more limited resources, the flexibility and pace available to owners of smaller businesses offers a multitude of opportunities to take advantage of. 

One such advantage is to partner with Sage HR, the HR Management Software partner of choice for small businesses. Sage HR creates amazing experiences for your people. Starting from a free 30 day trial, through easy setup and organisation wide deployment. The flexibility to cancel any time is also available, giving you complete comfort in Sage HR not only meeting the  needs that your business has. But it is also adaptable to the changes that your business may encounter over time. 

Sign up to Sage HR today and access the benefits of HR software designed with your business needs in mind.  



Say hello to easy personnel management! 🙂 Sage HR changes how organisations attract, retain, manage and engage their workforce. Designed for SMEs, it improves productivity and connects businesses to their people.

Written By

Jade Taryn Graham

Jade is the founder & CEO of Inspired a people & talent consultancy working with the most innovative early stage companies worldwide. Founder & CCO of Inspired Talent Media Ltd and contributing writer for Sage HR where Jade writes about people, leadership, work/life balance and change.