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Owners Lack Confidence in HR, According to Paychex Small Business Survey

Human Resources

Paychex asked small business owners about HR, and the results were revealing. Just as HR leaders in larger organizations are automating their processes and helping drive corporate strategy, we found that small business owners have a ready opportunity to move beyond traditional payroll processing to strategically address the employment regulations and HR obligations affecting their businesses.

As you take a look at the survey results, consider how you would answer for your business. You may find opportunities to more confidently and efficiently manage your HR functions, from recruiting to employee management, and regulatory compliance.

Regulatory awareness and enforcement varies

There are two ways to look at how well businesses are aware of and enforcing HR regulations. The optimistic view would be that more than half of small businesses owners claimed they were aware of and enforcing each of the HR regulations mentioned. The more pessimistic view shows that about 20 percent do not enforce the regulations, and 42 percent weren’t aware of, or were not enforcing, youth employment standards.

Since non-compliance may lead to costly fines and penalties, it’s important for small business owners to be aware of the fact that requirements involving overtime pay and employee classification, for example, apply regardless of the number of people they employ. One employee is all it takes.

Small business owners lack confidence in managing certain HR obligations

Less than 50 percent to almost 70 percent of survey respondents were very confident in how their businesses are actively managing certain HR obligations. This leaves significant space for doubt and unawareness. In fact, 21 percent of respondents were not confident, or weren’t sure, about managing the HR function as a whole.

A lack of automation could be contributing to this lack of confidence, as outsourcing HR using an automated solution can help reduce the risk of human error, as well as help small business owners keep track of the specific requirements that may affect their business.

Among individual obligations, those pertaining to employee management tended to rank higher, while pre-hire tasks inspired the least confidence. The onboarding process was the most befuddling, with 32 percent of small business owners not knowing, or having no opinion on whether their business is actively managing their obligation.

HR functions tend to be fulfilled in-house, if at all

Among survey respondents, it was clear that most understood the benefits of outsourcing their payroll processing. Sixty-three percent claimed they rely on automated payroll with or without mobile functionality, or have no employees to pay (12 percent).

Sixty-three percent of respondents either automated or didn't use a time and attendance solution, with only a 5 percent greater number (17 percent) of business not using the function as compared to payroll. This may help confirm that small businesses understand the natural benefits of integrating their payroll and time and attendance processes.

But other HR functions tended to either be done manually, or they simply weren’t being done.

Employee management functions were most often cited as being manual processes, with nearly half of small business owners claiming performance management, recruiting and applicant tracking, and travel and expense management were handled manually.

The most unused HR functions or responsibilities included onboarding, where 49 percent forgo a formal and/or automated process for welcoming and transitioning new employees, and to a lesser extent retirement administration and benefits administration.

Onboarding and new-hire reporting are two areas where outsourcing can give small business owners an advantage. Consider, for example, how a paperless process for Forms I-9, W-4, state withholding, and direct deposit could potentially save time, improve efficiency, and give small business owners a clear audit trail to help reduce their risk of non-compliance with employment regulations.

It’s likely that the benefits results were influenced by the almost 72 percent of businesses with fewer than 100 employees that do not offer a retirement plan to employees, and nearly 82 percent with fewer than 50 employees that don’t offer health insurance. There’s no need for benefits administration when there are no benefits to manage.

Building HR confidence

Small business owners have a passion and talent for what they do. Naturally, they want to spend more time on what they value most. When owners are forced to oversee HR functions, it can result in a lack of confidence, unacceptable results, or potentially even regulatory penalties.

Outsourcing those unwanted HR responsibilities to a company that can help your business understand and deliver on them is an opportunity, one that could help a small business build HR confidence – and an edge over its competition.

The Paychex Pulse of HR survey showed that HR leaders have a positive view of how their function is seen within their organization. With new, powerful HCM technology – and in the case of Paychex, with the option of best practices assistance from a dedicated HR professional – HR leaders can be poised to continue their strategic partnership with the C-suite.

Learn more about the Paychex Small Business Survey.


Data included in the Paychex Small Business Snapshot was taken from the results of the Paychex Small Business Survey, administered by Bredin, a third-party research firm specializing in small business. The survey was conducted online between August 18, 2017 and August 24, 2017 and polled 250 principals of U.S. companies with fewer than 500 employees. The group surveyed was not exclusively Paychex clients, but included other small business owners to provide a full view of the small business landscape.



This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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