GUEST BLOG: Many Irish are SMEs failing in HR basics

By David Bell, director, The HR Department

A survey has revealed that 93% of Irish companies believe that HR plays a crucial role in business, yet only 55% actually invest in an HR service.

Business owners are all too aware of the risks associated with employing staff, however a recent survey of 600 Irish SMEs, carried out by The HR Department, has revealed that although an amazing 93% of Irish companies believe that HR plays a crucial role in business, only just over half actually invest in an HR service.

The figures highlighted that a surprising 68% of companies who employ up to 10 employees have no HR function, with this figure only dropping to 36% for companies with 11-50 employees and 29% for businesses who employ 50-250 staff members.

The research also revealed that more than a third (35%) of businesses surveyed don’t have the most essential HR material – a staff handbook – which is imperative to ensure company policies are in place should a business be involved in an employee/employer dispute.

Of the 65% of companies who do have a staff handbook, not all of them contain the necessary policies:

• Only 57% incorporate grievance procedures, including bullying and harassment policies
• 55% cover maternity rights
• 61% include an annual leave policy
• 60% cover disciplinary procedures
• 56% indicate rules on termination of employment
• 48% refer to pension policies
• 25% include a dress code policy

LACK OF UNDERSTANDING

The research also demonstrates a clear lack of understanding amongst Irish business owners on the multiple roles HR plays. Human resources encompasses a number of things, however some companies don’t realise to what extent.

Only 65% of businesses believe HR has the capacity for change, employee contribution (64%), administrative efficiency (60%) and strategy execution (40%).

The primary reasons for employing a HR professional internally or externally were all relatively similar: 56% believe it provides support in the hiring and dismissal of employees, 53% feel more confident having someone who best understands employment law and 49% rely on HR to avoid legal issues.

With employee retention becoming a growing concern for employers as the economy recovers, the research suggests that many companies may be missing opportunities to enhance employee welfare through a HR function, leaving them exposed to higher employee turnover.

NOT INVESTING

The primary reason for not investing in a dedicated HR professional or outsourced HR service was that companies felt their business was too small (40%), followed by cost (16%). Interestingly, 11% of respondents feel they have a good enough relationship with their staff and therefore do not require an HR function.

Of those companies that do not have a dedicated HR function, 42% would consider outsourcing their HR requirements, including 57% of businesses with 1-10 employees, 47% of companies with 11-50 employees and just 45% of businesses with 51-250 members of staff.

The number of companies ending up in the courts or employment tribunals over employee issues is rising in Ireland. We at The HR Department are surprised to see such a disconnect between the perceived importance of HR and the level of investment in it. It’s worrying to see just how many businesses lack even the most basic HR functions. The research shows that we need to educate business owners on how effective HR can be to their company, regardless of the industry they operate in.

The HR Department provides expert practical and commercial advice to Irish business owners and managers in the areas of HR and employment law. More recently, The HR Department has launched a number of online HR packages, providing small business and start-ups with an affordable HR solution.

Image (above): StockMonkeys.com