Top 6 Human Resource Management Challenges Faced by SMEs

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Why is HR management important for SMEs?

What are human resource management challenges to SMEs now? A small to Medium Enterprise (SME) is a company that maintains revenue, assets, or several employees below a particular threshold.  The criteria and definitions for what constitutes an SME can vary across different countries.

Most SMEs tend to focus on business growth as a top priority while Human Resource (HR) related issues can seem trivial. This has affected SMEs to suffer from more human resource management challenges than large and established companies.

So, what are the top 6 HR challenges faced by SMEs?

We have identified these top 6 common challenges faced by SMEs, and the methods to remedy them:

1. Cyber Hackers are Targeting SMEs

According to cloud security research reported by Forbes 1, small businesses are three (3) times more likely to be targeted by hackers than larger companies.  On average, small businesses with less than 100 employees were found to be more vulnerable to the attacks, and they experienced 350% more social engineering attacks compared to companies of larger size. 

Cyber attackers are smart, once they have access to their targeted SMEs’ accounts, they will most likely target the accounts of CEOs and CFOs in expectation of higher returns. Executive assistants are the second most popular target alternative as they often have access to executive accounts and calendars and send messages out on behalf of the executive teams. 

This is one of the top challenges faced by SMEs. While you may be concerned about the high investment cost to invest in data security to protect your employee's payroll, AYP global pay can be a perfect choice to mitigate this risk with a lower cost to spend on high technological solutions.

2. The Opportunity To Hire Great Talents 

Would you prefer to work with Google or a start-up IT services company with high potential growth, from a talent perspective? Given the question, most young people would surely prefer the former option.

The answer is simple, who would give up the great opportunity offered by the world’s top leading search engine company? This is the conundrum that often most SMEs face by losing their competition to reputable MNCs.

Getting talented employees is surely one of the human resource management challenges (HR challenges) for SMEs.  Not to worry, why not collaborate with AYP to solve this?

AYP has access to more than 7 countries’ talent pools with more than 500,000 HR users across the APAC region. Stand a chance to get in touch with the “A players” that you wish to approach to create outstanding values for your company.

3. SMEs Onboarding Experience 

The benefits of a strong onboarding program are often overlooked by SMEs.  New hires are frequently confused by this.  It could be challenging to spend time with the new employees in your office without losing precious time in other more crucial areas of your business.

The good news is a company's retention rates can be improved with a strong onboarding program. A new employee's initial impression of your company will largely be formed by your onboarding procedure.  If new hires are not properly onboarded by a company, 40% of them will leave the company within a year, according to business research from Catalyst.

Your HR team needs to have a solid onboarding program.  With AYP’s help, you don’t need to rack your brains trying to figure out the best onboarding process, journey, and methodology to onboard your newcomers. 

AYP offers an easy onboarding process to ensure your new employees will integrate well with your organizational culture when they are onboarded. The entire process is automated with just a single dashboard.  New employees have absolute freedom to create and manage their profiles.

In addition, they can quickly learn more about the company, get familiar with other colleagues by viewing the profiles, and understand the various roles involved in different tasks.

4. The Challenge To Retain Employees 

Often, SMEs suffer from retaining good talents and suffer from a high staff turnover rate.  According to a report by SHRM 2, more than 25% of the study’s respondents mentioned that the lack of career development opportunities was a pushing factor for them to seek alternative offers. 

Apart from attractive salary offers, the majority are expecting some form of development and progression in their career path. Since employees spend one-third of their time at work, it is crucial from their point of view that they develop more skills and achieve more success.  Training and development play a significant role here.

Unfortunately, most SMEs tend to have less well-structured organizational structures and multiple roles to juggle, this could lead to losing talented staff who have ambitious goals to achieve when the road to the future seems to be nowhere. 

With 10 years of leading the future of work in the HR industry, AYP has trusted advisors and in-country HR experts that are always here for you to create solutions to mitigate your risks of losing great talents and improve employee retention.

5. Inadequate Document Organization

No matter how large or small a firm is, documentation is essential.  However, SMEs often neglect the documentation requirements for managing a company. This includes the appropriate tax forms and payroll business reports.  If these files are maintained at the office, these documents can quickly become disorganized or even lost. 

Contracts, company policies, claims, and leave application forms related to employees must be correctly and effectively documented. In severe circumstances, it is also possible for these records to be easily stolen, thus deeply threatening the privacy and safety of your employees and the company as a whole.

Keeping documents online is an efficient approach to guarantee important information, such as corporate regulations and policies is readily and easily accessible to the employees.  Therefore, online report management guarantees greater data security and organizational order for documentation. 

AYP’s solution enables you to organize such documents efficiently.  EProfile easily saves employee information, and all leaves and claims submitted by employees can be easily tracked and approved via eLeave and eClaim. ePayroll easily manages your taxes and gives you safe and secure e-access to your payroll reports.

Online documentation enables you to plan, keep and organize all your documents, all so easily from your fingertips.

6. Payroll Management Challenges

For SMEs, handling employee payroll and taxes can be time-consuming. Employees may become frustrated by errors or mistakes in payroll processing, which could gradually erode their trust in your company.

SMEs frequently struggle more when dealing with penalties and lawsuits since SMEs have generally fewer resources than larger businesses. All of these can significantly damage an SME’s reputation and incur unnecessary costs beyond the budget.

Although accurate payroll reporting and tax filing are difficult, they are necessary components of a business's operations and must be done with the highest care. The HR department of SMEs must maintain accurate records of their payroll reports, in addition to staying updated on taxes and other legislations. However, it can be challenging to do so as these legislations are ever-changing.

As such, you might want to consider hiring a Payroll Outsourcing Manager (POM) or using payroll software to help you stay compliant with laws and produce payroll reports accurately. 

AYP provides PEO (Professional Employer Organization) with more than 100 legal experts who are very familiar with different APAC countries' labour laws and regulations.

Collaborating with AYP will enable your company to run accurately, timely, and compliantly in payroll matters. As such, your employees can focus on the key and core areas for your business growth.

Turn Your Human Resources Management Challenges Into Opportunities 

SMEs are at risk of facing all of the above potential HR-related risks and challenges, ignoring these HR challenges and putting off efforts can be expensive and increasingly troublesome in the long run. 

We have a solution to tackle all of the issues thankfully.  Regardless of your company's size, AYP provides multiple solutions to a range of HR-related problems encountered by businesses.  Under a single platform, everything from onboarding to claims and payroll can be conveniently viewed and monitored.

Although HR may not seem to be a priority for SMEs, it often might develop into larger and more serious issues in the future.  These issues can be resolved by using HR software like AYP Global Pay, allowing you to manage both your staff and your business with ease and worry-free.

 Schedule a demonstration section with us to learn more today!

Featured Content

1. How HR Analytics Help With Talent Performance

2. Top 6 Human Resource Management Challenges Faced by SMEs

3. 10 Recruitment Trends and Talent Acquisitions Coming


  1. Small Businesses Are More Frequent Targets Of Cyberattacks Than Larger Companies: New Report. Forbes.
  2. Lack of Career Advancement Main Reason Workers Consider Leaving. SHRM.
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