Managing human resources in small firms is different for four main reasons: size, priorities, informality, and the nature of the entrepreneur. These create several risks. Small business owners run the risk that their human resource practices will put them at a competitive disadvantage; there is a lack of specialized HR expertise; the smaller firm is probably not adequately addressing potential workplace litigation; the small business owner may not be fully complying with compensation regulations and laws; duplication and paperwork lead to inefficiencies and errors.

The U.S. Department of Labor’s FirstStep Employment Law Advisor helps employers (and particularly small businesses) determine which laws apply to their business. The DOL’s site also provides information on the Fair Labor Standards Act (FLSA). It contains several “elaws Advisors.” The U.S. Equal Employment Opportunity Commission’s (EEOC) website provides important information regarding EEOC matters, such as Title VII. The DOL’s Occupational Safety and Health Administration site similarly provides, among other things, the OSHA Handbook for Small Businesses. Internet resources can make small business owners more effective in HRM. For example, the Department of Labor’s O*NET is effective for creating job descriptions. Small businesses can use the online recruiting tools we discussed in Chapter 5.

In dealing with employees, small firms should capitalize on their smallness. Smallness should translate into personal familiarity with each employee’s strengths, needs, and family situation. And it should translate into being relatively flexible and informal in the human resource management policies and practices the company follows. Even without the deep pockets of larger firms, small firms can offer employees work–life benefits that large employers usually can’t match. Small firms also rely on more informal employee selection, recruitment, and training practices.

Even small businesses need HR forms. Very small employers start with a manual human resource management system. This generally means obtaining and organizing a set of standardized personnel forms covering each aspect of HR—recruitment, selection, training, appraisal, compensation, and safety—as well as some means for organizing all this information. Office Depot and several direct-mail catalog companies offer HR materials. As the company grows, most small- to medium-sized firms begin computerizing individual HR tasks. For example, the G. Neil Company sells off-the-shelf software packages for monitoring attendance, employee record keeping, writing job descriptions, writing employee policy handbooks, and conducting computerized employee appraisals.