HR Services for Small Business: A Complete Guide to Managing a Growing Team

If you're like most small business owners, you probably started handling HR tasks yourself. Payroll in Excel, benefits paperwork in a folder, employee documents scattered across your desktop. It works—until it doesn't. That's exactly where Max Shak found himself while running Nerdigital.com. 

"For small business owners, it's not just about picking a service—it's about finding a solution that fits the unique challenges of a growing business, from compliance to employee satisfaction," Max explains.

As his team grew, Max realized he was spending more time wrestling with HR tasks than actually running his business. He knew he needed help, but the options were overwhelming. 

HR software, outsourcing companies, consultants, PEOs—each promised to solve all his problems. Sound familiar? .The good news for Max is that he found a solution that gave him back his time while keeping his business compliant and his team happy.

This guide will help you navigate the same journey. Whether you're struggling with compliance concerns, drowning in admin tasks, or simply wondering how to create a better workplace for your team, you'll find practical, actionable guidance for taking your next steps in HR management as a small business owner.

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Do you need HR for a small business?

The short answer is no, you don't need a dedicated HR department when you're first starting out. Like most small business owners, you can handle the basic HR tasks yourself in the beginning. But as your team grows, HR administration becomes essential. 

You'll likely hit a point where juggling payroll, benefits, and employee relations becomes more than a one-person job. That's when having dedicated HR support becomes not just helpful, but crucial.

Here are some of the challenges that come from handling HR by yourself:

1. Keeping up with compliance requirements across multiple states.

Staying on top of labor laws and regulations is probably not what you dreamed about when starting your business. Yet it's one of the most critical aspects of running a company. According to the National Association of Manufacturers, small businesses face an average of $14,700 in regulatory costs per employee annually, with labor laws taking the biggest bite out of that budget.

When Chris Estrada, CEO of Nationwide United Auto Transport, faced this challenge, he focused on finding HR support that understands his particular industry’s compliance requirements: "Initially, I prioritized service providers with industry-specific knowledge because understanding our unique needs and challenges is paramount. I wanted a service proficient in laws relevant to transport, hiring practices for drivers, and importantly, safety regulations."

2. Managing the true costs of employment and benefits.

Here's a reality check that surprises many small business owners: Your employees actually cost way more than just their salary. The actual cost of an employee typically ranges from 1.25 to 1.4 times their base salary when factoring in taxes, benefits, and administrative costs. Small businesses often underestimate these costs, which leads them to budget shortfalls and cash flow problems. Without proper HR guidance, these hidden costs can quickly snowball into serious budget issues.

One business owner on reddit described the impact that turnover had on their budget: "For an employee that works for us 4 weeks and then quits (common for a laborer) our costs come out near $30 per hour per employee."

3. Handling the growing volume of HR documentation and tasks.

If you've ever spent a Sunday afternoon catching up on employee paperwork, you know exactly what we're talking about here. Employee files, training records, performance reviews, policy updates–it’s a list that never seems to end. Every hour spent shuffling papers is an hour you could be spending on growing your company or serving your customers.

George Matusyan, owner of United Windows Pro, explains how he solved this documentation problem for his business: "We had to find an easy-to-use platform to automate HR, complete with online HR records access for both us and our workers, self-service for employees such as timesheets and vacation requests, and robust reporting capabilities. A cloud solution gave us a single point of entry for all HR activities, which saved us tons of time and allowed everyone to access the information they needed."

4. Maintaining good employee relations and workplace culture.

Small businesses often struggle to maintain consistent employee relations practices without dedicated HR support. According to SHRM's "The State of Global Workplace Culture in 2023" report, employees who rate their organization's culture as "good" or "excellent" versus "poor" or "terrible" are 790% more likely to feel satisfied at work and 83% less likely to be actively looking for a new job.

Ryan Farley, co-founder of LawnStarter, explains: "The absolute top priority for us was finding an HR service that would be responsive to any complaints or issues we ran into. Especially for things like benefits, retirement plans, and legally-mandated training, any delays or mistakes could have serious consequences for our employees."

💡Homebase tip: Homebase can help with small business HR growing pains. It simplifies HR for small businesses with features like automated payroll processing that calculates taxes and deductions, built-in compliance alerts to avoid costly mistakes, and team management tools like time tracking, scheduling, and communication all accessible through one platform.

Types of HR services for small businesses

Now that you understand the challenges, let's talk about solutions. There are a few different ways you can get the HR support you need without hiring a full-time team. Whether you're looking to streamline payroll, stay compliant, or build a better workplace culture, here are the key ways these HR services can help your small business:

• Manage employee performance: Have a clear system to recognize great work and identify where people need extra support.
• Set up payroll: Use simple software to handle paychecks, taxes, and timesheets without the headache.
• Automate repetitive tasks: Let technology handle the repetitive stuff like tracking time off and storing employee information.
• Get advice on HR tasks: Work with HR professionals who can look at your business and suggest better ways to handle people-related tasks.
• Invest in employee growth and development: Give your employees opportunities to learn new skills and advance in their careers.
• Ensure compliance with employment law: Have someone dedicated to keeping up with employment laws so you don't have to worry about it.
• Reduce costs: Get professional HR help only when you need it, without paying for a full-time person. Use HR consulting services to manage administrative tasks, compliance, and strategic HR functions.

The good news is there are several ways you can fulfill all of these HR needs without the overhead of full-time staff. Let's look at four different ways you can get the HR help you need, at a price that works for your business: outsourced HR services for small business like PEOs, HR consultants, part-time HR support, HR software platforms, and a combination of these.

Outsourced HR services

• Average cost: Average $150-180 per employee per month (plus setup fees ranging from $1,000-5,000).
• Best for: Growing businesses with 10-100 employees who want (and have the budget for) comprehensive HR support without the hassle of building an internal HR department.

A Professional Employer Organization (PEO) is like having a complete HR department without hiring one. They become a co-employer with you, which means they take on many of the HR responsibilities that can bog down your day-to-day operations. This includes handling payroll, offering better employee benefits (often at better rates than you could get on your own), ensuring you stay compliant with employment laws, and managing risk. 

You can find a PEO via online directories like the National Association of Professional Employer Organizations (NAPEO) or through recommendations from other business owners.

As Rafi Friedman, CEO of Coastal Luxury Outdoors, talks about what it was like to outsource HR to a PEO: "While it wasn't the cheapest option out there, we chose Insperity specifically because it was the most full-featured option we could find. It saved us from having to assign odd HR tasks to office assistants. Everyone gets paid on time, stays compliant with mandated training, and nobody has complaints about their benefits."

HR consultants

• Average cost: $100-200 per hour
• Best for: Small businesses that need expert help with specific HR projects (like creating an employee handbook) or periodic reviews.

Think of HR consultants like an on-call specialist: You call them in for specific projects or expert advice, but they're not part of your regular team. They typically help with one-time projects like creating your employee handbook, updating policies, or solving a complex HR issue. 

Consultants offer high-level expertise exactly when you need it, without any long-term commitment. HR consultants are typically found through local professional networks, online platforms like Upwork, or HR consulting firms in your area.

Beni Avni, founder of New York Gates, explains how he went down this route: "First, I assessed the range of services they offered. I needed a provider that could handle everything from payroll and benefits administration to employee compliance and performance management. Second, reliability was crucial. I sought out reviews and testimonials to ensure the service had a track record of meeting deadlines and being responsive to questions."

Part-time HR support

• Average cost: $35-75 per hour or $2,000-4,000 per month
• Best for: Growing businesses that need regular, ongoing HR support but aren't ready for a full-time hire.

Unlike consultants who help with specific projects, part-time HR support is like having a regular, part-time employee who handles all your day-to-day HR needs. They become part of your team, getting to know your business and employees while managing everything from onboarding and benefits to employee relations. You can find part-time HR professionals through local staffing agencies, job boards, or HR networks.

Thomas Anderson, CEO of Trusted Wedding Gown Preservation, shares his experience in finding the right part-time HR support: "The ability to grow with my business was key, as I aimed for someone that could adapt to changes without hitches. I preferred someone with industry-specific experience, as certain nuances and regulations unique to our business are best understood by those who have dealt with it before."

HR software platforms

• Average cost: $8-20 per employee per month
• Best for: Small businesses looking to automate basic HR tasks and improve their HR processes without a big financial investment.

Think of HR software as your digital HR assistant that’s always on the clock. These platforms automate many of the time-consuming HR tasks that bog down small business owners, from tracking time off and managing payroll to storing employee documents and handling onboarding paperwork. Most modern HR software is cloud-based, meaning you can access it from anywhere and don't need to install anything on your computer.

This automated approach worked well for Andrei Kurtuy, CCO of Novoresume, when his company's growth demanded better HR tools: "When our team size outpaced our internal HR resources, we needed a software provider that could quickly scale with us, offer robust regulatory compliance, and streamline onboarding, payroll, and benefits administration through a single platform. After reviewing several options, we chose a solution that balanced simplicity with comprehensive features tailored to small businesses."

Consider a hybrid approach.

The truth is there isn't a one-size-fits-all HR solution for small businesses. Most successful small businesses end up using a combination of these services. For example, you might use HR software for day-to-day tasks like payroll and time tracking, while bringing in an HR consultant for specific projects like creating your employee handbook or updating policies.

Check out the top 3 HR services for small businesses.

Now that you understand the different types of HR services available, let's look at some specific providers that are popular with small businesses. While there are a ton of options in the market, these three consistently rank among the top choices for their features, reliability, and value. 

ADP TotalSource

ADP TotalSource is a Professional Employer Organization (PEO), which means they help take on some of the employer responsibilities like payroll, benefits, and compliance. The catch is that it’s designed more for larger companies, and the pricing can feel a little steep if you’re a small business trying to stay lean.

• Pricing: ADP TotalSource doesn’t post pricing publicly—you’ll need to get a quote—but it’s generally on the higher side.
• Best for: This service is a better fit for bigger businesses that need the whole package when it comes to HR. If you’re a smaller team, though, all the bells and whistles might feel like overkill, especially if you’re just trying to handle payroll and schedules without breaking the bank. That’s where Homebase shines—it’s built specifically for small businesses like yours, with simple, affordable tools to manage your team.

Rippling

Rippling is a modern platform that combines HR with IT and finance tools, which is handy if you’re running a tech-heavy operation or hiring people from around the world. It’s great for managing things like benefits and payroll, but the focus on IT means you’re paying for tools you might not need.

• Pricing: It starts at $8 per user per month, but depending on the features you choose, those costs can add up fast.
• Best for: Rippling is perfect for tech companies or businesses juggling international teams. But for a small business focused on keeping things simple—like tracking hours, scheduling shifts, and staying on top of payroll—it might feel a little overcomplicated. Homebase sticks to what small businesses need most, without the fluff or the extra fees.

Gusto

Gusto handles payroll, helps with hiring, and integrates with job boards like LinkedIn and Indeed to make recruiting easier. It’s approachable and affordable, but it’s missing some key features that hourly teams, like restaurants or retail shops, really need—like scheduling and time tracking.

• Pricing: Starts at $40 a month, plus $6 per employee. It’s budget-friendly for payroll, but extra tools might cost more.
• Best for: Gusto is great if your top priority is payroll and hiring, especially if you don’t need much else. But if you’re managing hourly employees, you’ll feel the pain of its missing features pretty quickly. Homebase gives you those must-have tools, like scheduling and time clocks, all in one place so you can get back to focusing on your business.

Best HR service for small business: Homebase

Think of HR software like a digital Swiss Army knife for managing your team. It should make taking care of HR easier for you, not more complicated. 

Homebase stands out because it was built specifically for small businesses, with an app that's as easy to use as your favorite social media platforms. Instead of juggling multiple spreadsheets and paper forms, you get one simple platform that handles everything from scheduling and payroll to employee documents and team communication.

Let's walk through exactly how Homebase can help with each of the HR challenges we discussed earlier. These are also the features and functionalities you should look out for in your HR service provider–regardless of the method you choose:

1. Proactive HR compliance.

As we established earlier in the challenges section, compliance mistakes can lead to very expensive fines and penalties. Homebase keeps you ahead of the curve with tools like:

• Real-time alerts: Get notifications about changes to labor laws like wage increases or new break requirements.
• Built-in compliance: Easily track overtime, breaks, and make sure your scheduling meets legal requirements.
• Employee handbooks: Quickly create compliant policies to communicate expectations clearly.

For example, if your state introduces a new minimum wage or break requirement, Homebase sends an immediate alert and can update your scheduling tools automatically. Homebase users often rely on this feature to prevent accidental violations and to save hours that would otherwise be spent on legal research.

2. Easy payroll and tax filing.

You’re here reading this article, which means you’re more than familiar with the stress of payroll day. You need to make sure everyone gets paid correctly and on time, calculate overtime, deal with tax withholdings, and keep track of all the paperwork. Homebase takes this headache away with features like:

• Everything connects automatically: Your employees' hours, overtime, and time off all flow directly into payroll, so you don't have to manually enter anything.
• Taxes handled for you: The system automatically calculates, withholds, and files all your payroll taxes (federal, state, and local).
• Flexible payment options: Choose what works best for your team, like direct deposit, paper checks, or even same-day pay.

For example, restaurant owners particularly love how the system automatically calculates tip reporting and overtime based on actual clock-in/clock-out times, eliminating hours of manual calculations. And retail store owners often use the same-day pay feature to help with employee retention, especially during busy seasonal periods.

3. Recruiting and onboarding made easy.

Finding and hiring great people is one of the biggest challenges for any small business owner. Between writing job posts, sorting through applications, and getting all the new hire paperwork done, it can quickly turn into a second job. Homebase turns this overwhelming process into something much more manageable with features like:

• Post once, reach everywhere: Write your job post once and it automatically goes to top job boards like Indeed and ZipRecruiter. No need to create multiple accounts or post in different places.
• Keep track of candidates: All applications come to one place where you can rate candidates, add notes, and track where they are in your hiring process.
• Paperwork made simple: New hires can fill out their W-4s, I-9s, and other forms online before their first day, saving you both time and hassle.

For example, coffee shop owners love how they can quickly post seasonal hiring needs and track which applicants have barista experience right in the app. And service businesses use the digital onboarding feature to get all the paperwork done before a new employee's first day, so they can focus on training instead of filling out forms.

4. Scheduling and time tracking.

If you've ever spent hours juggling employee availability, dealing with last-minute shift swaps, or trying to figure out who actually worked what hours, you know how much time scheduling and time tracking can eat up. Homebase makes this whole process much smoother with features like:

• Easy schedule builder: Just drag and drop shifts into place, copy previous schedules, or let the system suggest schedules based on your team's availability.
• Mobile time clock: Employees clock in and out right from their phones, with GPS verification so you know they're actually at work.
• Automatic notifications: The app sends shift reminders to reduce no-shows and lets employees request shift swaps directly through their phone.

For example, retail managers love how employees can swap shifts through the app (with manager approval), cutting down on the back-and-forth texts and calls. And restaurant owners particularly value the GPS-verified time clock that prevents "buddy punching" and ensures accurate labor costs.

5. Employee engagement and communication

Remember the days of group texts that spiral out of control, or important announcements that somehow never reach the right people? Keeping your team connected and engaged shouldn't require you to be a full-time communications manager. Homebase helps you build a more connected workplace with features like:

• All team communication in one place: Send announcements, share updates, and chat with your team right in the app—no more juggling different messaging apps or hoping someone checks their email.
• Employee recognition tools: Celebrate birthdays, work anniversaries, and team wins right in the app where everyone can see and join in.
• Real-time updates: Share schedule changes, policy updates, or other important news instantly, with read receipts so you know who's seen what.

For example, restaurant managers use the team chat to quickly fill shifts when someone calls out sick, while retail stores use the announcement feature to keep everyone updated on new promotions or policy changes. The birthday and anniversary celebrations have been especially popular for building team spirit, particularly with businesses that have multiple locations or remote workers.

Streamline your small business HR today.

Choosing the right HR solution is one of the most important decisions you’ll make as a small business owner. Whether you opt for comprehensive PEO services, targeted consultant expertise, dedicated part-time support, or automated software solutions. The key is finding what works best for your specific needs and budget.

Remember:

• Start with your most pressing HR challenges.
• Consider your budget and growth plans.
• Think about your comfort level with technology.
• Factor in your industry's specific requirements.
• Don't be afraid to mix different solutions.

Ready to set up your small business HR service? Try Homebase for free and see how the right HR tools can transform your business operations. Our team is here to help you choose the features that best fit your needs.

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