How is HRM in SMEs different from larger companies?

How is HRM in SMEs different from larger companies? - Centric HR

Although HRM departments in both smaller and larger companies share common goals, their paths to reaching these goals, as well as the resources available to them, differ quite a bit. In this article, we go over those differences and provide a general overview of HRM in SMEs.

So, how is HRM in SMEs different from larger companies? Whilst their desired goals are often similar, HRM in SMEs lack the resources, budget, time, and sometimes, the qualifications and experience that larger HRM departments have. 

Read on to learn more about HRM in SMEs, and how it differs from that of larger companies.

How is HRM in SMEs Different from Larger Companies?

HRM in an SME is often less of an HR department and more of a one-man-show. It might even be the Admin team or an Operations Manager taking on HR duties out of necessity. The point is, SMEs often lack the resources that larger companies have, right from the start, before other employees, policies, procedures, and physical resources are considered.  The key differences, however, include:


It’s likely that a larger company will have a dedicated HRM department, with more than one HR Executive/Manager. SMEs, on the other hand, may have just the one HR Executive/Manager, or may simply make do, utilising the Administration team (where one exists), or other relevant members of staff such as Operations Managers, Assistants to Directors etc.

Because of this, SMEs may have a harder time of it, in general. There is likely to be fewer people to share the responsibilities of HRM, and often less experience to be able to get things right the first time, show innovation, and satisfy employees.

Although, this is not to say that the HR departments of SMEs are ineffective; they simply lack the time and resources of bigger departments.

Qualifications & Experience

It’s not always the case, but HR workers in larger companies are likely to be more qualified, or generally more experienced than those in SMEs. This is often due to SMEs relying on other members of their workforce to perform HR duties, or smaller recruitment budgets.


The HR roles and responsibilities of SMEs differ somewhat from that of larger organisations.

Since HR workers in SMEs often wear more than one hat, their roles and responsibilities will be different from larger organisations, and will overlap with their regular roles. Larger companies, however, will usually have specified roles such as HR Executive, Payroll Executive etc.

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Because of this, you could argue that HR workers in SMEs have more responsibility, as they will often share the responsibilities associated with two roles.


SMEs lack the physical and human resources of their larger counterparts, as well as having a smaller budget to work with. This limits their ability to perform at the same level as larger companies. However, that does not mean that they can’t work efficiently for their business.

Recruiting Methods

Larger HR departments have a larger budget, therefore more freedom when it comes to recruiting. They may be able to use recruitment services, or place ads on recruitment boards and websites, which smaller companies may not have the budget for.

This doesn’t necessarily mean that they will automatically get the pick of the best candidates, but they have a higher chance of finding the best, or more qualified candidates.

SMEs may have to rely on smaller job sites, social media, and word of mouth to find good candidates. However, this isn’t always a bad thing; many candidates are now looking to work for smaller companies with a better culture.

Why is HRM So Important to Small Businesses?

Whilst you might feel that HR in SMEs lacks the headstart that larger companies have, don’t underestimate its importance, or its impact on the business. HR helps SMEs with:

  • Compliance with laws and regulations
  • Effective hiring practices to gain the best talent
  • Staff retention due to:
    Training and development
    Employee recognition
    Company culture
  • Employee satisfaction, attitudes, and perceptions

What are the HR Problems in SMEs?

We’ve already mentioned a few of the challenges that HR departments in SMEs face, but the challenges don’t stop there. Here are a few of the most common challenges that SME HR departments face:

  • Performance management and development
  • Members of staff performing HR duties with limited knowledge or training in HR
  • Limited resources
  • Retention
  • Recruitment
  • Compliance with employment law
  • Conflict resolution
  • HR Outsourcing and HR Consultancy with Centric HR


At Centric HR, we work with a number of SMEs for HR outsourcing and HR consultancy. We recognise that SMEs may have a smaller budget, but never underestimate the power that effective HR can have on your business.

We also offer a Free HR Health Check to help you analyse your business and workforce needs. Take advantage of our free HR Health Check with no obligation to commission our services.

Get in touch with our experienced team today to see what we can do for your business by contacting us here.

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Picture of Sandra Berns

Sandra Berns

Centric HR was founded by Sandra Berns, a confident and versatile Human Resources and Organisational Development Practitioner with 25 years demonstrable experience and a Fellow of the CIPD. Sandra has both Operational and Strategic HR expertise across Public and Private sectors and has assisted senior teams in meeting challenging workforce objectives in many corporate environments.