Human resources and small business: 5 essential tips to build your HR function

When you run a small business, you often wear multiple hats — from marketing to finance to daily operations. 

But one area many small business owners overlook is human resources (HR). Even with a small team, having a basic HR structure matters. It protects your business legally, helps attract and retain good people, and creates a positive workplace culture that supports growth.

Here are five practical tips to help you set up your HR function, plus guidance on what expert advice to seek along the way.

1. Start With Compliance and Legal FoundationsBefore anything else, ensure your business meets employment laws and regulations. At a minimum, you’ll need employment contracts, clear job descriptions, and knowledge of your obligations around pay, working hours, leave entitlements, superannuation, and workplace safety. In Australia, this means understanding the Fair Work Act, National Employment Standards, and any relevant awards for your industry.Action step: Create or review employment agreements that clearly outline pay, duties, termination conditions, and policies like confidentiality.

   Advice to seek: Consult an HR consultant or employment lawyer to check your contracts and policies comply with the law. This one-time investment can save you major costs and headaches if disputes arise.

2. Define Roles and Structure EarlyAs a small business, it’s tempting to hire reactively when work piles up. But taking time to map your ideal team structure helps you hire smarter and avoid confusion. Start by writing clear job descriptions for every role — even your own. Define tasks, required skills, reporting lines, and success measures.Having clarity not only helps you recruit but also sets fair expectations for current employees. This prevents “role creep,” where people take on tasks outside their expertise, leading to frustration and burnout.Advice to seek: If unsure how to define roles, a business coach or HR advisor can help you build an organisation chart and job templates suited to your growth stage.

3. Build Simple HR Policies and ProcessesYou don’t need a thick HR manual. Start with essential policies that protect you and your team, such as:

• Workplace health and safety
• Equal opportunity and anti-discrimination
• Leave and flexible work
• Performance and conduct expectations
• Grievance or complaint proceduresThese policies should be written in plain language and easy to access. Even a simple Google Drive folder can work at first.Also, create straightforward processes for onboarding new hires, tracking leave, and reviewing performance. These small steps help you scale without chaos.Advice to seek: HR consultants can draft or review your policies so they’re compliant but practical for a small business.

4. Focus on Culture and CommunicationCulture isn’t about free coffee — it’s about how your team works together. In small businesses, a healthy culture starts with trust and open communication. Regular check-ins, clear feedback, and transparency about business goals help employees feel valued.Even if you have just one or two staff, set the tone early. Celebrate wins, address conflicts promptly, and model the values you want your business to stand for.Advice to seek: Consider leadership or people management training for yourself or any managers. Great technical skills alone don’t make someone a strong leader.

5. Use HR Tech and Outsourcing WiselyYou don’t have to do it all manually. Affordable HR software can help you track employee records, leave requests, and performance notes. Tools like Xero, Deputy, or Employment Hero are designed for small teams and can save time.If HR tasks feel overwhelming, outsourcing is a smart move. Many small businesses use part-time HR consultants or virtual HR services to handle recruitment, policy updates, or tricky employee issues.Advice to seek: Ask your accountant or small business network for recommendations on HR software or outsourced HR support that fits your size and budget.

Final Thought

Creating an HR department as a small business isn’t about building bureaucracy — it’s about protecting your people and your business while laying a strong foundation for growth. Start small, get the legal basics right, define clear roles, build fair policies, and nurture a positive workplace. And don’t hesitate to bring in expert advice where needed. Investing in HR early pays off in better hires, happier staff, and fewer costly problems down the track.

If this article has inspired you to think about your unique situation and, more importantly, what you and your family are going through right now, please get in touch with your advice professional.

This information does not consider any person’s objectives, financial situation, or needs. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation, or needs.

(Feedsy Exclusive)