Study finds small-business HR is often unpaid, untrained and improvised

A FrankCrum study of 1,000 small business owners and HR handlers found that 72% have felt unqualified for a high-stakes HR situation, and 39% of small businesses have no dedicated HR person or department. The findings point to rising legal, operational and burnout risks as HR duties pile onto employees without added pay, formal training or review safeguards.

Why it matters: - Small businesses are often making sensitive HR decisions without dedicated staff, formal training or consistent oversight. - The study points to real-world risk: delayed terminations, unaddressed employee issues, documentation errors and potential legal exposure. - The findings also suggest a growing gap between the HR work small businesses need and the support they give the people doing it.

What happened: - FrankCrum surveyed 1,000 small business owners and employees who handle HR at their companies. - The study examined how HR work is assigned, paid, trained, documented and supported, including use of generative AI. - Seventy-two percent of respondents said they have felt unqualified or unprepared for at least one high-stakes HR situation. - Seventy-one percent said that uncertainty caused a direct consequence in the past year.

The details: - Thirty-nine percent of small businesses have no dedicated HR department or employee. - Fifteen percent said the owner or founder handles HR. - Fourteen percent said HR is shared informally across employees or departments. - Ten percent rely on an office manager, operations leader or other non-HR employee. - Only 13% of respondents involved in HR decisions held an HR-specific title. - Twenty-nine percent were administrative assistants, coordinators or specialists. - Forty-two percent of people who took on HR duties received no pay increase. - Twenty-seven percent received neither a raise nor a title change. - Fifteen percent received a title change only. - Twenty-four percent received both a raise and a new title. - Men were more than twice as likely as women to receive a compensation increase for taking on HR duties, 45% versus 22%. - Women were more likely to receive neither pay nor title, 34% versus 21%. - Forty-three percent spend 10 or more hours a week on HR. - Thirteen percent spend 20 hours or more on HR. - Fifty-nine percent say their HR time has increased over the past two years. - Only 25% hold a formal HR certification. - Thirty-nine percent received employer-provided training. - Thirty-two percent taught themselves. - Twelve percent have no HR-specific training. - Forty-nine percent use payroll software with built-in HR functions. - Forty-three percent use spreadsheets. - Forty-two percent keep paper documents. - Thirty-three percent rely on email chains. - Thirty-four percent use a dedicated HR platform. - Documentation errors were the most common administrative problem in the past year, at 27%. - Only 40% said they were very confident in their workers' compensation records. - The top concerns were employee retention at 28%, employee lawsuits at 25% and wrongful termination claims at 23%. - Half of respondents said their business has used generative AI for HR in the past year. - Common AI uses included researching HR questions, creating onboarding materials and drafting handbook content. - Twenty-five percent used AI to generate guidance for disciplinary actions or terminations. - Fifty-eight percent said HR or legal always reviews AI output. - Twenty-five percent said it is usually reviewed. - Eleven percent said AI output goes only to non-HR staff. - Five percent said there is no review process. - The most common high-stakes situations were employee conflict and disputes at 29%, harassment complaints at 26% and discrimination complaints at 25%. - Over the past year, 30% delayed a termination because of HR uncertainty. - Twenty-six percent delayed disciplinary action. - Twenty-two percent left employee issues unaddressed. - Twenty-one percent delayed pay or promotion discussions. - A quarter brought in outside HR assistance. - Twenty percent turned to a lawyer. - Gen Z and millennial respondents were more likely than Gen X to say they had felt unqualified. - Gen Z and millennials were also more likely to report increased HR time. - Gen Z had the highest AI adoption rate, at 62%, compared with 57% of millennials and 36% of Gen X. - Gen X respondents were the least likely to report a dedicated HR department, at 26%, compared with 47% of millennials and 49% of Gen Z.

Between the lines: - The study suggests HR at many small businesses is treated as an informal add-on, not a specialized function. - That creates a compounding problem: more responsibility, little or no raise, limited training and limited review of high-risk decisions. - The AI findings suggest adoption may be moving faster than safeguards, especially for termination-related work. - Younger respondents appear more exposed to the day-to-day burden of improvised HR, while older respondents may have more experience or work in more established setups.

What's next: - Small businesses are likely to face more pressure to formalize HR responsibilities, training and review processes. - The study points to a need for clearer role definitions, better documentation practices and more consistent oversight for sensitive employment decisions. - FrankCrum says its HR consultants advise business owners on hiring, performance management and employee relations. - The full study is available here.