8 Hiring Challenges Facing Small Business Owners

Small business hiring challenges

Here are some of the biggest challenges small businesses must overcome when trying to stay competitive in the hiring process.

It’s a tight market.

Since the unemployment rate is slightly over 4 percent, the pool of unemployed job candidates is smaller than in recent years. Often, your ideal hire works elsewhere, meaning they need a reason to quit their job and work for you. When a promising talent is not looking for work, you must identify and attract them to your company. 

“We’re in a bit of a liminal moment — no longer a full-blown job seeker’s market, but not entirely an employer’s market either,” said Cindy Diogo, co-founder of Consoul. “I’d call it a ‘selective candidate’s market.’ While skilled professionals — especially in specialized or technical roles — are still fielding multiple offers, hiring activity has noticeably slowed in many sectors. It still feels like a tough market overall, particularly for generalist roles or early-career candidates. So, while employers might technically have the upper hand in volume, candidates still hold the power when it comes to quality roles.”

Solution: The first thing you need to do is create a clear message for attracting talented candidates. If your team can’t answer the question “Why should I quit my job and work for you?” then you need to revisit your message and potentially your team members. The answer can’t be “Because we are nice people.” Your message needs to be clearly defined to attract highly skilled candidates. 

You also need to offer competitive employee benefits and work perks. For example, remote work and flextime benefits have become highly desirable to many job seekers. Create an employee benefits package that goes above and beyond what your competition offers. Using the best human resources (HR) software can also automate and streamline benefit implementation. 

Other employers have built inclusive cultures.

Working for a company that prioritizes diversity, equity and inclusion has become a priority for many job seekers. In tandem, many companies have placed an emphasis on diversity and inclusion. If your company doesn’t foster a diverse and inclusive environment, expect your pool of job applicants to drastically diminish.

Solution: Create a diverse and inclusive workplace that celebrates all types of employees. It is imperative that you do this in a thoughtful and genuine way that comes across as sincere.

Other employers are prioritizing mental health.

In addition to diversity and inclusion, many professionals are prioritizing their mental health. They want to work for organizations that care about (and aid in) their mental well-being. Large companies are often at an advantage in offering a comprehensive benefits package that prioritizes mental health. 

“Access to high-quality health insurance is one huge area in which corporations have a competitive advantage in the talent market,” said Jessica Noon, founder, principal coach and consultant at Daybreak Ideas. “Hiring the best talent usually means figuring out how to offer this, at a minimum.” 

Solution: Provide employee benefits that show job prospects that you care about your team’s mental health. This can include benefits like flexible work schedules, employee assistance programs and unlimited paid time off policies. 

Noon mentioned that while offering health insurance can be expensive for employers, there are ways to reduce costs. “One option is bringing on a professional employer organization (PEO) to get you access to group health insurance at a reasonable cost,” she said. “They usually offer payroll services and basic HR risk management support as well.”

The skills you want reside in larger firms.

In the past, small companies could attract talent from larger firms by emphasizing work flexibility and a family-like atmosphere. But, over the years, most large companies have invested a fortune in work-life balance alternatives as well as other bells and whistles. Don’t expect a candidate to take a pay cut to work at a smaller firm just because you won’t make them use a vacation day for a child’s doctor’s visit. Realistically, is that worth $10,000 less in salary and a cut to their 401(k) match?

Solution: If larger companies are stealing away the talent you are seeking, get creative about what you offer. In addition to offering standard employee benefits and competitive pay, consider offering unique fringe benefits to make your company stand out. You can also emphasize your company mission statement and how your business differs from the rest.

Candidates have options.

The traditional mindset is that a candidate applies for a job — basically asking an employer to consider them. For many, the balance of power has now shifted. Employers ask the candidate to join them. Many small companies let their egos get in the way of this newfound practice. They think the candidate needs to show they want the job and make some type of sacrifice. 

This is a self-defeating philosophy, especially when a candidate is considering multiple employers. The choice is not between a candidate’s existing employer and your company. It is between the existing employer and any of two, three or five companies that will appear over the next few months.

Solution: Accept that the candidates you seek may not need you as much as you need them. With the labor shortage, employers are at the mercy of job seekers. Focus on how you can benefit your employees and make sure that emphasis shows throughout your recruitment process. 

Stephanie Manzelli, chief human resources officer at Employ, also recommended that companies take a skills-based approach to hiring. “Training your teams to hire for skill sets can quickly lead to larger talent pools, improve retention rates and ultimately generate cost savings,” she said. “To ensure you’re hiring the best talent, focus on skill set rather than university or region.”

Hiring employees can be costly.

Employees are the most expensive cost of any organization. Large organizations often have more capital to spend and can offer more competitive salaries and employee compensation packages. This can make it difficult for smaller organizations to compete for top talent.

Solution: When determining employee compensation for an open position, you are restricted by how much you can spend. But you can make your offer more competitive by supplementing employee salaries with competitive benefits that don’t cost as much.

You are posting inaccurate job descriptions.

A job description is often a candidate’s first interaction with your organization. It tells the job seeker about your company and the role they may be applying for. Unfortunately, many businesses get it wrong by creating inaccurate and vague job descriptions. This can lead to qualified candidates passing you over or, worse, having the wrong candidates apply for (and get) the job. A bad hire can cost your business 30 percent of the employee’s first-year earnings.

Solution: Before posting a job description, determine the scope of the role and the type of person you want to hire for that position. Consider attributes like experience level, job title and purpose, education, salary, skills and competencies. Select and define the factors most important to your business and create a job description to match. 

Noon also suggested thinking beyond what a role entails day-to-day when drafting a job description. “The best recruitment process starts with great job design. It’s about designing how this role fits into the business, what success looks like, what skills and capabilities will enhance your team and how the person’s role could grow into a full function.”

You have a poor recruitment process.

Many businesses struggle with implementing an engaging and effective recruitment process. This can play a major role in the type of employees who get through the screening and interview process. Without a well-thought-out recruitment process, you risk deterring the very employees you seek to hire.

Solution: Make your recruitment process candidate-friendly. Don’t make a candidate leave work in the middle of the day for a half-hour screening interview. Don’t have an interviewer who thinks it is their job to ask questions but not answer them. Engage with the candidate. If you don’t, they will project any standoffish behavior onto their potential futures as your employees and stop the hiring process before it gets started. 

“Technology should enhance, not replace, face-to-face engagement,” added Manzelli. “Consider AI-powered interview intelligence to help eliminate distractions like note-taking, second-guessing and chasing interviewers for feedback — and instead, focus on empowering teams to have meaningful conversations and better decisions.”

Natalie Hamingson and Jeff Zinser contributed to this article.