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8 Hiring Challenges Facing Small Business Owners

Skye Schooley
Skye Schooley
Staff writer
business.com Staff
Updated Oct 06, 2021

Learn how to overcome hiring obstacles to add ideal candidates to your team.

Over the past year and a half, small businesses have faced a litany of challenges, especially in managing their human capital. While the start of the coronavirus pandemic forced many employers to lay off and furlough employees, business has picked up, and employers need new hires again. However, the recent labor shortage and what some are calling the “Great Resignation” have caused staffing troubles for many small businesses. Here are a few reasons why hiring top talent might cause a headache for small businesses in today’s market, and how to help your business stand out in the hiring process.

1. It’s a tight market.

Now that the unemployment rate has dropped to 5.2%, the pool of unemployed job candidates is smaller. Your ideal hire might be working somewhere else, which means they need a reason to quit their job and work for you. When a promising talent is not looking for work, you need to identify them and attract them to your company.

Solution: With more open jobs than available quality candidates, employees have their choice of where they want to work. 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.

You also need to offer competitive employee benefits and work perks. For example, remote work and flextime have become highly desirable to many job seekers. Create an employee benefits package that goes above and beyond what your competition offers.

2. Other employers have built inclusive cultures.

Working for a company that prioritizes diversity, equity and inclusion (DEI) has become a top priority for many job seekers. In tandem, many companies have placed an emphasis on DEI initiatives. 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.

3. 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.

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 (EAPs) and unlimited paid time off.

TipTip: If you want access to competitive benefits, consider partnering with a top professional employer organization (PEO). Read our review of TriNet to see if it has the benefits you are looking for.

4. 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 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 what your company mission is and how your business is different from the rest.

5. Candidates have options.

The traditional mindset is that a candidate applies for a job – basically asking an employer to consider them. In reality, 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 the fact that the candidates you are seeking 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.

6. Hiring employees can be costly.

Employees are the most expensive cost of any organization. Large organizations often have more capital to spend and can therefore offer more competitive salaries and employee compensation plans. 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.

Did you know?Did you know? Wage and salary account for nearly 71% of worker compensation costs in private industries, while benefits account for roughly 29%.

7. 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 when creating accurate and informative 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% 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.

8. 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 run the risk of deterring the very employees you are seeking 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 employee and stop the hiring process before it ever really gets started.

If you are looking for a way to organize your recruitment process, you may want to use high-powered HR software. Read our BambooHR review if you want HR software that helps with recruiting and performance management, or check out our GoCo review for software to build custom workflows.

Jeff Zinser contributed to the writing and research in this article.

Image Credit:

AndreyPopov / Getty Images

Skye Schooley
Skye Schooley
business.com Staff
Skye Schooley is a staff writer at business.com and Business News Daily, where she has written more than 200 articles on B2B-focused topics including human resources operations, management leadership, and business technology. In addition to researching and analyzing products that help business owners launch and grow their business, Skye writes on topics aimed at building better professional culture, like protecting employee privacy, managing human capital, improving communication, and fostering workplace diversity and culture.