More than one-third (36%) of small to mid-sized businesses are using virtually no HR technology or are at the foundational level (payroll and record-keeping systems only), according to new research from UKG, a leading provider of HR, payroll, workforce management, and culture solutions for all people, and HR.com, the largest network of HR executives. With continued economic uncertainty and a challenging labor market, the study also found that failure to invest in HR technology is costing organizations in the long run.

“HR professionals at small and mid-sized businesses have their hands in many areas, making it all the more important they have intuitive technology that helps them stay organized and compliant so they can think ahead,” said Julie Develin, senior partner, HCM advisory at UKG. “HR technology that is efficient, easy to use, and quick to go live can be the key in helping leaner HR teams engage their people while also focusing on the bigger picture: driving the business to succeed.”

According to the research, to best compete, small and mid-sized businesses need to get the HR basics right to scale and engage employees. The report shows that smaller organizations tend to focus on foundational HR areas, including:

• Recruitment, selection, and onboarding (64%)
• Benefits administration (55%)
• HR administration and employee records (52%)
• Employee relations (51%)
• Compliance and regulations (43%)
• Payroll (43%)

Top HR Challenges Plaguing Small to Mid-sized Businesses

As HR teams grow over time, these foundational areas are crucial in setting the business up for success. However, the study found that there are several areas where small to mid-sized businesses can improve:

• One in 4 (24%) organizations report that they do not track HR key performance indicators (KPIs); and
• A little over one-third (36%) say their HR operations focus primarily on back-office tasks instead of people-focused tasks.

Retaining key talent (60%) and hiring qualified employees (56%) are two primary concerns for small to mid-sized businesses, and without proper investment in HR technology, the report says these companies risk falling behind. Despite that, over half (64%) say that less than 1% of annual revenue goes to HR technology investments.

Best Practices for Small to Mid-Sized Businesses

Although 36% of respondents say that their organization uses only foundational or virtually no HR technology, the good news is that 27% of small to mid-sized businesses say they are at a strategic or advanced level, meaning that they are already using a variety of HR technologies, such as employee self-service portals (82%), HR information systems (78%), and onboarding systems (71%). These technologies can free up HR professionals’ time so they can better tend to employee needs and engagement initiatives that drive the business. And more than half agree they want to use technology to increase HR efficiency (69%), improve service to employees (60%), and increase the quality of HR services overall (50%).

According to the report, to accomplish these goals, UKG and HR.com suggest that HR professionals:

• Boost the maturity level of their operations by starting with an evaluation to see where current levels are, and where technology can elevate HR services;
• Invest in HR technology strategically with business priorities in mind to improve efficiencies and manage compliance; and
• Introduce employee self-service possibilities to reduce HR administrative duties and empower employees to more easily request time off, see their pay information, and view their schedules.

To learn more about the report, watch a webinar featuring experts from UKG and HR.com