SMBs See Value in HR Cloud Solutions, But May Not Invest

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While the market for HR technology among small businesses is growing steadily, new employers aren’t sure-fire prospects for vendors of cloud-based solutions. A study by found that during 2023, 58% of SMBs without such software weren’t sure if they’d adopt it during 2023. More than a quarter (28%) said they had no plans to.

Half of SMB HR professionals use the cloud to manage their workforce, though more of them (59%) still use paper to complete their work in some areas, such as recruiting and training.

In an analysis of SMB spending, estimated there are 3.2 million companies with fewer than 250 employees using cloud-based HR software in the U.S. SMBs have escalated their technology spending, according to the technology research and consulting firm Analysys Mason. Globally, the firm estimated that SMBs would spend $1.45 trillion on IT over the course of the year.

Still, 59% of these companies still use manual solutions, like spreadsheets, to complete some HR functions, including recruiting and training. That’s one result of cloud software’s costs, which can range from $5 to $20 per employee per month, on top of a monthly base fee. That adds up when you consider that most companies require more than one solution to recruit and manage their workforce.

Making things more complicated: limited customization options and the general focus of HR tech products on larger organizations. “[I]t is clear that there is not a one-size-fits-all solution for small to medium businesses,” wrote.

The Benefit of HR Tech

When SMBs Implement HR software, they usually see a payoff. More than two-thirds (69%) said dedicated technology solutions helped their business cut down on payroll-processing time, while 25% reported improved legal compliance. Additionally, 38% believe using HR software has led to higher employee satisfaction, and 22% said HR software improved retention.

When they hold back their investment in HR tech, small businesses may simply be pragmatic. Since they hire, train and manage fewer employees, many SMBs find using old-fashioned, paper tools to be manageable, said. In fact, in many cases technology’s advanced capabilities may simply not be necessary.

Of course, AI is part of the picture in SMB HR. An increasing number of products have artificial intelligence baked in. Analytics and chatbots, for example, help make many HR functions more efficient for small companies, just as they do for larger organizations.

Image: iStock

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