12 – HRM in Small Business

Introduction

A lot of tiny firms don’t have any employees. One person oversees the entire operation, with family or friends occasionally assisting. Hiding to hire someone to help you is huge because you now have to deal with payroll, benefits, unemployment insurance, and other considerations. This isn’t even considering the slew of issues that might come from personality clashes and a loss of control over your company’s operations.

People are an organization’s most valuable asset. They have the potential to propel enterprises to new heights if adequately managed. Two plus two may equal four or even ten. In general, organisations are guided by a set of predetermined objectives. They use physical, financial, and human resources to achieve their goals. These objectives are meaningless unless people grasp the underlying idea, translate it into action plans, and put their hearts and souls into achieving them. As a result, organisations rely on people for their existence and growth. People, in a similar way, require organisations.

To sustain themselves and their families, the great majority of people work. However, people labour for a variety of reasons other than financial stability. They may, for example, work to keep occupied and feel useful, as well as to produce and achieve anything. They want to be noticed and attain status, or they want to test and push their abilities. People and organisations work together to satisfy these diverse needs. Regrettably, this combination rarely comes close to perfection. Employees express some difficulties in their endeavours to be productive and efficient in their employment and to feel fulfilled in their work life, just as organisations confront various challenges in reaching their objectives. Human resource management’s challenge is reducing these roadblocks and challenges while improving people’s contributions to organisations.

12.1 HRM’s Importance

People have always been at the heart of businesses, but their strategic relevance is expanding in today’s knowledge-based sectors. Employee Knowledge, Skills, and Abilities (KSAs) are becoming increasingly crucial to an organization’s success, significantly as they assist develop a set of core competencies that set it apart from its competitors. With the right HR policies and processes in place, a company can hire, develop, and employ the greatest minds in the industry, achieve its stated objectives, and outperform the competition.

Human Resource Management assists a business and its personnel in achieving their objectives in the following ways:

At the corporate level

1. Good human resource procedures can help attract and retain the best employees. Planning foreshadows the types of personnel the organisation will require in the short, medium, and long term.
2. It aids in developing suitable attitudes toward the job and the firm, promoting team spirit among employees, and developing loyalty and dedication through appropriate compensation schemes by assisting in the training of people for demanding jobs.

At the individual level

Effective human resource management benefits employees by:

1. Encouraging teamwork and team spirit among employees.
2. It provides good possibilities for people with the potential to advance.
3. It enables people to operate with zeal and dedication.

At the societal level

Suitable human resource management methods benefit the entire society.

1. The number of job openings increases.
2. Limited resources are put to the best possible use. Companies that pay and treat their employees properly are always ahead of the pack and produce exceptional outcomes.

At the National level

The efficient utilisation of human resources aids in the better exploitation of natural, physical, and financial resources. People with the right talents, attitudes, and beliefs help the country grow ahead and compete with the best in the world, resulting in a higher standard of living and better employment opportunities. A small business’s human resource management needs are not the same size or complexity as those of a vast corporation. However, even a tiny corporation with only two or three employees faces significant human management challenges. The stakes in personnel recruiting and management are very high in small businesses. No company wants a slacker, incompetent, or dishonest employee. A small business with a staff of a few dozen workers, on the other hand, will be significantly more severely harmed by such an employee than a large corporation with hundreds of employees (or thousands). According to Jill A., “Most small business employers have no formal training in how to make hiring judgments.”

A small business owner should examine numerous factors before employing a new employee. When considering an increase in employee wages, a small business owner’s first step is to honestly investigate the company’s current state. Are present personnel being used to their full potential? Are the existing methods of production efficient? Is it possible to meet the company’s demands through a contract with an outside contractor or other means? As the owner, are you making the best use of your time? “Any personnel turnover should be considered a chance for rethinking your organisational strategy,” Rossiter said.

Small firms must also match potential employees’ skills to the company’s requirements. Efforts to manage this can be far more effective if the small business owner commits time and effort to defining the role and actively participating in the hiring process. However, the role of human resource management does not end with drafting a thorough job description and hiring an appropriate individual. Indeed, for a small business owner, the hiring process is the start of HRM.

Small company consultants highly advise that all businesses, no matter how small, adopt and document human resource policies. “Several small businesses can afford even a rudimentary personnel department during the first few years of existence,” Burstiner admitted. “However, a considerable volume of personnel forms and data tends to accrue rather quickly from the start. Specific personnel policies should be created as soon as feasible to minimise problems. These are important guidance in various situations, including recruiting and selection, compensation plans and employee perks, training, promotions and terminations, etc.” Depending on the nature of the firm (and the owner’s comfort level), the owner may or may not include his staff in this endeavour. In any case, a well-thought-out employee handbook or personnel manual can be valuable for ensuring that the small business owner and staff are on the same page. Furthermore, a written record might protect a small corporation if its management or operating processes are challenged in court.

Some small business owners must also consider training and other development needs when managing their personnel. The demand for educational supplements can vary greatly.

For example, a bakery owner may not need to spend much on staff training. Still, a company that provides commercial electrical wiring services may need to develop a continuing education system for its employees to stay afloat.

Finally, the owner of a small firm must create and maintain a productive working environment for his or her employees. Employees who believe they are adequately treated will more likely be effective assets to your organisation. Small business owners who communicate personal expectations and company goals, provide adequate compensation, offer meaningful opportunities for career advancement, anticipate workforce training and developmental needs, and provide meaningful feedback to their employees are far more likely to be successful than those who do not.

12.2 Development of Human Resources

Human resource development (HRD) is a positive idea in human resource management. It is founded on the premise that investing in people is vital and will invariably result in significant long-term benefits for the company. Its goal is to promote the total development of human resources to benefit employees, organisations, and society as a whole.

HRD, according to Prof. T.V. Rao, is a process by which an organization’s employees are assisted in a continuous and planned way to:

(1) acquire or sharpen capabilities required to perform various functions associated with their current or expected future roles; (

2) develop their general capabilities as individuals and discover and exploit their inner potential for their own and organisational development purposes; and

(3) Develop an organisational culture in which a person’s personal and organisational development goals are met. (T.V.Rao and Udai Pareek)

In a nutshell, HRD attempts to assist people in acquiring the skills they need to effectively perform all of their functions and contribute to the success of their organisation.

It’s all about keeping human abilities current to satisfy shifting demands. For organisational development and R&D, the HR Manager must function as a change agent and OD consultant.

Competent employees may not always be qualified. Some employees arrive with only rudimentary qualifications and demand additional training or education. Others join the organisation with the ability to perform at a high level, but their talents become obsolete after a while. Organizations change with time, and management must guarantee that individual skills and organisational needs are aligned for the future. Employee training provides individuals with the specialised skills they need to carry out their jobs effectively. HRD’s primary responsibilities include management development, career planning, counselling, and coaching.

Even the most advanced technology is useless if no one can operate it. As a result, practical training is essential to update employees’ skills.

12.3 Pricing for Labour Relations

Human resource management is concerned with the management of people for organisations to be competitive and successful. HRM & IR professionals keep up with issues and trends that affect employment relationships, such as the labour market and economics, the product or service market, the political environment, environmental concerns, technological change, employment regulations, organisational psychology, and social trends, to do so in a fast-changing global economy.

Industrial relations (IR) is a multidisciplinary discipline that examines the collective characteristics of workplace connections. Because of the importance of non-industrial work connections, it is often called Employment Relations (ER). Fair employment practices and decent work are central to IR’s concern for social justice. Industrial relations are more than just labour relations and unionised job settings, as many people believe.

Workplace bargaining, management strategy, employee representation and engagement, union-management cooperation, workplace reform, job design, new technology, and skill development are all concerns that interest managers and employees.

Hiring employees, negotiating employment contracts and conditions, performance management and reward systems, dispute resolution, disciplinary processes, ensuring employee health and safety, employee motivation, work design, team and organisation restructuring, and training and development are all major HRM and IR tasks.

“Industrial relations” are one of modern industrial society’s most delicate and complex issues. Workers have a higher standard of living due to rising affluence and earnings; they have gained education, sophistication, and mobility. Career patterns have altered, and a more significant portion of the population has been forced to leave their farms to work as wage and salary earners under difficult working circumstances in metropolitan regions. Massive numbers of men, women, and children have flocked to urban areas, ignorant and impoverished. Individually-owned businesses have become corporate enterprises, and the companies they work for have become corporate enterprises.

Simultaneously, a progressive, status-dominated, secondary group-oriented, universalistic, aspirant, and sophisticated class of workers has emerged. They have formed their trade unions and thus gained bargaining power, allowing them to fight their employers for their rights in the growing industrial society. As a result, the government has stepped in to play a vital role in establishing harmonious industrial relations, partly because it has become an employer of millions of industrial workers but primarily because it has enacted a vast body of legislation to ensure that the rights of industrial workers in private enterprises are adequately protected. Aside from that, rapid developments in production techniques and methodologies have occurred. Long-held positions have vanished, while new work opportunities have emerged that require distinct patterns of experience and technical education. As a result, labor-employer relationships have become more complex than in the past, and the widespread labour unrest has given them a razor-sharp edge. In these conditions, everyone interested in industrial peace would benefit from a comprehensive grasp of the elements that cause this dissatisfaction and how to eliminate them.

12.4 Labour Laws

The goal of labour law is to govern the relationship between an employer and his or her employees. This law has the broadest reach of any branch of law in that it affects the lives of far more people, millions of men and women, than any other. This is one of the aspects that makes it the most fascinating of all branches of law, and the study of this subject has an enormous scope and ever-changing facets.

Since World War II, there has been a significant shift in how people think about labour legislation and relations. “Labour is not a commodity,” according to the 1944 Philadelphia Charter, and “poverty anywhere is a menace to prosperity everywhere.” According to W. Friedmann and others who have attempted to analyse the essential aspects of the legal growth in this branch of law, the employer’s ‘social duty’ is the primary bedrock on which this law is built. The legislators’ approach to building a wage packet for the working man in the post-second World War period, wage fixation, and regulations relating to working conditions are examples. The Indian Constitution establishes broad rules for the government to follow.

In his book Labour and the Law, Otto Kahn-Freund argues the following observations.

1. The collective bargaining system is based on a balance between management and organised labour collective forces. The courts have made an insignificant contribution to the orderly development of collective labour relations. Collective bargaining is a procedure in which management and the union agree on the terms of employment and conditions of service. “It is a business contract (that) decides the price of labour services and the terms and circumstances of labour’s employment,” according to the statement.
2. Labour law is one of the most essential fields since it governs how most people make a living. Nonetheless, law is a secondary factor in human relations, particularly in labour relations.
3. Law is a strategy for social power management. This applies to labour law and other areas of any legal system. Labour law aims to provide a minimum standard of employment. It establishes minimum standards for separation benefits and specific provisions for old age, as well as maximum working hours, minimum safety conditions, minimum requirements for holidays and leave, protection for women and children from arduous labour, and prohibition of children under a certain age from working.

Small business owners already have a lot on their minds, and employee lawsuits are another thing to worry about. A single adverse judgment verdict might deplete a company’s assets to collapse for many small enterprises. As a result, business owners and managers must understand the fundamental labour regulations that apply to their organisations.

The following are some of India’s labour laws:

The 1923 Workmen’s Compensation Act

The Workmen’s Compensation Act compensates workers for injuries sustained on the job and their dependents in the event of their death. The Act establishes the rate at which an employee’s remuneration is paid. This is one of India’s several social security legislations.

The Trade Union Act of 1926 was enacted to protect workers’ rights.

This Act established the norms and rights afforded to Indian trade unions. The law was changed in 2001.

The 1936 Wage Payment Act

The Payment of Wages Act establishes a schedule for employers to distribute employee wages and specifies the tax withholdings an employer must deduct and remit to the federal or state government.

The 1946 Industrial Employment (Standing Orders) Act

This Act compels employers in industrial facilities to issue standing orders that specify and post the terms and conditions of employment. These standing orders must be approved and validated by the government. These instructions limit the employer’s flexibility regarding employment, hours, time, leave, productivity measurements, and other concerns. According to the standing orders, the company must classify its employees, state the shifts and pay wages, and follow the regulations for vacation, sick leave, holidays, and termination, among other things.

The 1947 Industrial Disputes Act

The Industrial Issues Act of 1947 governs how businesses handle labour disputes such as lockouts, layoffs, and reductions. It oversees the legal processes for labour dispute resolution and adjudication.

The Act also specifies what regulations and conditions firms must follow before terminating or laying off a worker who has worked for the company for more than a year. Before the employment can be legitimately ended, the employer must give notice of termination to the employee, send a copy of the notice to the appropriate government office, explain valid reasons for termination, and wait one month. Instead of the notice, the employer may give full salary for one month. In addition, for each year of continuous service, the employer must provide the equivalent of 15 days’ average wage. Suppose the government grants the employer permission to lay off an employee who has worked for four years, in addition to various notices and due process. In that case, the employee must be paid a minimum of the employee’s wage equivalent to 60 days before retrenchment.

The Minimum Wage Act of 1948

The Minimum Pay Act establishes minimum wages for all businesses and, in some situations, people working from home, as specified in the Act’s schedule. Minimum wages can and do change at the discretion of the federal and state governments. At the government’s discretion, the minimum wage is further classified by job type, location, and various other considerations. The minimum pay ranges from ‘143 to 1120 per day for labour in the centre domain. State governments set minimum wage schedules.

The 1951 Industries (Regulation and Development) Act

Several significant industrial businesses were declared under the law’s so-called First Schedule. It subjected several industries to federal controls in addition to the rules enacted by state governments. It also set aside over 600 products that can only be produced in small-scale businesses, limiting who can enter these businesses and, most importantly, the number of employees per company for the specified products. In the early 1950s, the list contained all essential technical and industrial products, covering everything from iron and steel to fuel derivatives, motors, machinery, machine tools, ceramics, and scientific equipment.

The Employees Provident Fund and Miscellaneous Provisions Act of 1952 enacted the Employees Provident Fund and Miscellaneous Provisions Act.

This Act aims to enhance employees’ financial stability in a business by establishing a mandatory savings scheme. The Act mandates the creation of a contributory Provident Fund in which employees’ contributions must be at least equivalent to the employer’s contribution. Employees must contribute 10% to 12% of their wages.

1961 Maternity Benefit Act

The Maternity Benefit Act governs women’s work and the required maternity benefits. Under the Act, any woman employee who worked for at least 80 days in any establishment during the 12 months immediately preceding her projected delivery is eligible for maternity benefits. The employer must pay for maternity benefits, medical allowances, maternity leave, and nursing breaks.

The 1965 Bonus Payment Act

This Act applies to businesses with 20 or more employees. It mandates that an employer provide a bonus to employees based on profits, production, or productivity. Even if the employer loses money throughout the accounting year, the Act was changed to mandate corporations pay a minimum bonus. The current minimum wage is 8.33 percent of the gross pay.

The Gratuity Payment Act of 1972

This law applies to all businesses with ten or more employees. If an employee resigns or retires, he or she is entitled to a gratuity. The Indian government requires that this payment be made at a salary of 15 days for each year of service completed, up to a maximum of 1000000.

12.5 Laws on Pollution Control

The 42nd amendment to India’s constitution, which protects the environment, was ratified in 1976, making India the first country in the world to do so. “Endure to maintain and improve the environment, as well as to safeguard the country’s forests and wildlife,” the amendment stated. Every Indian citizen is obligated to “guard and improve the natural environment, including forests, lakes, rivers, and wildlife, and to have compassion for living beings,” according to the constitution. The Environment Protection Act of 1986 defines environment as the “interrelationship that exists among and between water, air, and land, as well as human beings, other living things, plants, microorganisms, and property.” The Water (Prevention and Control) Act of 1974 is widely regarded as the first set of restrictions. Since then, it has been changed numerous times. There are six pollution regulations in total:

1. The Water (Prevention & Control of Pollution) Act, 1974, and its amendments;
2. The Water (Prevention & Control of Pollution) Cess Act, 1974, and its amendments;
3. The Air (Prevention & Control of Pollution) Act, 1981, and its amendments;
4. The Environment (Prevention) Act, 1986, and its amendments,

• National Environmental Tribunal Act, 1995, and
• National Environmental Appellate Authority Act, 1997;

5 The Public Liability Insurance Act of 1991, and

6 Hazardous Waste (Management and Handling) Rules were enacted in July 1989.