Nearly four in 10 small businesses operate without a dedicated HR department or HR employee, leaving owners and other staff to manage responsibilities that can carry significant legal and employee relations risks.
The finding comes from a FrankCrum report based on a survey of 1,000 small business owners and employees involved in HR activities. The report highlights the rise of “accidental HR managers” — employees who take on HR responsibilities without formally choosing the role or receiving specific training.
According to the survey, 39% of businesses have no dedicated HR function. In these organisations, HR duties are handled by business owners (15%), shared informally among staff (14%), or assigned to office managers (10%).
Only 13% of respondents involved in HR decisions held an HR-specific title. Meanwhile, 29% were administrative assistants, coordinators or specialists without management titles.
HR responsibilities are added to existing workloads
The report found that HR duties often begin as temporary arrangements or informal requests before becoming a regular part of an employee’s job.
Some 18% of respondents said HR responsibilities were added informally without a change to their role, while 14% said the duties developed gradually over time.
The additional workload can be substantial. According to FrankCrum, 43% of employees handling HR tasks spend at least 10 hours a week on them, often alongside their original responsibilities.
Nearly six in 10 respondents (59%) said the time they spend on HR work had increased over the previous two years. One in five described the increase as significant.
However, the additional responsibilities do not always lead to higher pay. While 34% of employees said their compensation increased after taking on HR duties, 42% reported receiving no pay increase.
The report cautioned that expanding responsibilities without adequate training or workload adjustments can contribute to burnout, particularly when employees must handle sensitive workplace matters.
Small businesses face compliance and employee relations risks
Without clear ownership of HR processes, small businesses may struggle with employment law compliance, employee complaints, documentation and termination decisions.
The survey found that respondents were concerned about several potential risks:
- Employee lawsuits: approximately 25%
- Wrongful termination claims: 23%
- Employment law compliance: 20%
- Harassment or discrimination complaints: 19%
- Documentation errors: 18%
- Wage and pay disputes: 16%
- Workers’ compensation claims: 9%
These concerns highlight the challenges of managing employee matters without dedicated HR expertise. The report argues that unclear responsibilities and limited training can leave businesses less prepared to respond to complex situations.
AI is also being used for HR tasks
The report found that small businesses are increasingly using artificial intelligence for HR-related work, including research, onboarding materials and workplace documentation.
Among the uses identified, 26% of respondents reported using AI to draft employee handbook content, 25% to prepare guidance for disciplinary action or terminations, and 24% to develop workplace policies.
While these tools can help produce initial drafts, employment policies and decisions involving discipline or termination may require specialist review. AI-generated content should not replace checks for legal accuracy, fairness and relevance to the organisation’s circumstances.
Why formal HR ownership matters
The report recommends that small businesses clearly assign responsibility for key HR processes, including employee records, termination decisions and escalation of complex cases.
It also advises businesses to establish when external HR support or employment law expertise should be sought, rather than leaving employees to resolve unfamiliar situations independently.
For small businesses that cannot justify a full-time HR department, clearly defined responsibilities and access to qualified external support may help address gaps in expertise.
The findings point to a wider challenge for small employers: HR work may be getting done, but that does not necessarily mean it is being managed with the right training, authority or resources.
