12 Top HR Tools for Small Businesses

Small businesses are no small matter. In the US alone, they contribute 1.5 million jobs annually and make up 64% of all new jobs created, according to Fundera. 

Globally, the definition of a small business varies. 

For example, any org chart with less than 500 employees in the US is considered a small business. This number contrasts sharply with Australia's definition of fewer than 15 employees or the EU's version of under 50 staff members. 

But the one thing they all have in common? 

People. 

And managing these people is no small feat. 

From recruiting and onboarding to employee benefits administration and performance management, there are many HR tasks to juggle, even in smaller teams. 

So, how can you stay on top of all these moving parts? 

This guide highlights 12 HR tools for small businesses that will help you efficiently manage your people resources. 

And best of all, they won't destroy your budget.

🧰 12 Top HR tool picks for small businesses

HR software ranges from tools that handle specific administrative tasks to those offering an all-in-one solution for your people processes. 

For small businesses, the cost will be a significant consideration when selecting the best software for you, along with user experience and scalability.

We've put together a list of 12 recommended HR tools for small businesses, from payroll to performance management, benefits to talent management, and plenty in between. 

Check it out here and pick the ones that support your growth journey. 

1. Zavvy 

Zavvy is a holistic solution for onboarding, training, developing, and connecting your workforce.

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Pricing: a comprehensive Zavvy plan starts from as little as 4€ per user per month. The price adjusts to your needs, so you'll never pay for modules you don't need or want.

Key features of our highly intuitive platform include: 

• Pre & onboarding (templates, journey builders, spaced content delivery, onboarding buddies, creative assignments, and more). 
• Training (microlearning, progress analytics, admin management, ready-to-use training journeys, external training library). 
• Feedback & Development (employee survey templates, 360 feedback builder, growth plans, performance reviews, automated reminders, multiple role descriptions, and career framework templates). 
• Connections (Slack or Microsoft Teams employee introductions, coffee chats, walking meetings, reminders, check-ins, science-based talking point templates).

Best for: companies committed to the future of work who are invested in employee engagement, productivity, and creating a community from the ground up. 

2. Gusto 

Gusto is a payroll software that caters to businesses of all sizes. It offers a wide range of features, including payroll processing, tax filing, basic time tracking, and more. 

Pricing: Gusto starts with a base fee of $40 per month plus a cost of $6 per employee per month. This includes: 

• single-state payroll, including W2s and 1099s; 
• employee profiles; 
• health insurance admin; 
• financial benefits plans;
• time-off and attendance reports; 
• custom admin settings; 
• integrations for accounting, time tracking, expense management, and more.

Best for: teams of any business size and at any stage of business. The best part? You won't pay a cent until you're ready to run payroll. 

3. Toggl Hire 

Toggl Hire is a skills assessment and talent management software that enables hiring teams to test for job-specific skills during recruitment. It's a convenient way to shortlist quality talent in line with your job descriptions and competency frameworks. 

Pricing: Toggl Hire is free for small businesses that only want to post one active job. The free plan gives recruiters access to 5 tests per job. Plus, it provides detailed info (including contact info, answers, and test results) for up to 5 candidates. 

If you need to accelerate your hiring strategy further, the Basic plan costs $17 per month (billed annually) for three active jobs, five tests, and 20 candidates. 

Expect: 

• 180+ skills to test;
• 150+ job role templates; 
• cheat-proof settings; 
• 2-click setup; 
• custom admin settings. 

Best for: companies seeking candidates with specific skills. 

4. Nectar HR

Nectar HR is an employee recognition and culture enablement software that recognizes great work and builds communities. Use it to deliver meaningful shoutouts to your small teams or connect your Nectar points to Amazon to access amazing rewards. 

Pricing: There are zero setup fees and a monthly payment option if you prefer flexibility. The standard plan starts at $2.75 per employee per month (or $3 billed monthly.) This includes the following core features: 

• peer-to-peer recognition; 
• manager-to-employee recognition; 
• company incentives; 
• milestone automation (for birthdays, anniversaries, and years of service); 
• custom core values; 
• company-specific rewards;
• global reward options; 
• corporate discounts; 
• mobile app & desktop access;
• integrations with third-party software like Slack and Teams; 
• analytics and reporting. 

Best for: companies looking for a game changer for small business retention strategies. 

5. Heka 

Heka is a personal health and well-being platform that offers every employee financial, nutritional, mental, and physical well-being products. Each receives a monthly allowance to spend on the specific support they need rather than being given a blanket benefits package they don't use. The result? Peace of mind that you're helping your employees be happier, healthier, and more productive. 

Pricing: Companies save an average of £728 per employee per year. Contact Heka for a custom quote depending on your organization's needs. Choose from health benefits features including: 

• mental health support; 
• financial well-being; 
• fertility and family planning; 
• career and life coaching;
• learning and development; 
• nutritional health; 
• gym memberships; 
• miscellaneous treats like axe-throwing or pottery kits. 

Best for: small businesses who want to mentally, physically, and financially support their employees through the difficulties of the pandemic and cost of living crisis without breaking the bank! 

6. Loom 

Loom is a video messaging and screen recording tool used for asynchronous communication. HR teams streamline the onboarding process by creating a library of recorded videos for new joiners to review in their own time and from any business location. From team welcome videos to tool tutorials or even more advanced training materials, new hires can watch the videos until they're up to speed. 

Pricing: Loom's free version allows you to record up to 25 videos with a 5-minute maximum recording length. If this isn't adequate, the premium plan for unlimited vids starts at $8 per user per month. Plus, there's a 14-day free trial available.

Best for: helping small businesses in remote teams establish an immediate camaraderie regardless of location. It's also super fun, with the ability to add emojis, time-stamped comments, and even a welcome confetti celebration to your videos. 

7. Bamboo HR 

Bamboo HR is an all-in-one HRIS solution covering everything from employee records and applicant tracking to performance and compensation management features. 

Pricing: available on request. For companies with fewer than 20 employees, BambooHR charges a monthly flat base price. For 20+ employees, expect a per-employee, per-month rate. You never have to sign an annual contract, but you will see volume discounts if your employee headcount rises. 

Best for: startups starting small but have plans to extend as their company grows. As an all-in-one software, you can be confident that it covers plenty of bases in the same package. 

8. Notion 

Notion offers a centralized digital workspace that is a single source of truth for your HR processes. 

Use it to handle everything from HR meeting notes, task and document management, employee databases, company mission statements, employee handbooks, leave calendars, or your company intranet.

Pricing: Small teams can get started with Notion for free, but there's a limited 7-day block history. Upgrade to the Notion Plus plan for $8 per user per month (billed annually) and receive unlimited blocks for teams with a 30-day page history and up to 100 guests. 

Best for: companies who want a centralized space for small teams to come together, collaborate, and get organized.

9. Zapier 

Zapier is the ultimate way to connect several business HR tools, allowing them to exchange information with each other to save valuable hours for your small hours. 

Use Zapier, an automation tool, to connect your favorite apps. For example, you might connect Bamboo HR to Slack so that any new joiners entered into your HRIS are immediately added to your company Slack channel. 

Pricing: Zapier has a generous free plan which gives you five free zaps and up to 100 tasks per month. If you need more, there is a Starter plan. It costs $19.99 per month, offering 20 zaps and up to 750 tasks. 

Best for: HR teams with tons of repetitive tasks you want to ditch. Once you've set up your automation steps, you'll leave them to run in the background and spend the saved time in other areas of your small business that yield results. 

10. monday.com

monday offers a comprehensive Work OS to help HR teams manage their entire employee lifecycles from recruitment and onboarding to well-being and L&D. It's a centralized platform incorporating advanced features like team collaboration, project management, employee leave requests, and more. 

Pricing: Check monday.com out for free as part of a 14-day trial. Beyond that, monday's plans are available for teams as small as three seats, priced at $8 per user per month. 

Expect: 

• unlimited boards; 
• unlimited docs; 
• 200+ templates; 
• 20+ column types; 
• unlimited free viewers; 
• compatibility with iOS and Android apps. 

Best for: fostering a smooth internal flow of your HR function. Use it to share notes, assign tasks, track progress and manage transparent collaboration across your small business. 

11. ActivTrak

ActivTrak is a productivity tool that provides workforce insights into how employees cope with their workloads. Crucially, the focus is on engaging employees rather than surveilling them. 

The program monitors employee calendars, workloads, and communications to spot when burnout levels might be spiking and then intervene if there's an imbalance. 

Pricing: The free plan gives you 30 days of data history for up to 3 users. You'll also have access to: 

• activity dashboard; 
• reports on top applications, websites, categories, productivity, activity alarms, and email notifications. 

For slightly larger teams, the advanced plan costs $10 per user per month (billed annually), which provides a data history of up to 6 months. As well as the free plan features, you'll also receive: 

• working hours report;
• Slack or Microsoft Teams notifications;
• USB or file transfer detection. 

Best for: employers who understand their role in supporting their employees' work-life balance. 

12. LMS365

LMS 365 is a learning management system that directly integrates with Microsoft Teams. Bundle training plans to navigate learners and track employee skill developments with competency assignments. 

Pricing: the Freemium version of LMS365 will be enough for most small or medium businesses as it offers 100 monthly enrollments. Other features include: 

• customizable interactive quizzes; 
• learning module designer; 
• unlimited learning data storage; 
• Eight custom courses; 
• skill manager tool. 

Best for: Small businesses who already rely on Microsoft Teams and want a simple training add-on. 

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🕵️ Why do small businesses need HR software?

Small businesses often have limited resources, so HR tools can be extremely valuable for helping manage and support their workforce.

1. Limited HR personnel 

HR issues are strategic for company success, covering everything from retention and performance to regulatory compliance and business payroll. But for most small businesses, there aren't enough hours in the day or people on staff to handle all of these tasks.

Max Benz, Founder, and CEO at BankingGeek, breaks down the frustrations for HR teams: 

"As small businesses generally don't have large teams or resources, it can be difficult to ensure that HR processes are properly managed and optimized for productivity. This can have a direct impact on the overall success of the business."

2. Training and upskilling 

Gone are the days of one-size-fits-all training. 

Today's workforce is transitioning from traditional to skills-based learning environments tailored to each team member's needs.

This is especially important when it comes to upskilling and development. Continuously building upon existing skill sets ensures your employees stay relevant in this rapidly changing landscape while giving your small business the competitive edge to succeed. 

3. Employees have high expectations 

Today's employees are in the driving seat. They expect basic HR processes to run like clockwork. Still, they also have a strong desire to be engaged and invested in the success of their organization.

HR tools can help small businesses meet these high expectations by streamlining HR processes and making it easier to engage and empower employees.

4. Onboarding for new joiners 

Onboarding can be chaos without a structure in place. Still, small businesses can use HR automation to streamline workflows during preboarding, onboarding, training, and post-onboarding. 

5. Automation 

Workato research shows that HR automation has increased by 599% over the past two years. 

As an example, Eran Galperin, founder of Gymdesk, explains how automation has supported their small business: 

"I like how automated recruiting software has shortened the process for us in finding candidates and onboarding and documenting new employees. If you have a small HR department like ours that is recruiting talent from around the world, it does save a lot of administrative time.Automated software can help locate and track potential candidates from across the globe more efficiently than manual processes."

😟 What HRM issues do small businesses face?

Small business owners have a lot of weight on their shoulders. 

Not only must they generate cash to stay afloat, but they also have the responsibility of managing their people. 

There's a lot to consider, from staying up to date with HRM (Human Resources Management) policies to ensuring employee satisfaction.

Recruitment 

Small businesses may need help attracting the right people when they can't offer the huge salaries of larger corporations. 

Oliver Savill of Assessment Day manages a team of six and makes a new hire every couple of years. He explains why aptitude testing is the key to his recruitment strategy: 

"Just because we're a small company, it doesn't mean we should miss out on the top candidates. The challenge we face is the quality of hire. We try to hire people with above-average intelligence because they tend to do better work, make better decisions, and learn faster. As an SME, we're less able to upskill new employees or redeploy them into other departments. So each hire has to be good. When we recruit, we have relatively small applicant pools, so we have to select more carefully. The bigger employers get so many applicants they can just take the top, say 5%. But we have to make sure those on our shortlist meet a minimum level of aptitude.

Our preferred tests are numerical and verbal reasoning tests, as we need smart people who can work with numbers and written information. So far, everyone we've hired has scored high on these tests, and they're all great employees!"

Payroll 

Employees of any sized business care about getting paid on time for a job well done. 

But errors frequently creep into the process. 

Quickbooks states that 1 in 4 American workers has received an inaccurate paycheck before, and the IRS charges $7 billion in penalty fees yearly due to 1 in 3 employers making payroll mistakes. 

For small businesses, the fear of costly errors can be crippling. Especially if you consider that payroll is particularly complex when working with teams across borders. 

CEO Brian Nagele of Restaurant Clicks tells us: "As a digital marketing agency, we leverage the benefits of location-independent freelancers and in-house team members to expand our content reach and talent pool. But this also means payroll isn't straightforward, especially when squaring off payments to freelance contractors. Payroll varies on a month-to-month basis for us, which makes it a painstaking process to execute.

I love using automated payroll tools to handle salary payments for our full-time staff because it gets the repetitive tasks out of the way each month. This allows me to focus on the more complex procedures for finalizing freelance payments since these aren't always billed at fixed or recurring rates."

Diversity 

Similarity bias can be a huge problem for small businesses, as hirers focus on culture fit rather than culture add. This means that recruiters are drawn to candidates who are "more of the same." 

The way around this bias is to focus on a skills-based hiring process, including anonymized elements, rather than relying on background info. 

Why? Data from the recruitment platform Applied reveals that skills-based hiring yields a 4x boost in diversity and 3x more suitable candidates. 

Retention 

Employees expect their employers to treat them well, regardless of the company's size. 

If you cannot offer competitive pay packets to retain your best employees, go big on HR tools that reward your team for a well-done job. Focus on employee recognition and flexible benefits to keep your talent in their seats for as long as possible. 

Jamie Irwin, Director of Straight Up Search, says: "It's hard to find talented people who are willing to stay with my company for the long term, and even when I do hire quality talent, it's difficult to maintain their engagement for any length of time. Additionally, it can be tricky to attract new candidates in an increasingly competitive job market." 

Jamie explains how using automated people software helps him keep the pulse of employee engagement and better serves his retention goals: "I'm able to track employee attendance, performance reviews and goals easily; this allows me to not only measure productivity, but also identify areas where my team needs more support or development opportunities." 

Compliance 

From GDPR to Health & Safety and the numerous state and federal laws in the US, there are plenty of regulations for small businesses to learn and ensure they comply with to pass periodical HR audits to keep their business running smoothly and legally.

Solicitor Toby Pochron from Freeths LLP backs the idea of small businesses having a compliance officer to navigate the complexities of small business: 

"A compliance officer may be an employee who takes this on as part of their role, or it may be an individual who a small business employs solely as a compliance officer. The role is a multifunctional one; their day to day may cover training, investigations, drafting of policies and procedures, keeping up to date with compliance changes, or putting in place lessons learned."

Burnout 

The World Health Organization classified workplace burnout as an occupational phenomenon in 2019. It can happen in any type or size of business but is common in small businesses when the volume of work outweighs the number of employees. 

John Ross, Chief Executive Officer of Test Prep Insight, tells us: 

"I don't think we're unique among companies in dealing with employee burnout. Since the pandemic, I'm sure just about every employee within every company has felt it to some extent. However, for some reason, we've been hit particularly hard. We've had several team members leave, and the rest have felt more disengaged. So I'm positive that burnout is the root cause.

So, in the past year, I've implemented burnout detection software that helps to identify when certain employees are at higher risk of burnout."

Performance reviews 

LinkedIn's Workplace Learning report reveals that 64% of organizations saw their workplace learning culture grow stronger during the past year. ‍

Employee appraisals play an enormous part in growth and development, as Rosmy Barrios, Director of Health Reporter, elaborates: 

"When running a small business, employee feedback becomes an invaluable source of information. It helps us understand staff performance and gauge levels of motivation and engagement. However, the biggest challenge I face when gathering this performance management feedback is having the time to gather the data and implement changes for improvement. 

Powerful performance management tools quickly collect feedback from employees, as well as measure KPIs such as customer service ratings, team morale, and more. It helps us save time while giving us visibility into our employees' experiences to make better decisions that positively impact not only our business but the customers too."

Rewards and recognition 

Nectar HR recently surveyed 800 full-time employees across the US. Of these: 

• 83.6% felt that recognition directly impacts their motivation to succeed at work.
• 77.9% believe they would be more productive if their employer recognized their work more frequently. 

CEO Lotus Felix of Lotus Brains Studio agrees: "Recognition historically remains one of the core motivators for top performance. However, with distributed working becoming the norm, it's harder for small businesses to identify and proportionately reward top performance. What use is the traditional "World's Best Employee" mug for a remote worker when they don't have physical colleagues around whom to strut about the coveted cup?

This is one problem I struggled with till we started using employee recognition tools. These have made employee performance recognition more transparent and decentralized."

🎁 Check out our 42 meaningful employee recognition ideas to boost engagement. 

💸 The ROI of HR software for small businesses

As with any technology, HR software is an investment. And with tight budgets, small businesses understandably want to know if it's worth plunging money into a specific tool. 

Storyblok, creators of a headless architecture CMS, is a fantastic example of an initially small company that needed to rely on tools to scale. Their team of People Experience Managers was responsible for achieving rapid business growth at a remote-first company, making fluid onboarding a critical step in the process. 

Zavvy's learning scientists worked closely with Storyblok. As a result, we developed a streamlined preboarding and onboarding experience to prepare new joiners for their roles while eliminating anxiety and making everyone feel welcome. 

Each joiner receives a roadmap containing details about coffee chats, company culture, onboarding buddies, and an intro to the most important tools. 

Using Zavvy to integrate with Storyblok's existing tech stack of BambooHR and Slack achieved an impressive ROI:

• 9/10 onboarding experience rated by new hires. 
• Up to 2 hours saved during preboarding.
• 2+ days saved during orientation. 
• 2.448€ in repetitive work saved each month (based on the average HR manager salary in Germany). 

Markus Schwarz, People Experience Manager at Storyblok:

“What surprised me most was that you can automate so much without sacrificing experience. We are sending people trackable tasks, engaging content, fun reminders via Slack, and connecting them to their onboarding buddies. All with a single click."

➡️ Check out the entire Storyblok remote onboarding case study to discover more of their best practices.

➡️ Zavvy enables small businesses and their people

Zavvy is a holistic solution that makes executing your key people processes easier than ever. 

Our suite of HR tools includes components for: 

• 🚀onboarding workflows; 
• 🔄 feedback and performance management; 
• 🌱 people development;
• 💼 leadership development; 
• 💪 innovative training methods: including social learning, microlearning, and more; 
• ☕️ employee connection programs: designed to increase employee collaboration and engagement and eliminate isolation from your teams.

Each area of our HR suite is backed by support from our highly experienced learning scientists. They bring vast research-based best practices to the forefront of HR technology. 

Want to know more? Try out Zavvy for free by booking a demo with our team. 

❓ FAQs 

Let's wrap up with some frequently asked questions about HR tools for small businesses. 

What do small businesses need from HR? 

Small businesses need easy-to-use, cost-effective HR tools that can handle all the essentials of managing a workforce, such as: 

• onboarding; 
• performance reviews; 
• training; 
• recognition. 

Usually, small businesses don't always have a dedicated HR function. At least not at first, so these tools must also be simple enough to use without requiring much training. 

What are HR software tools? 

HR tools are software solutions designed to streamline and automate HR management processes, such as onboarding, performance reviews, training, recruitment, and more. The aim is to save valuable hours, maximize efficiency, and ensure compliance with regulations. 

What are the tools needed for HR? 

The essential tools for HR include recruiting software, onboarding solutions, performance management and feedback systems, training and development platforms, employee engagement apps, rewards and recognition products, and HR analytics. Some tools handle a single area of HR, while others are all-in-one. With the right tools in place, small businesses can easily manage their people processes and unlock the full potential of their employees. 

Can a founder be HR? 

Yes, a founder can initially handle Human Resources tasks in a small business. HR software can help founders handle early HR tasks, making it easier to manage key people processes. 

However, having a dedicated HR professional with specialized knowledge on board is usually beneficial to ensure compliance with regulations and ongoing employee satisfaction.