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Small Business continues to “Gut it Out”
The National Federation of Independent Business (NFIB) recently released its Small Business Survey for October 2025, reporting that small businesses continue to struggle with inflation, profitability and inability to hire the right people. “In October, 32% (seasonally adjusted) of all owners reported job openings they could not fill in the current period, unchanged for the second consecutive month. Before August, the last time unfilled job openings hit 32% was in December 2020.” For businesses that want to grow, this presents a challenge. For many small business owners, this uncertainty is translating into slower hiring and more caution when it comes to new initiatives or major decisions. For the HR teams supporting these businesses, their work is perhaps more scrutinized than it has been in prior years and HR strategy for small business is now at the forefront of planning efforts.
HR strategy for small business helps mitigate the issue
A well-conceived workforce plan that is aligned with the business goals is a good starting point. Small businesses don’t need anything overly complex or formalized, but a good workforce plan should address the full employee lifecycle, even if it’s only a statement of position for process areas that haven’t been fully defined yet.
Recruiting Strategy that looks at knowledge, skills and experience, but also evaluates culture fit for long term success. This is especially true when it’s hard to fill vacancies. Creative sourcing strategies, promoting values and culture, and a well-developed employer brand can be all help here.
Retention Planning, with a specific focus on employee engagement. Gallup reported a drop in employee engagement from 23% to 21%, mostly fueled by a drop in manager engagement. More small businesses are looking to engagement surveys to better understand employees wants and needs and then use the information to build meaningful action plans.
Org and Job Design is a helpful exercise for organizations planning on growth and unsure of how to manage the workload. Reorganizing accountability areas for greater efficiency or to incorporate new tech accelerators, combined with well-constructed job descriptions can help alleviate the work ‘overload’. SHRM has a library of good job description templates for small businesses.
Employee Development is critical now, and small businesses are planning for long- and short-term learning and development needs, especially when it’s hard to recruit for open roles. Sometimes, reskilled the current workforce is more cost effective than hiring from outside. Small businesses will typically budget for this on needs basis, identifying the specific training required for an employee in a specific job role. As a budget benchmark, this can range from 2-5% of payroll, with the variance in spend coming from on- vs off-the-job development and the degree to which the company is focused on internal development and promoting from inside vs external hiring.
Total Rewards planning can create an opportunity to shift a greater percentage of wages to variable pay. Well-designed incentive compensation is a game-changer for small businesses. It will reinforce key behaviors, create greater affordability of payroll though compensation programs that only grow when the business grows, and when communicated correctly, create greater employee engagement and overall understanding of business goals.
Restructuring / Redundancy planning is also important. Challenger, Gray and Christmas, a leading outplacement company, reported in its November Report that employers have announced over 1 million job cuts, an increase of 65% from the same time last year and up 44% when compared to all of 2024. While a lot of the cuts are sitting with larger organizations, the fear is that small businesses will follow suit in 2026. Taking a careful look at areas of the business that aren’t working and identifying areas where employees can be redeployed more effectively can build employee engagement and support the bottom line. And on the other hand, if the outcome is redundancies, while less appealing, they are an opportunity to realign the business objectives and the organization for future success.
HR can no longer focus primarily on compliance and payroll when is comes to supporting smaller organizations. A proactive HR strategy for small business, centered on culture, engagement and development will help weather the storm.
