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Why HR support for SMEs could help to close the UK’s productivity gap

Figures released by the Office for National Statistics showing that productivity in the UK has fallen for the second quarter in a row

Recruiting the right staff, managing them in the right way and getting the best from employees is a challenge for businesses of all sizes.

New research from the Chartered Institute of Personal Development (CIPD) has demonstrated that providing HR support to SMEs should be a particular focus for the Government as it is more likely to boost workplace productivity.

With figures released by the Office for National Statistics this month showing that productivity in the UK has fallen for the second quarter in a row despite workers registering increasing numbers of hours, the UK is continuing to trail behind the rest of Europe in terms of workplace productivity.

This continuation of the “productivity puzzle”, which has become a serious issue since the financial crisis, means that many firms will be looking to the Government for help to increase their staffing issues.

So why is this likely to cause the recruitment sector and business at large a headache? Low productivity levels are a signal of weak economic growth which means that the Chancellor is less likely to boost his investment plans in helping businesses to grow.

The CIPD is recommending that the Government focuses on helping SMES with HR backing following its pilot HR support scheme, which ran in 400+ small businesses with 5-10 employees in Glasgow, Stoke-on-Trent and Hackney.

The pilot scheme, called ‘People Skills’ was created by the CIPD and was supported by J.P. Morgan. The figure the Government is being asked to invest in HR support for SMEs by the CIPD is £13m a year.

The Head of Public Policy, Ben Willmott, is bullish in his recommendations as to how this sum would be found when he suggested that funding for three years of the People Skills service to transform HR business support for SMEs in all the Local Enterprise Partnerships could be funded through an investment of around £40m from the Government’s National Productivity Investment Fund.

Typically, small firms need advice on recruiting and on-boarding a new employee including contracts and job descriptions, in addition to support on how to motivate staff to improve retention rates.

With many SMEs not having a full-time HR Manager or Consultant embedded in their current resource pool, it is hardly surprising that this HR support was taken up so enthusiastically.

In fact, once funding ran out in Scotland, the local council continued to pay for the scheme as demand was so high!

The People Skills evaluation report shows that supplying even basic HR support would help to boost productivity in the workplace.

For example, owner-managers of small firms felt that the quality of their employee management had been improved after accessing support from the People Skills pilot. This was measured in terms of workplace productivity, staff relations and financial performance.

Small businesses play a crucial role in building and maintaining flourishing local communities which, in turn, create a thriving UK economy.

Helping SMEs to polish their basic HR practices through improved recruitment and retention strategies which lead to enhanced productivity is a vital component in their overall success and in the success of the country’s bottom line.

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