When you’re leading a growing business, HR can feel like just one more thing on an already packed to-do list. Between sales, clients, operations—and everything in between—it’s easy to assume HR can wait. But at HRi, we’ve seen the same myths come up time and time again in SMEs. And while they might seem harmless, they can quietly cost your business time, money, and team morale. In this article, we’re busting three of the most common HR myths we hear from small business leaders—and showing you how to avoid the pitfalls they create.

 

HR Myth 1: “We’re too small to need HR support.”

The assumption: If you’ve only got a handful of people, you don’t need HR. Maybe you’re handling things yourself or splitting responsibilities across the team. Either way, it can feel like formal HR is a luxury you’ll think about later.

The reality: The moment you employ people, HR becomes part of your business. Whether it’s drafting contracts, managing performance, or staying on the right side of employment law—there are responsibilities you can’t afford to ignore.

Small teams don’t mean small risks. In fact, without dedicated HR support, even a minor issue can become a major disruption.

Why it matters:

• Most employment laws apply from your very first hire
• Missteps can lead to legal costs, lost time, and damage to team morale
• HR processes help set expectations and build a solid foundation as you grow

Example:

A small consultancy with five employees had no formal HR support. When a team member raised a grievance, there were no clear procedures or documentation in place—leading to delays, miscommunication, and, eventually, a formal complaint.

What to do instead:

• Get the basics in place: contracts, policies, and documented procedures
• Consider external HR support tailored for SMEs
• Build scalable systems now to save time and stress later

If you’ve got people, you’ve got HR responsibilities. The size of your team doesn’t change that.

 

HR Myth 2: “We don’t need contracts—we trust our people.”

The assumption: You’ve built a great team, everyone gets along, and it feels unnecessary to formalise things. Trust is strong, and you don’t want to rock the boat with legalese.

The reality: A strong team is built on mutual understanding—and nothing supports that better than a clear, written agreement. Contracts aren’t about distrust; they’re about clarity. They outline expectations, responsibilities, and protect both sides if things go off track.

Why it matters:

• Verbal agreements don’t hold up well in disputes
• You may be unintentionally breaching employment law
• Vague arrangements lead to confusion, especially if things change

Example:

An SME relied on handshake agreements and good faith. When a long-standing employee challenged a redundancy process, the lack of a formal contract created complications and made the business vulnerable during the tribunal process.

What to do instead:

• Provide a written contract for every employee (this is also a legal requirement!)
• Clearly define roles, responsibilities, pay, notice periods, and working hours
• Regularly review and update contracts to reflect role changes or legal updates

Trust is great. So is protecting that trust with clear, compliant agreements.

 

HR Myth 3: “We’ll deal with performance issues when they become a problem.”

The assumption: Addressing underperformance feels awkward. It’s easier to let it slide—especially when you’re busy or don’t want to create tension.

The reality: Delaying difficult conversations almost always makes them harder. If someone’s performance is affecting their role or the wider team, it’s already a problem.

Proactive conversations aren’t just about correcting behaviour—they show employees that their contribution matters and that development is a priority.

Why it matters:

• Unaddressed issues spread and affect morale across the team
• You miss the opportunity to support improvement early on
• Inconsistent handling of performance can expose your business to grievances or legal challenges

Example:

A startup avoided addressing concerns about a team member’s repeated missed deadlines. When a client raised a complaint, the issue escalated quickly. With no documentation or feedback trail, the business had limited options and lost the client relationship.

What to do instead:

• Set clear expectations from the start
• Offer regular, informal feedback alongside structured reviews
• Document conversations and create a fair performance management process

 If it’s showing up, it’s already a problem. Early conversations save bigger headaches later.

 

Bonus: Other HR Assumptions That Catch SMEs Off Guard

Here are a few more we hear regularly:

• “We’re a family—we don’t need formal policies.”
  Until a team member raises a complaint and there’s no process to follow.
• “Probation periods are optional.”
  Without them, it’s harder to manage new hire fit or make early exits smooth.
• “I downloaded a contract template online—it’s fine.”
  Generic contracts can leave out key legal requirements or conflict with UK law.
• “Someone resigned—we don’t need to do anything formal.”
  Exit interviews and offboarding protect your business and ensure final pay and holidays are managed properly.

 

Good News: You Don’t Have to Do It Alone

We know most SME leaders wear multiple hats—and HR might not be the one you’re most excited about. But getting the people’s side of things right is essential for long-term success—and avoiding stress down the line.

That’s where HRi Certified^® consultants come in. They’re independent HR professionals who’ve been assessed against our high standards, and they understand the unique challenges SMEs face.

They’ll help you:

• Stay compliant without the overwhelm
• Put simple, scalable HR processes in place
• Support your team while protecting your business

Explore the HRi Accredited HR & People Directory to find trusted consultants ready to support your business.

Author: Mary Asante | HRi