Small businesses often operate with limited resources, and it’s easy to see HR as an administrative function or something to worry about later. But poor HR practices—whether it’s unclear policies, inconsistent hiring, or failing to address employee concerns—come with a price tag that many don’t realize until it’s too late.
According to Zach Abraham, Principal and CEO of AlignHR, neglecting HR can quietly erode your profits, culture, and long-term stability.
“In any organization,” Zach explained during the Beyond Compliance podcast, “your largest expense—somewhere between 45 and 60 percent—is payroll and benefits.”
That’s nearly half, or more, of your total business spend.
When this much of your budget is tied to people, managing those people effectively is not optional—it’s essential. Businesses that fail to plan around their workforce are risking both money and morale.
Even without obvious problems like lawsuits or major compliance issues, poor HR shows up in subtle (but costly) ways:
Zach emphasized that waiting until something goes wrong is a risky game for any business. “A lot of people think HR is just hiring and firing,” he said. “But when you’re spending over half your budget on your people, that deserves strategy.”
Many small business owners believe that having HR policies or systems in place is something reserved for larger companies. But the truth is, small businesses often feel the impact of HR problems even more acutely because they have fewer people and less margin for error.
Zach pointed out, “It’s not about HR for HR’s sake. It’s about building the kind of structure that helps your people succeed—and that helps your business grow.”
A proactive HR strategy doesn’t mean over-complicating things. It means:
Businesses that build a strong HR foundation often see results beyond just compliance. When employees know what’s expected, feel supported, and have a clear sense of purpose, they perform better—and stay longer.
This leads to:
“Most businesses want to grow,” Zach said. “But if your people practices don’t grow with your business, you hit a ceiling.”
Whether you have five employees or fifty, a thoughtful HR strategy isn’t a luxury—it’s a necessity. The costs of ignoring it are real, and they often show up quietly in places you least expect. But the good news? You don’t have to build it alone.
AlignHR specializes in helping small to mid-sized businesses create people strategies that are practical, scalable, and aligned with their business goals. From compliance to culture, the right HR partner can help your team and your bottom line thrive.
Visit AlignHR.com to learn more about how we support organizations like yours.
This blog draws from Episode 1 of Beyond Compliance, a podcast by AlignHR. Each episode features real conversations about what’s working—and what’s not—in the world of HR for small and growing businesses.
Listen to the full episode below to hear more from Zach Abraham about the financial risks of poor HR and how to lead with purpose and strategy.
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