Small firms are bullish when it comes to investing in HR tech

In 2018, roughly 3 in 4 small firms had already digitalized some aspect of human capital management.²⁵ COVID-19 increased small firms’ use of tech in many areas, especially those impacted most by remote work. But even as businesses emerge from the pandemic into a challenging economic environment, small firms’ tech investments have increased.

More than 6 in 10 small organizations (62%) say expanding their use of benefits technology is very important.

As a result of rising investments, there’s been a 121% increase since 2018 in the number of small firms that describe themselves as “highly digital” (24% in 2018 compared to 53% in 2022).²⁶

By far, the most common HR function digitalized is payroll (95% of small businesses), followed by enrollment, benefits administration, and learning and development. Adoption has risen dramatically since 2018, when only 72% of small businesses had digitalized payroll.²⁷

Nearly all (99%) small firms now outsource one or more HR functions to an external third party, up three percentage points from 2021. Gains were also seen in the number of small employers who have integrated their technology systems. Nearly half (46%) of small businesses describe themselves as fully integrated (using only one platform for all HR and employee benefits functions), a 40% increase since 2020. The number of employers who aren’t integrated at all (use different platforms for each) fell from 17% in 2020 to 4% in 2022.

Despite an uncertain economic climate, most small firms are growing and anticipate further growth

While small business owners ranked growing their businesses as their third greatest challenge overall (behind talent attraction and employee retention), most still expect to achieve it. Indeed, despite the numerous challenges they’ve faced during the past three years, and the challenges they know lie ahead, about two-thirds of small businesses experienced moderate or significant growth.

67% of small business experienced growth of the past 3 years and 78% of small business anticipate growth over the next 3 years

Younger firms (<5 years old) are especially optimistic, with more than half (54%) expecting significant growth. Tech firms are also the most positive, as well as those who rate themselves highly when it comes to using HR technology.

Takeaways: Keeping workforce well-being top-of-mind is key to preparing for economic uncertainty

To prepare for the future during economic instability, small firms should consider how they can more actively support their employees, so they retain them. While investing in employee well-being through benefits, technology, and policies may seem counterintuitive at a time when every dollar counts, the threat of losing valuable workers could be financially devastating.

Fortunately, bolstering benefits and work culture does not necessarily require a significant monetary investment. Keeping in mind how small business workers’ priorities have shifted, the employers who will succeed are the ones who’ll put employee needs first, and make employees feel supported, and that they belong. While this could mean offering more benefits, it could also mean expanding flexible work policies or communicating about benefits more frequently.

Flexible work arrangements

Telecommuting: For many employees, the option to work remotely at least part-time is a must-have. Investing in collaborative technology and communicating regularly with employees helps maintain connections and can boost productivity.

Flexible scheduling: Allow employees to adjust their work hours to accommodate their personal lives, such as caregiving responsibilities, child care, or health conditions.

Mental health and dental benefits

Mental and emotional health resources: Access to counselors and meditation apps are key to helping employees cope with stress.

Dental benefits: An offering that's highly sought after and about half of small business employees lack them. Look for plans that include features that can save employees money, such as 100% coverage for children’s preventive care.

Benefits decision-making support tools

Raising awareness: Employees desire more information about their benefits choices. Look into providing  employees with decision-making support tools via a tech platform, and into boosting benefits communications.

Corporate culture

Diversity, equity, and inclusion (DEI) strategies: Provide a framework of resources and policies that can help ensure all employees feel supported and included. Prioritizing DEI is tied to higher employee engagement and satisfaction.

Social justice responsiveness: A rapidly growing area of focus as employees increasingly desire and expect their employers to take a stand on important issues. Developing a strategy that aligns with your company’s values and strengths will help determine appropriate ways to respond.


25 Small Business, Big Benefits. The Guardian Life Insurance Company of America. 2018.

26 Ibid

27 Ibid

28 Ibid

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