Attracting and retaining talent: A practical guide for SMEs navigating skills shortages

Written by Lucy Clarke from Bitesize HR

Finding and keeping the right people has become one of the biggest challenges for UK small and medium-sized businesses. With rising operating costs, tightening labour markets, and increasing employee expectations around flexibility and development. SME’s can easily feel left behind, especially when competing with larger organisations offering bigger salaries, bigger benefits packages, and bigger brands.

But here’s the truth; SME’s have unique advantages when it comes to attracting and retaining the right people, and with the right hr strategies, kept simple, practical, and affordable, they can build a committed, skilled workforce without relying on constant recruitment.

This blog breaks down the realities of today’s talent landscape, what employees are looking for, and how you can develop a practical, sustainable approach to talent management even without an internal hr department.

The UK talent landscape in 2025: what SME’s are facing

• Skills shortages across industries. Many sectors, from logistics to manufacturing to professional services, are experiencing persistent vacancies. even administrative and entry-level roles, traditionally easier to fill, are now competitive. for SME’S, this means a longer time to hire, higher recruitment costs, more pressure on existing staff and reduced capacity for growth.
• The rise of employee expectations. Employees are no longer just looking for a paycheck. they want, hybrid or flexible working (where possible), development opportunities, supportive managers, wellbeing and work–life balance, psychological safety and fair treatment. smes that ignore these expectations risk higher turnover and fewer applicants.
• Increased competition from larger employers. Big companies can afford higher salaries, bigger benefits packages, slick recruitment processes and stronger employer brands. but smes have something many larger employers do not, agility, connection, personal development, and meaningful work.
• Changing immigration rules. For some SME’s international recruitment used to fill critical gaps. but visa costs have risen, requirements have tightened, and sponsorship responsibilities have increased. this makes workforce planning more important than ever.

Five-part guide for talent management

Part 1: Developing skills from within. your most powerful talent strategy

When labour markets are tight, the fastest, most cost-effective way to secure talent is to grow your own. internal development reduces reliance on external hiring and strengthens retention by showing employees that growth is possible.

To do this well you’ll need to implement a range of initiatives to run alongside each other. some will apply to everyone, others to individuals and that’s ok. here are a few examples of the initiatives that can be used.

1. on-the-job learning. shadowing and or project involvement.
2. micro-learning. short, focused sessions help employees learn a single skill.
3. stretch assignments. give employees responsibility for small components of a project to build confidence.
4. peer-to-peer learning. employees share knowledge informally.
5. coaching for line managers. gives line managers the confidence they need for performance discussions, difficult conversations, delegation, and communication.
6. paid qualifications which are great for new and emerging skills e.g. ai or for high-potential talent who really want to gain a qualification as they progress

Create simple development plans, keeping them practical with two or three goals, clear skill or behaviour focus, resources or support needed and realistic timeline. this prevents over-commitment and gives consistency.

Part 2: Attracting talent—what SME’s can offer that big companies can’t

SME’S often underestimate the value of what they provide. while they may not be able to compete on pay & financial benefits, they excel in other areas employees care deeply about.

A compelling employer value proposition (evp). your evp explains why someone should work for you instead of a competitor. SME’s often offer a close-knit culture, meaningful work and real influence, variety in tasks, quicker progression, visibility and recognition, supportive leadership, flexibility and agility. highlight these authentically in job ads and interviews.

Write job adverts that speak human. job adverts often fail because they list unrealistic requirements, read like legal documents and lack personality. simplify them. use plain language. show what the role really offers and how to make it stand out for example:

“we’re a small business where everyone matters. you’ll have room to grow, shape how we do things, and be part of a team that genuinely supports each other.”

Offer flexible working where possible. not every role can be hybrid, but almost every role can be more flexible. options can include compressed hours, flexible start/finish, 4-day week (without reducing hours), predictable shift patterns, occasional remote admin days and job-sharing. employees value control over their time as much as they value pay.

Speed matters and whilst larger companies lose great candidates due to slow processes. SME’s can win by responding faster, interviewing quickly, making decisions within 48–72 hours and communicating clearly. fast, respectful recruitment is a competitive advantage.

Part 3: Retaining talent—what really keeps employees loyal

Retention doesn’t rely on salary alone. research shows employees stay when they feel valued, listened to, supported, developed, fairly treated and connected to their work.

• Build strong manager capability. employees don’t leave companies; they leave managers. SME managers often wear multiple hats and haven’t received hr training, leading to fear of:
• Giving feedback
• Addressing performance
• Having “difficult conversations”
• Delegating effectively

Manager coaching solves this and reduces hr problems dramatically.

Recognition and appreciation don’t need a budget. Try saying thank you more often, acknowledging effort, not just results, celebrating small wins, spotlighting good work in team meetings and even the old school handwritten notes. this has a huge impact on morale.

Having clear expectations. Most performance issues come from unclear expectations. ensure employees understand what success looks like, how their work is measured, priorities and deadlines and how to ask for help. clarity reduces stress and increases engagement.

Provide career pathways, even if your business is small. not all progression needs to be promotion. looking at specialist responsibilities, cross-department experience, leadership development and project involvement are ways an employee’s see a future with the business.

Part 4: Navigating UK visa and sponsorship rules (simple overview)

• Some SME’S rely on skilled international hires. recent changes have increased costs and tightened requirements. key considerations to note is:
• Certificate of sponsorship costs have risen
• Skilled worker salary thresholds have increased
• Right to work checks must follow strict government rules
• Sponsors must track and report absences, role changes, and address changes

if you choose to sponsor workers, ensure:

• You have clear processes in place
• Someone is responsible for monitoring compliance
• You get hr support to manage audits or home office queries

Sponsorship is still possible but requires good record-keeping and guidance.

Part 5: Building a talent strategy that fits SME’s (simple, practical, sustainable)

A good talent strategy doesn’t need to be complicated. for SME’s, it should be:

• low bureaucracy; minimal paperwork, maximum clarity.
• Manager-friendly; tools and templates that managers use.
• Affordable; focused on internal development and simple flexibility.
• Sustainable; something the business can maintain consistently.
• Future-proof; predicting the skills and roles you’ll need 12–36 months ahead.

I recommend SME’S focus on these five core pillars:

1. Workforce planning
2. Skills development
3. Flexible working
4. Effective recruitment
5. Strong manager capability

When these are aligned, talent becomes far easier to attract and retain.

Final thoughts

SME’s can compete and win with the right approach. talent management doesn’t need to be overwhelming or by copying big companies, but by using their strengths. keeping authenticity, agility, connection, trust and meaningful roles. when you combine these with a practical hr approach, easy systems, confident managers, clear expectations. you create a workplace where people want to stay and grow.

If you need help building a talent strategy or supporting managers with hr responsibilities, that’s exactly what hr consultants like me specialise in: helping businesses remove the fear of hr and build confidence, clarity, and capability.