Compensating employees in micro-sized social enterprises with innovative HR practices

Purpose: The purpose of this paper is to understand how micro-sized social enterprises can compensate their employees equitably, despite encountering resource scarcity and prioritising their social mission.

Design/methodology/approach: The researcher interviewed the founders of micro-sized social enterprises from around the East Midlands and asked about the innovative human resource (HR) practices they used to compensate their employees. The eight interviews were semi-structured, in-depth and analysed thematically.

Findings: The findings and discussion demonstrate that the founders recognised the importance of compensating their employees equitably, but also acknowledged how paying them according to their contribution conflicted with prioritising their social mission as they never had sufficient resources to do everything. Alternatively, these founders used innovative HR practices to establish transactional relations, which primarily consisted of training, experience and references. This was perceived as equitable, despite paying their employees less than their contribution merited, as it allowed them to improve their future career prospects. These HR practices also benefitted these micro-social enterprises by increasing their human capital without increasing their costs.

Originality/value: The paper could be beneficial for academics and practitioners as it explores how the characteristics associated with being a micro-sized social enterprise impacted their HR practices.