Small and medium-sized companies are struggling to compete with multinationals when it comes to recruiting the best employees, a new study shows.

Despite accounting for the vast majority of businesses in Ireland, just 38 per cent of SMEs said they felt they could hold their own against larger firms, according to the Hays Ireland/ISME survey.

The study reveals that while 81 per cent of the 563 employers surveyed believe recruitment is an important part of their business strategy, many feel ill-equipped when competing with bigger companies to secure skilled staff.

The survey attributed this lack of confidence among SMEs to the absence of a dedicated HR function, a lack of training in how to hire staff and a failure to understand how employment law works.

While three quarters of SMEs said they felt confident about the future, as many as 41 per cent of respondents said one of the biggest obstacles to growth was the ability and resources to recruit staff in an increasingly competitive market.

Less than half of all companies surveyed said they did not have a HR department. In addition, two thirds of firms had not received training around hiring staff, while 78 per cent had little or no knowledge of employment law.

"There is no doubt that there is a chasm in the depth of resources between multinationals and SMES. However, we should not undervalue what SMEs can offer to the top candidates. There are many advantages to working in smaller businesses such as the environment, the range of work you are involved in and ability to directly impact on results," said Hays managing director Richard Eardley.