This study investigates differences in particular HRM practices in small and medium family and non-family firms relating to employee training, compensation levels, job security and the consequent influence of these differences on productivity. Differences in employee training and development, compensation and productivity were observed at both small and medium levels, with non-family firms providing more training and wages for their employees and gaining more productivity from them than family firms. Higher employee productivity in non-family firms confirms a closer alignment of compensation with employee performance in these firms. The findings confirm a paternalistic culture and relatively high informal HRM practices for family firms, and highlight the difference between family and non-family firms in the extent to which various human resource factors motivate employees to perform.