FOSMEs (Family Owned Small and Medium Scale Enterprises) represent more than 90 percent of enterprises in Saudi Arabia, providing 51 percent of jobs in private sector and contributing 22 percent of GDP. Employee recruitment, selection and retention is always related with performance outcomes of the organization, including SMEs. 70 percent of SME managers say they lack skilled workforce and managing employee retention is a big challenge. The aim of the present research is to investigate the current practices in employee recruitment, selection and retention in family owned SMEs, so that new models can be developed. The researcher adopted the quantitative and qualitative approaches; the data was collected by using questionnaires and semistructured interviews using convenience sampling. The totals of 150 questionnaires were distributed to the targeted SME managers / owners, using purposive convenience sampling. Out of the 150 administered questionnaires, 120 were returned, out of which 100 were selected upon which the analysis is based. The results suggests that majority of FOSMEs do not have a formal HR department; do not have HR Policies and practices. word of mouth, news paper advertisements, referrals, agencies e-recruitment are some of the popular recruitment techniques and English language, math’s test , interviews, medical test are some of the popular selection techniques and factors like good relations, recognition, salary, medical benefits are important for employees to work longer. The results from this study will facilitate the owners, entrepreneurs and managers of FOSMEs to face the challenges of lack of qualified labor and high employee turnover rates and also meeting the Saudiazation targets.