Small and Medium Size Enterprises (SMEs) contribute a greater percentage to Gross Domestic Product (GDP) in ensuring economic growth, employment, income stability and poverty reduction in most developing countries like Ghana. Inspite of the critical role played by SMEs in the development of this country, most of these enterprises face challenges in the recruitment and selection practices in their bid to engage competent staff. The study examines employee recruitment and selection practices of SMEs into details with the aim of identifying their challenges and establishing best practices in recruitment and selection systems applicable and convenient for such enterprises considering their important role to the country. In order to investigate the challenges, a conceptual and theoretical framework of the study was designed. These guided the design of data collection instrument to suit the research. The study combined the use of questionnaires and semi structured interviews as methods of data collection and analysis as well as the use of secondary data through accessing publications and reports and studies made by other researchers in the study area. Simple random sampling was used in selecting the respondent for the survey. The study found out among other things that poor planning, lack of employee competencies, lack of recruitment skills, ineffective job analysis, ineffective selection methods, poor leadership, lack of good conditions of service are some of the challenges faced by the SMEs in recruitment and selection of employees.In the view of the researcher recommendations such as enhancing the recruitment and selection skills of entrepreneurs, developing good job analysis, extensive advertising and promotion, improving conditions of service and collaborating with reputable recruitment agencies to support SMEs among others would lead to cost effective recruitment and selection processes, retention of staff and the strategic engagement and management of staff to attain maximum benefit and improve profit of the SMEs.