The adoption of HRM 4.0 in SMEs requires cultural readiness, yet many organizations overlook this assessment. This study applies a multi-grade fuzzy logic to evaluate the readiness level of a plastic manufacturing SME. It develops a conceptual model, identifies weaker attributes using Importance-Performance Analysis (IPA), and suggests improvement strategies through a case study. The case study finds that the SME scores 7.06/10 (‘Very Good Readiness’) but has nine weaker attributes that may hinder HRM 4.0 implementation. To address these challenges, the study recommends raising employee awareness of the organization’s vision and sustainable development goals, providing on-the-job and skill training, and introducing a mentor-mentee program to support junior employees. This research contributes to the understanding of HRM 4.0 by offering a structured assessment model that aids SMEs in achieving a smooth transition toward Industry 4.0-driven HR practices. The current study on cultural readiness assessment in SMEs has certain limitations. It was conducted in only one plastic manufacturing organization to check the assessment model. Further research can be possible in other manufacturing firms in different geographical locations for broader validation.