A well-run HR department can fulfill many different business needs: Ensuring compliance with labor laws, recruiting and onboarding new employees, managing compensation and benefits, and prioritizing employee engagement, as just a few examples. Most large enterprises have in-house HR teams that serve as a backbone for the entire organization, defining and sustaining the company’s culture and values.
For smaller businesses, the need for an HR department may seem a little more nebulous. While HR teams can undeniably add value, they also bring their own sets of expenses. For example, FullHR’s internal research shows that a senior-level HR professional may cost over $225,000 annually, once you factor in salary, benefits, and employer taxes. That’s a tall order for smaller companies working from modest budgets.
What Does HR Actually Do?
In determining whether your small business should develop its own in-house HR team, a good starting point is to define exactly what HR does. Ideally, a team of HR employees (or even a single HR generalist) could add value in a number of ways, including:
- Ensuring compliance with local, state, and federal labor laws, potentially shielding the business from major penalties or lawsuits.
- Building a robust team through effective recruitment, hiring, and onboarding policies.
- Supporting the professional development of all team members.
- Managing compensation, benefits, and payroll.
- Handling performance reviews.
- Writing and updating the employee handbook.
- Working to build a strong, positive company culture.
At the outset of a small business, the entrepreneur may handle all or most of these tasks on their own. As the company grows, however, it may make more sense to delegate some of these tasks to someone with an HR background, both to ensure these tasks are done with precision and to free the business owner’s time for strategy, vision, and other value-adding tasks.
When is it Time to Delegate HR?
So, when is it appropriate for the business owner to hand over the keys to the HR department? There’s no hard-and-fast rule here, but most HR professionals say that a company should have its own internal HR department once it passes 10 employees.
There may be merit to starting an HR team even sooner. This is true if the executive’s time is especially valuable, and if he or she needs to be putting in as much time as possible designing products or steering the company.
It may also make sense to launch an HR team as a way to invest in employee retention. Studies show that employees are quite a bit more likely to stay engaged with a company long-term if they feel like there’s someone at the organization who listens to them and takes their concerns seriously, something a good HR professional can do. To retain top talent, HR services can be critical.
Another Way: Outsourced HR
There’s also a middle-ground between having an expensive HR team and simply having the business owner do everything… and that’s outsourcing HR as needed.
Outsourcing to an agency like FullHR can allow you to fulfill all of your core HR tasks as needed, and in a way that’s scalable and sustainable. Plus, it’s a more cost-effective model than paying salary-plus-benefits for an in-house HR specialist.
We’d love to tell you more. Reach out to FullHR to explore outsourced HR options for your small business.