Once your company reaches a certain scale, outsourcing aspects of your human resources or hiring a full-time HR generalist to help manage this business function makes sense.
Many corporate needs may be met by a human resources department, including labor law compliance, employee recruiting, engagement and development, and salary and benefits administration. HR is frequently the backbone of a huge corporation, setting a business culture and investing in the long-term success of its personnel.
HR is important, but for some businesses, forming a distinct human resources staff to handle a small number of employees isn’t always practical. Here are some things to think about if you’re unsure if you need an HR department or whether you can outsource your HR.
Why do small businesses need HR?
It’s critical to understand the role of HR when deciding whether or not your firm requires an HR manager, partner, or complete staff. The department of human resources is in charge of:
- Ascertaining that the firm complies with all applicable local, state, and federal employment laws.
- Hiring and retaining new employees.
- Training employees and supporting their professional development.
- Managing compensation and benefits.
- Handling performance reviews.
- Creating an inclusive company culture.
- Writing and maintaining employee handbooks.
When should a business owner delegate HR?
There is no “regulation” that a small corporation must have an HR department or manager in charge of human resources. When a firm has at least 10 workers, however, most experts advocate hiring a full-time human resource person.
Some business owners make the decision to recruit an HR partner as soon as possible. This selection is based on how much time you value. Determine the value of your time as a business owner. Concordia St. Paul University noted, “These unconnected duties can mount up and take significant time away from the real productivity and profitability of your organization.” “If you see a significant drop in productivity or other workers are unable to keep up with the increased demands on time due to HR responsibilities, it’s definitely time to hire a human resource generalist.”
However, valuing your time isn’t the only consideration. Creating a separate HR department can help boost employee engagement and foster an open, inclusive workplace.
What are the benefits of creating a separate HR team?
Employee engagement and retention are heavily influenced by HR. According to research, 75% of employees would stay at a firm longer if they felt the company listens to and answers their issues. Having someone other than the business owner listen to and handle employee needs may assist in maintaining everyone working along professionally, especially in a small firm.
Delegating recruitment activities can also save money for a small firm. According to a CareerBuilder poll, the average yearly cost of employing the incorrect person is $17,000, which includes missed productivity, time, and the cost of finding and training a replacement. This risk may be mitigated by appointing an HR professional to handle the recruiting, hiring, and onboarding processes.
Should you outsource your HR function?
If you opt to delegate your HR responsibilities, you must then decide whether to engage an HR professional or outsource HR to a third party. Professional employer organizations (PEOs) and administrative services organizations (ASOs) are companies that can assist you with urgent operational needs while allowing you to focus on growing your business. HR software, including as payroll software, hiring platforms, and onboarding solutions, may assist you manage certain HR-related duties.