HR can consist of a single human resources professional or an entire HR department – either way, they handle all matters related to an organization’s employees. These professionals are responsible for hiring and onboarding, monitoring employee time and attendance, managing employee compensation, organizing employee training and development, building a company culture, and maintaining legal compliance.
You probably didn’t become an entrepreneur to dig through mountains of employee paperwork. However, a recent OnPay study found that 41% of small business owners choose to handle human resources themselves. On average, small businesses spend about 18 hours a month on HR-related tasks. For those who also handle payroll themselves, the total jumps to almost 40 hours a month. That’s a daunting amount of time for someone already being pulled in a hundred directions.
As your business grows in size and complexity, an in-house HR professional often becomes a necessary next step. We identified a few key telltale signs to help you determine if it’s time to hire an HR professional.
FYI: You can handle HR internally by hiring an HR professional or department, or you can outsource HR functions to a top professional employer organization (PEO) or a highly rated HR outsourcing (HRO) service.
1. Your time is needed elsewhere.
You are likely wearing many hats, sacrificing your time to keep costs at a minimum. Taking on HR responsibilities makes good financial sense while your company is in its early stages, even if it means a few late nights. There may not even be enough work available to necessitate hiring a full-time HR employee.
However, if you’re personally dedicating 18 or more hours a month to HR, you may want to reevaluate how you invest your energy. What’s your time worth? What higher-value endeavors would you tackle if you had the bandwidth? Moreover, if you’re overwhelmed and your to-do list is out of control, this can have a trickle-down effect on both morale and the bottom line.
Ask yourself what really fires you up about running your business. Would doing more of it benefit your company? Are there things nobody else can do that you’d like to spend more time on? If the benefits of focusing your time elsewhere outweigh the cost, it may be time to hire someone to take HR responsibilities off your shoulders.
2. You’re struggling to maintain legal compliance.
Companies must abide by labor and employment laws on the federal, state and local levels. These laws enforce equal employment opportunities and safeguard the safety and health of workers on the job. Even the most diligent employers can have trouble understanding and abiding by every applicable law, which is especially true for those who operate in multiple cities or states.
In the OnPay study, 86% of small business owners said they’re confident their HR practices are fully compliant with state and federal regulations. However, when asked about specific tasks such as maintaining employee records, properly categorizing employees and contractors, and having up-to-date employee handbooks, more than half were not so sure. With so many moving parts, uncertainty can creep in. Business leaders we’ve spoken to report wondering if they are missing something critical, especially when they don’t have more time to make sure things are being done right.
Tip: HR compliance is a challenge for any business owner. Learn how to overcome these top HR compliance challenges.
An in-house HR professional can increase your confidence that everything is being handled responsibly. Whether you’re managing HR yourself, outsourcing certain tasks, or delegating to a non-dedicated employee, how confident are you in both your compliance and best practices? Are you spending a lot of time speaking with HR consultants or wading through the internet trying to stay on top of current laws? Depending on your answers, it may be more cost-effective to bring in a dedicated HR professional.
If you’re uncertain about maintaining legal compliance, this may be an excellent opportunity to bring on an expert who can mitigate risk and relieve you of any nagging worries.
3. You need help with staffing, onboarding and developing your team.
Unemployment rates are low at just 4.6%, while demand for top talent remains high. Finding and recruiting solid employees is difficult, especially in a world where remote and hybrid work is common. You have many competitors in securing the best employees, which is why it can be helpful to have a trained professional dedicated to staffing your business.
Editor’s note: Looking for an HR outsourcing firm to handle your business’s human resources? Fill out the questionnaire below to have our vendor partners contact you about your needs.
Once you’ve hired your employees, you’ll want to keep them – which is next to impossible if you don’t have strategic employee onboarding and professional development plans in place. If your onboarding process only consists of the new hire signing some paperwork, consider hiring a professional to enhance your approach. Similarly, if your employees don’t have a clear development plan in place, they are likely to leave your organization in search of better opportunities. If you notice this as a cause for high employee turnover, it may be time to hire someone else to take the reins.
4. You’re growing – with no plans to stop.
As teams scale, growing pains are to be expected – even celebrated. Each exciting milestone brings its own set of challenges. But growth also sometimes makes things more complicated. Communication may start to break down, especially if employees and contractors are spread out over multiple locations. There may be limited bandwidth to offer employee evaluations. New-hire onboarding might become a handshake and a signature. It may be challenging to answer employee questions, discuss sensitive issues, and resolve conflicts. Perhaps not everyone is aware of company policies, either because you’re uncertain of them yourself or because they weren’t communicated (or even written down anywhere).
The key is recognizing when issues are out of hand. According to that same small business study, once a company reaches 20 employees, there’s an equal chance that HR is handled by the owner, a non-dedicated employee, or a dedicated HR person or team. Once a company grows to between 50 and 100 employees, there’s a 55% chance it has a dedicated HR person.
If you’re on your way to 50 employees or more, it’s time to consider hiring an HR professional. Based on per-employee pay and the cost of your current HR solution, is that something you can afford right now?
If hiring a dedicated HR professional isn’t feasible now but will be in one or two years, consider other solutions in the meantime. This could mean delegating HR tasks to a non-dedicated employee or using an online HR service provider. Find a solution that fits your particular business, and have a plan for when you outgrow it.
Bottom line: You should consider hiring an in-house HR professional if your business has (or is approaching) 50 employees.
5. You want to keep employee compensation competitive.
An important function of HR is to ensure employees are paid fairly and accurately. If you struggle to attract or retain employees due to noncompetitive pay, an expert can help you with compensation management. They can reevaluate your compensation packages to ensure you are offering competitive wages and attractive employee benefits.
Human resources professionals are also responsible for other essential compensation functions, like tracking employee time and attendance, managing time-off requests, and running payroll. As your team grows, these tasks can be difficult to do on your own, especially if you are doing them manually.
Tip: A great way to streamline your HR processes is to use top-rated HR software. Either you or an HR professional can manage the software.
6. Your top priority is company culture.
Most entrepreneurs set out to create the kind of company they want to work for. Many accomplish that by building a culture that unifies everyone as part of a greater vision. That culture can also help businesses attract and retain top talent – and gain an edge on the competition.
It is widely agreed that company culture has a significant impact on the bottom line. Clear feedback and reward systems, a positive working environment, and career development opportunities all contribute to less turnover and happier, more productive employees.
If you’re looking to boost morale, increase productivity and attract prospects who will help you achieve your vision, but don’t have the time to do this effectively yourself, it may be time to bring in an HR professional. At the very least, make sure someone (other than you) is responsible for protecting the culture you set out to create, and is strategically developing it alongside you.
7. Your worries are the only thing holding you back.
Let’s say you’ve determined that hiring an HR professional is both necessary and cost-effective, but something is still holding you back. Hiring someone to develop and manage your team and culture can feel like dropping your kids off at daycare for the first time. It requires a tremendous amount of trust. If you’ve held the reins for a long time, it’s natural to be apprehensive about handing them off. However, the benefits of delegating this responsibility are worth the investment.
Employees are most effective when their skills and interests align with their responsibilities. A business owner is no exception. If you stick to your strengths and trust tasks to others with the talent and time to see them through, you’ll be a more effective leader.
If you’re not quite ready today, but you need to hire some HR help within the next year or two, consider bringing on a contractor or non-dedicated employee, or outsource to a third-party HR service provider.
If you’re ready to take the plunge, take the time to recruit an HR professional who meshes with your company culture. Go slow and be picky. In the long run, fast hires often go poorly for everyone involved. Choose a team player who will keep your vision front and center, but won’t be afraid to challenge the status quo. Then, get ready to spend those reclaimed hours on other high-value endeavors.
It’s thrilling to have grown your business to the point where you can bring on help to manage your team. Celebrate that success with an investment in your most important (human) resources and you’ll be set up to thrive in the face of any challenges that come your way.
Mark McKee contributed to the writing and research in this article.