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When You Should Hire Your First HR Person

ByMark McKee,
business.com writer
|
Aug 28, 2019
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> Human Resources
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Here are the key signs it's time to consider bringing on an HR employee.

  • Small businesses spend between 18 and 40 hours a month on HR-related tasks.
  • Deciding when to hire someone to handle those tasks for them can be a tough decision for small business owners.
  • You should consider hiring an in-house HR person if your business has, or is approaching, 50 employees.
  • If you don't want to hire a full-time employee, consider hiring a contractor or using an online service.

It's unlikely you became an entrepreneur so that you could dig through mountains of employee paperwork. Your dream was probably not monitoring ever-changing workplace compliance laws, either.

However, a recent study found that 41% of small business owners choose to handle HR themselves. On average, small businesses spend about 18 hours a month on HR-related tasks. For those also handling payroll themselves, the total jumps to almost 40 hours a month. That's a daunting amount of time for someone already pulled in a hundred directions.

Eventually, every leader needs reinforcements. As your business grows in size and complexity, hiring an in-house HR professional becomes a necessary next step. But how do you know when the time is right? What are the signs your company is ready to take the plunge? Here are five signs it might be time to hire your first HR team member. 

1. Your time is needed elsewhere.

You are likely wearing many hats, sacrificing time to keep costs at a minimum. Taking on HR responsibilities, even if it means a few late nights, makes good financial sense while your company is in its early stages. There may not even be enough work available to necessitate hiring a full-time employee solely dedicated to HR.

However, if you're personally dedicating 18 or more hours a month to HR, it may be beneficial to re-evaluate 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. Uncertainty has crept in.

According to the same study, 86% of small business owners say 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 allocate to HR to make sure things are being done right.

Hiring 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 utilizing 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? Based on your answers, it may be more cost-effective to bring in a dedicated HR professional. Nearly 30% of small businesses have been audited by the IRS, and the fines for noncompliance are typically serious. If you're uncertain, this may be a great opportunity to bring on an expert who can mitigate risk and relieve you of any nagging worries.

3. 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 difficult 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 getting 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 may be time to consider hiring an HR professional. Based on per-employee pay and the cost of your current HR solution, is it something you can afford right now?

 

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.

 

 

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 be delegating to a non-dedicated employee or utilizing an online HR service provider. The important thing is that the solution fits your particular business and you have a plan for when you outgrow it.

4. Company culture is a top priority.

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, there should be someone (other than you) responsible for protecting the culture you set out to create and strategically developing it alongside you.

5. The only thing holding you back is worry.

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 day care for the first time. It requires a huge 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 well 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, it'll make you a more effective leader.

If you're not quite ready today, but hiring some HR help is a must within the next year or two, consider bringing on a contractor, non-dedicated employee or online HR service provider. [Looking to outsource your human resources tasks? Check out our best picks and review for HR outsourcing services.]

If you've decided that you're ready to take the plunge, take your time to recruit an HR professional who jives well with your company culture. Go slow and be picky as you choose an HR manager. In the long run, fast hires often end up being bad for everyone involved. Choose a team player who will keep your vision front and center but not 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
Mark McKee
See Mark McKee's Profile
Mark McKee is the president and COO of OnPay, the top-rated payroll software company. His 15 years of experience in institutional investing, equity research, private equity, and investment banking give him deep insights into what growing businesses need to build easy, error-free financial practices.
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