Does your small business need an HR department?

If you are starting a new venture or are a small business owner, the struggle to allocate a budget for an HR department is real. But does a small business need an HR department? When is the right time to establish one? Is there any other option that would work for a small business?

We know the struggles a small business faces. For over 15 years, we have been working with small businesses from different industries, guiding them with workforce management.

Let’s explore the topic and clarify some of your doubts. Feel free to contact us if you need more information.

The Role of HR in Small Business:

As a business, you understand that employees are critical to your success. To help manage employees, HR functions, including recruitment, onboarding, benefits administration, payroll processing, and training, are essential.

In a small business, the business owner usually manages the HR functions. It is one of the many hats that a business owner wears. In the initial stage, HR functions are easy to manage. As the business grows, carrying out the basic HR activities, let alone the complex ones, may become tedious. If not appropriately addressed, the company might face issues and risk losing critical resources.

Even in a small business setting, HR is crucial in shaping the company and preventing legal complications.

Key functions of HR:

We know that HR is involved in everything from hiring an employee to retirement, and it helps maintain the organization’s smooth functioning.

Firstly, HR is responsible for hiring and recruitment. This activity involves attracting, screening, and selecting qualified candidates for open positions.

Secondly, HR manages employee relations and the work environment. This includes resolving conflicts, fostering a positive culture, and ensuring employee satisfaction.

Thirdly, HR ensures compliance with employment laws and regulations. This involves staying updated on laws and implementing necessary changes in your business.

Lastly, HR oversees performance management and employee development. This includes setting up performance review systems, providing feedback, and facilitating training and development opportunities.

Is having an HR department a legal requirement?

It is not. However, even for a small business, having a good HR strategy can be beneficial in planning for the business’s success.

What size companies need an HR?

This is a tricky question to answer. It involves many factors, such as the number of employees, the nature of HR activities, and the legal requirements involved.In general, having an HR to carry out the functionalities of the workforce is good even with five employees. Companies with over 50 employees may consider having an HR department or outsourcing from a reputable company that can take care of HR functions and add value to small businesses like PeopleWorX.

When should a business owner delegate HR?

So, losing your HR hat means your business is improving, and your presence is needed elsewhere than in carrying out HR functions. But it is not one size that fits all. Depending on the nature of your business, you should start delegating HR.

If your employee count is increasing, HR tasks start to interfere with core business operations, your growth plans, the complexity of the HR activities, or budget availability, you may consider delegating HR.

Should you outsource your HR functions?

Another hot topic is in-house or outsourcing. Given the nature of our businesses, we are obviously in favor of outsourcing. But hear us out and decide if outsourcing benefits a start-up or small business like yours.

• Get professional HR services without the overhead costs.
• Cost-effective
• Keeps you updated with industry information.
• Stays on top of labor laws and regulations.

We recommend outsourcing HR functions, especially for small businesses, when you need professional service that fits your budget without another department’s overhead costs and maintenance.

Leveraging Technology for HR functions:

Technology can simplify current HR activities. From automated payroll processing to timekeeping, HR technology can save you time and reduce manual errors. It can also help with data access and keep your business compliant.

Conclusion:

Deciding whether to establish an HR department is a significant decision for any small business. It requires careful consideration of your business’s needs, resources, and long-term goals.

Remember, HR’s goal is to support your business and its employees. Whether you have an in-house HR department or outsource HR functions, the focus should always be creating a positive work environment and promoting business growth.