Whether and when you need HR help depends on several factors. If you have only 10 employees and your business is stable, but not growing dramatically, then you’re probably fine with the status quo. (For a snapshot of a small business that prefers to go it alone, see our sidebar, “Keeping HR In-House.”) But if your business is growing fast, employs highly compensated professionals, has a virtual workforce, or has high turnover, you’ll likely need help.
By the time they have 50 employees, small-business owners have been forced to hand off at least some HR duties. Perhaps the office manager is handling the paperwork and department managers are doing most of the interviewing and hiring. But having different people involved can mean that everyone does it differently. How do you make sure that interviewees are all given the same, and the correct, information about the job, your company and its policies? For that matter, do your own employees even know what those policies are? Do you have an employee handbook that spells them out? And do you have a standard process by which employee performance and compensation are reviewed? “That’s when you need to start formalizing HR, because you’re no longer touching everything,” says Verne Harnish, CEO of Gazelles Inc., a consultant to small and medium-sized companies.
The number of employees isn’t the only measure of your company’s need for more HR support. If your employees are scattered – maybe some of them work from home, maybe you have salespeople across the country – you might need help even if you employ only a handful of people.
“When you start crossing geographic boundaries, new rules come into play,” says Martin Babinec, founder and CEO of TriNet, a professional employer organization (PEO) that handles human resources for small businesses in the technology, finance, and professional fields (and for AllBusiness.com too). A geographically scattered workforce brings into play multiple state employment laws. Different states may have different regulations on taxes and workers compensation, for example.
Babinec urges business owners to consider the value of their employees and the time and expense it takes to replace them. “The average salary of your employees is a proxy for how your human capital is valued in the marketplace,” says Babinec. The higher the salary, the higher their value to you and to others. That means they can find another job easily, which means you must offer something that will attract and retain them, like top-notch benefits. And in order to stay abreast of a top-notch benefits program you’ll likely have to team up with one or more of professional benefits services.