When should a small business or startup hire an HR person?
This is one of the questions we get the most at Charlie: when do you need to hire someone specifically to take care of HR? In this blog post, we've set out everything you need to know about the different levels of HR support for small businesses they require – when you can get by, when you should outsource, and when you need a full-time hire.
Hiring an HR manager is an important step in any company's journey. But it’s actually a bit misleading to characterise this as a “step” at all. Most businesses can – and should – ease their way into having formal HR structures as the organisation grows.
A lot of the time, the best option for a small business or startup isn't actually to hire someone to do the role full-time. Some companies will outsource their HR department to an HR consultancy. Many smaller startups find that – with the right support – HR responsibilities can be taken on by a current member of the business, such as the COO, Operations Manager or Office Manager. For companies of that size, having access to an expert through a service like Charlie's HR Advice is a better – and cheaper – option than an in-house hire.
Slightly larger businesses may choose to employ an HR professional part-time, and once you're past a certain size, having a full-time HR professional on the team becomes a necessity.
All of the above are legitimate methods – all that matters is that your business is handling this proactively, rather than simply ignoring HR until a problem crops up.
What kind of Human Resources support does a small business need – and when does it need it?
In the rest of this article, we'll go through the different stages of a company's growth and set out the different levels of HR support they'll need.
Very small businesses and early-stage startups (1-10 team members)
Small businesses which have less than 10 employees usually don't need a dedicated HR specialist. At this stage, it’s generally the case that (with a little bit of foresight and preparation) you can manage most HR tasks and challenges in-house.
What you absolutely do need, though, is a strong set of HR foundations. Once you have these in place, your HR will tend to run itself. At this company size, you can break these foundations down into two parts.
1. Getting your small business to be HR compliant
Every company in the UK (no matter how small) is legally required to have three specific HR policies on file for HR compliance reasons. If your small business or startup doesn’t have these policies in place, then your company is already in breach of employment law.
These policies are:
- A Health & Safety Policy
- A Disciplinary/Dismissal Policy
- A Grievance Policy
These policies must also be tailored specifically to your business and – most critically – you also need to understand how to use them.
To learn more about these three policies and the best way to put them in place at your business, you can download our free guide below.
Once you got your compliance policies in place, you also need to make sure that the way you collect and store sensitive employee data is safe and secure. No matter how small your company, if this personal data is scattered around messy folders or lost somewhere in the cloud, you may expose yourself to security issues — which in turn could result in legal actions against you.
Setting up some sort of HR automation from the very start is a good way to ensure you can grow your team without having to worry about this. With self-service HR software, new joiners can upload their personal data themselves into the platform, where it is safely stored following compliance best practice standards.
2. Crafting your company culture with an employee handbook
However, it’s worth bearing in mind that these three policies are just the legal bare minimum. The most productive and supportive company cultures are built on a range of different policies that set the tone for your company or startup and help your team members understand how it does its work.
By far the best way of achieving this is through writing an employee handbook (also called a company handbook) . A good company handbook encapsulates who you are as a company and how you operate. It’s no use copy and pasting your employee handbook from the internet, though – this document needs to be crafted to fit the way your company works and the company culture you want to build there.
If you’d like to learn more about how to create the right company handbook to fit your small business, you can take a look at our free guide.
All the same – if you're not a Human Resources specialist, then creating your own company handbook can be a challenging task. It's not something that a business owner should be taking on themselves unless they are prepared to devote some real time and effort to learning the ins and outs of the topic – there are too many potential pitfalls, both from the point of view of employment law and a company culture perspective.
So perhaps that's where you will need support to create your own employee handbook, and that's where it might be worth getting in touch with our HR advice team.
Our in-house HR professionals will make it their mission to create a bespoke handbook that contains policies and ways and working that resembles what you believe in for your business.
A growing small business or startup (11-40 team members)
By the time a small business begins moving towards the 20-person mark, it becomes necessary for there to be one person who is officially responsible for the Human Resources side of the company.
That person doesn't need to be a dedicated HR professional, however, and they don't need to be working on HR full-time either. For companies of this size, it's usually a better option for someone at the business to take the HR functions on as part of their wider role. They might be an Office Manager, the COO or work in the Operations team. The only necessity for this role is that their role allows them can prioritise HR tasks and be the point of contact for HR issues as they arise.
There are many different reasons why a dedicated HR person becomes so important at this stage.
Firstly, it is around this company size where it becomes important to have good processes in place if the business is going to continue to run smoothly. HR tasks such as employee onboarding or preparing new employees for their role, for example, tend to need a dedicated person running them to make sure they don't fall by the wayside. Having someone to take the lead on the company's hiring processes is another good example.
It's also at this stage that many startups and small companies look to put in place more formal performance reviews. Again – this is a project that needs someone to own it. Performance reviews are a crucial aspect of employee retention as well as driving performance across the team, and can't be left up to an ad hoc system.
Remember that this part-time HR person doesn't necessarily have to have an official HR qualification. They're there as a point of contact for HR issues, and someone to oversee the development of your company culture, rather than to provide expert knowledge of employment law. However, they are going to need access to trustworthy, reliable advice if a tricky issue comes up.
This is where a service like Charlie's HR Advice service becomes a very useful option. With HR Advice, you get access to your own dedicated advisor who is on hand to provide support and advice on any HR issue – whenever and however you need it. Having a direct line to an Human Resources expert is a really valuable option, especially for small businesses and startups, as they can give you instant answers to pressing questions about employment law, or confidential advice on difficult issues to do with employee relations.
What's more, HR Advice is a great way to 'level up' the skillset and HR knowledge of the person playing this part-time HR role at your company. Our advisors can guide them through different HR initiatives so they understand how to take on a more proactive HR role at the company.
If you'd like to learn more about Charlie's HR Advice service and how it can support your company, book a free call with the team.
An established small business (40+ employees)
By the time your company has grown anywhere near the 40-person mark, you're going to have to start looking at hiring an HR professional.
With 50 team members, there’s a potentially unmanageable number of HR tasks and admin to be kept on top of – employee contracts, share schemes, onboarding, payroll, performance reviews, probation reviews, hiring processes – this is now a full-time role and it needs a dedicated HR professional to get it right.
This final step – hiring a full-time HR professional – is one that a lot of businesses put off. It’s understandable: at a leadership level, hiring an HR professional is a relatively costly long-term investment which doesn't come with any immediate, tangible benefit to the bottom line.
Don't fall into this trap. Putting off hiring a full-time HR specialist who understands UK employment law is a serious mistake, risking negative effects on your team's performance and retention whilst opening you up to potentially costly legal incidents.
Other HR needs that you should consider
Treat what we’ve said so far as guidelines. Every business is different, so you shouldn’t consider these rules to be set in stone. In particular, there are a couple of special cases where you should be hiring a full-time HR professional much earlier:
If your startup is going to grow fast
If you know your business is about to grow a lot in a short space of time – say, increasing the team size by 100% or 50% within 6-12 months – it's a very good idea to hire an in-house HR professional early, before you really need.
When you’re hiring and onboarding a large number of new employees, HR immediately becomes a full-time job. A full-time HR professional will save the rest of your team a vast amount of time, as they take on various hiring and onboarding responsibilities, and they’ll keep you on top of the incoming mountain of contracts and other documents which accompany new hires. Additionally, when a company grows significantly, its culture can change dramatically – and someone needs to make sure it’s not heading in a negative direction.
If you’ve got remote workers or distributed offices
If your team isn’t all in one place, you need to be thinking about HR much, much more. If people are siloed off in various locations, the strain that a lack of proper HR structures and professionals puts on your team is amplified. Managing people in distributed locations is an extremely intensive task, and you’re going to need someone dedicated to the role much earlier.
If you’re in this situation, as a rough estimate, you should look at the numbers above – and halve them. That means you should have a person running part-time HR well before you hit 20 employees, and should probably have a full-time HR professional as you hit 25.