This is one of the questions we get the most at CharlieHR: when do you hire someone specifically to take care of HR? We've built this set of guidelines to help small businesses work out if they're ready for this vital hire.
Hiring an HR manager is an important step in a small business’ journey. For many, it feels like the moment the company truly “matures” from a scrappy, startup-y operation into a “real business”. But there aren’t really any clear rules around when and how a business should take this step.
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.
Often, very small businesses can get by with an external service, such as an HR consulting firm, or CharlieHR’s very own HR Advice service. Slightly larger businesses may choose to employ an HR professional part-time, or have an office manager or someone in operations handle HR concerns. Finally, 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 HR support do I need – and when?
Very small businesses and early-stage startups
Businesses which have less than 10 employees don't necessarily need a dedicated HR professional, but they do need a strong set of HR structures. That means an employee handbook containing the company’s policies. Do you have specific expectations of your employees – from things as specific as dress codes, or as broad as flexible working arrangements? How do you handle absence, lateness, or disciplinary issues? These need to be clearly written out, and accessible to everyone in the business.
Many of these policies aren’t just nice to have: they’re legally required. We’ve got an e-book running through these in detail, but the long and short of it is this: without some specific policies, your business is in trouble. This isn’t something you can afford to ignore.
Aside from the legal concerns, there’s another reason you should have a solid set of policies in even the smallest of businesses: consistency. Having these policies on hand reduces the risk of people in a business being treated inconsistently. That might not sound like a crucial issue, but it is: treating employees inconsistently risks building up resentment and souring your culture, risking your team’s performance, and increasing the chances of someone leaving your business.
Consistency matters. Achieving consistency requires a set of channels and structures. Without them, you won’t be – and when you’re not consistent, bad things happen.
Everyone underestimates the effects that inconsistency can have. Consider this example:
Alice and Bob work in the same role. Alice comes in every day on time. From time to time, Bob is slightly late – but he doesn’t face any repercussions. One day, Alice comes in late. She has a valid reason, and has told her manager. But Catherine, a different manager, sees that she is late, and – having not been kept up-to-date by Alice’s manager – tells her off.
Everything is eventually sorted out, but Alice is furious. She was publicly embarrassed over something that wasn’t her fault, and she’s frustrated that Bob is regularly late and faces no repercussions. She complains to Dom, Eric and Felicity. They start gossiping. Other team members hear. Bob finds out, and thinks Alice is spreading dirt about him. Bob starts gossiping. He exaggerates a bit, and a lot of people take his side.
Two weeks later, Alice hands in her notice, saying that she feels uncomfortable in the workplace. You’ve lost a valuable team member on bad terms, all because you didn’t have a consistent policy on lateness. Lorraine, HR & Office manager at Vinterior.
Setting up these policies can be a daunting task. There’s a genuinely overwhelming amount of potential policies a business needs to have – but fortunately, we can actually help you out here. Our HR Advice service can set up bespoke versions of all of these policies for your business, and maintain and update them as your needs change.
Reaching 20 employees
By the time a business approaches 20 employees, it becomes necessary to have a person who is officially responsible for HR. Most likely, the business now has multiple levels of management and seniority. It has fully passed the point where it can reasonably be thought of as a group of friends working on a project together.
Because of this, there needs to be a person who becomes the default point-of-contact for anyone with a concern related to HR. If an employee has a grievance, a query about any of the policies above, wants to know about their progression – or any other people-related issues – they need to know there is someone who can help them in an official capacity.
Crucially, this person doesn’t necessarily have to be a full-time HR professional. They could be a part-time HR professional, or – as is common in many businesses – they could share the role with other responsibilities. They might be an office manager, in operations or finance. The only necessity for this role is that they can prioritise HR issues.
Without someone who can prioritise HR issues, things like complaints, policy queries and other HR needs can end up being ignored or delayed in favour of matters deemed more pressing. This is a really bad situation to be in: these are often highly important issues to your employees, and if they're not addressed in a timely and professional manner, you can cause serious resentment.
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, and someone to oversee aspects of your business' culture, not someone to provide legal knowledge to deal with serious issues. However, you do need to have access to trustworthy, reliable advice if a tricky issue comes up – such as through an HR Advice service.
One word of warning: often, the person filling this part-time HR role ends up being a co-founder of a startup. This is generally a bad idea, for two reasons.
First - prioritisation: founders often have a huge amount of plates to juggle, and pressing demands from various parties, meaning that there will be times when they fail to make HR a priority.
Secondly – impartiality. The part-time HR role is one which is going to handle some very sensitive issues, and for someone to be comfortable bringing these issues to them, they need to appear as impartial as possible. Founders, who have been with the business from the beginning, are likely to have strong friendships and allegiances to various members of the team, making it tricky for them to be seen as impartial.
“If someone in your team has a problem with one of their colleagues, it’s already going to be a difficult conversation for them to bring up. If the HR person they’ve got to talk to is also a co-founder, with a close relationship with the other colleague in question, that conversation can be exceptionally uncomfortable”. Oliver May, Co-founder of Streetbees.
Growing to 50 employees
The point at which you have to hire a full-time HR professional is the moment when the number of HR-related conversations and queries becomes too much to be handled by someone in a part-time role. You can gauge whether this is happening by looking at response times: if someone submits a grievance and doesn't get a reply within 24 hours, you're probably in need of a full-time HR person.
When exactly this happens depends on a variety of factors, such as the type of business you have, the way your employees work, and the skill of your part-time HR person. The most reasonable guideline is that it roughly happens when your business reaches 50 people.
With 50 employees, there’s a potentially unmanageable amount of HR admin to be done – employee contracts, share schemes, payroll, performance reviews, probation reviews – and much, much more.
Meanwhile, there are constant conversations going on. Someone might be curious about their progression, unhappy with their manager – and needs someone to talk to. If that person is only doing HR as a part-time role, they simply will not be available for all of these conversations, and resentment will build up. With this number of people, there's a significant likelihood of a serious HR issue cropping up: one which is formal in nature and, if handled sloppily, could cost the business dearly.
At 50 people, you need an experienced professional who is fully dedicated to handling HR needs. If you don't, expect your performance and retention to suffer. For me, one of the most obvious pain-points is progression: a professional can create and maintain a robust system for L&D, reviews and feedback. Without this, people end up feeling like they've stagnated, and start looking for other jobs. Oli, Streetbees.
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 obvious, tangible return, and can feel superfluous when you’re managing an already-tight budget. At an employee level, teams will likely be angling for certain hires, and an HR person isn't likely to be top of many of their lists. They’ll want someone who can expand their capacity and boost their team in the short-term. Don't fall into either of these traps. Putting off hiring a full-time HR professional is a serious mistake, risking negative effects on your team's performance and retention, while opening you up to potentially costly and reputation-damaging incidents.
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 you’re 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 by 100% or 50% within 6-12 months, this is often a sensible time to hire a full-time HR professional, even if you’re only sitting at 20-30 people right now.
When you’re hiring and onboarding a large number of people, 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.
This article was an entirely collaborative effort – we reached out and spoke to a bunch of people from our network to put it together. Special thanks to Oliver May, Co-founder and CCO of Streetbees, Lorraine from Vinterior, Joanna from SamLabs and Alex from Verse.