Small Business and HR

Does a small business need a Human Resources function is the real question? Why would a company of 25, 40 or even 75 – 150 employees need a full-time employee to devote their energies to the activities of Human Resources? The reality is that they probably don’t.  Do they need competent HR support? Most assuredly they do. Does that support have to be a full-time dedicated HR person? No, again. Yet I see small businesses hiring full or part-time HR practitioners for their business.   What is a better option for them?

Most often in small companies, the duties of HR are divided up between multiple functions or people. In many instances payroll is outsourced and someone in finance or accounting processes time sheets and related administrivia; this same person may well handle benefits. The process of completing forms or maintaining employee records is often done by an administrative support person, occasionally the Office Manager or similar role. In many instances recruiting and staffing is handled by a temporary staffing company or agency. All of the transactional things HR does are neatly handled in a very efficient way.

In a small business HR is primarily a transactional activity.  (We’ll talk about the strategic later).  By transactional, I mean mostly administrative.   The duties are primarily focused on a few things.  These are:

     The creation and maintenance of 3 specific employee files

          I-9 file, Employee File, and Employee Medical File

     Development and distribution of an employee handbook with policies

          EEO, Harassment, etc. Along with training that most likely is a purchased off the shelf product

     Rare but occasional recruiting

     Posting the required state and federal notices

Here in NE Wisconsin, a well-experienced HR person fully able to act as a sole practitioner within your business will command compensation within a range of $45K to $65K a year.  Please note I wrote “fully able to act as a sole practitioner within your business.”  That means they have the knowledge, skills, abilities and experience to effectively manage all of the HR needs within your business.  Further, utilizing them for just these administrative tasks I mentioned above, is a waste of your payroll dollars.  Waste takes away profit.  This doesn’t mean the person you may have doing this job that you are paying $28K to isn’t competent.  It means they are most likely not appropriately skilled to do what you think you are paying them to do and the few times you might have a complex issue at hand that requires either high skills or experience are not sufficient to support the payroll cost of someone who is.

So what can a small business that needs strong HR support do?

Many rely upon legal counsel. Sometimes this support tool is actually an employment lawyer. Sometimes, all too often, it is a general practice attorney.  They can easily advise a company how to comply with the law. They can review and investigate situations.  Sometimes their natural aversion to risk gets in the way and a less than positive outcome is realized.  Their fees can be significant as well.

Another tool is to engage the services of an external resource. One that can help you the small employer not only maintain compliance but also develop your managers and supervisors to prevent compliance and other negative workplace issues from occurring all together. Some payroll companies provide this service; it is usually generic and while meeting your needs from an “I have that” perspective they may not be able to meet your needs from either a practical or cultural standpoint. In other words, a one size fits all approach may not be in your best interests.

There are HR professionals who can and do work with small employers on all areas of HR. Further, they can provide a much higher level of service and expertise than your budget would otherwise allow.  They can be found through your local Chamber of Commerce or by referral from other business owners.  These professionals can manage your employee relations, management/leadership training, compensation, regulatory compliance and related needs at a fraction of the cost of having an employee. 

Often times these professionals would be unaffordable to a small or medium sized company were they to hire them on a full-time basis.  However, their knowledge, skills and experience on a fractional basis can be a significant value-added proposition.  In short, you can find competent highly skilled HR support from a variety of sources on an as-needed basis. 

Whatever you decide finding skilled and experienced HR support is never as simple as hiring someone who likes people or who took an HR course or seminar someplace is not the answer.  Ultimately the stakes are too high for that.