Does a small business need HR?

Think HR is only for big businesses? Think again. This essential function brings many benefits that small business owners often overlook.

What is HR?

Human resources, a.k.a. HR, is a business department that manages employee resources. The department could be in-house. Or, a business might outsource its HR functions to another specialized agency. Either way, the goal of an HR department is to improve the workplace and the way people operate within it. To that end, HR for small business may span many different functions, including:

• Hiring and termination
• Payroll
• Compensation and benefits
• Performance management
• Legal compliance
• Risk management
• Training
• Labor and employee relations
• Organizational development

Why does a company need HR?

HR confers many benefits on a business:

• The department can help control costs. HR can put in place efficiencies that cut workforce-related costs for the business. At the same time, it establishes pay and benefit plans that reduce business costs. For example, HR can help negotiate lower rates on a group healthcare plan. It’s a win-win for the employer and employer.
• Boost employee hiring and retention. HR can help put in place policies that increase employee satisfaction. Engaged prospective employees and happy employees can improve your recruitment and retention rates. Workable says that the average business spends between $3,000 and $5,000 per new hire. So when you hire, you want the investment to be for the long-haul.
• They can keep your workforce sharp. HR personnel know which roles demand specific skills. As a resource, they can develop and offer training programs to help employees keep up with these skills. This way, your business stays ahead of the competition.
• They serve to help resolve conflict. HR personnel know how to mediate disputes when it arises. That could be inter-employee conflict or problems between an employee and the business.
• Improve employee performance. HR can put in place programs to track employee performance. These plans can keep employees engaged and successful in their roles.
• They can keep your business out of hot water legally. A company can get hit with a lawsuit for any number of reasons, such as hiring or firing practices. An HR department can help protect your finances and reputation in these situations.

Does a small business need HR?

Small business owners often assume that their size absolves them of the need for a human resources team. The truth is that you will still need to carry out HR tasks no matter your size. In this sense, small businesses stand to gain as much from HR as a mid-sized or large business can.

The real question is, do you do HR yourself or delegate the work to a dedicated HR team? There are many unique benefits to having a dedicated HR staff:

• It can save you time. Small business employees must wear many hats because of their smaller workforce. Adding HR functions to your plate can put an added strain on your schedule. Delegating HR to other personnel can free up time for high-priority tasks.
• It can make up for skills shortages. You may not have the expertise to handle HR tasks even if you want to tackle them. Trained HR personnel bring experience, knowledge and accuracy to these vital activities.
• HR helps you establish process. Small business owners often fly by the seat of their pants. They’re sometimes forced to get things done at the expense of processes, norms and ethics. Therefore, it’s important to establish these standards and uphold them in the long run. An HR team can help you put in place these processes and earn a reputation for strong governance.

What are some HR tips for small business owners?

Follow these tips when establishing HR for small business:

• Take HR in-house for more face time. Hiring one or more HR personnel can help you foster a more personal connection with HR.
• Outsource HR to cut costs. Outsource HR for small business to a consultant who works on-site if you can’t afford an internal HR hire. You can also outsource it to a team at another firm.
• Look for a culture fit when hiring or outsourcing. You and your HR personnel need to be on the same page on how employee resources should get handled.
• Consult with key HR personnel before policy roll-outs. Be sure to run major initiatives by HR before you roll them out to employees to avoid hiccups.
• Document HR policies. HR personnel may come and go from your business over time in the same way employees do. To ensure continuity, put all HR policies on paper. One way to capture essential information is to create an employee handbook.
• Educate yourself and staff. The onus shouldn’t be on HR alone to follow HR laws and regulations. Get the employer training you need to ensure that you also stay compliant. Also, ask HR to deliver HR-related training to employees when needed.