I am frequently asked, “At what point in our growth should we hire an HR person?”
This is a great question!
Human Resources has many functions and even though it is all under umbrella of HR, there are different areas of expertise. Take a look at our blog about what HR does. When thinking about adding an HR person, it is probably best to break it down into the stages of your company’s growth.
The early stage start-up (No HR person needed)
If you are just starting out with 1 – 24 paid employees, you don’t need an HR person. You will need payroll and appropriate onboarding so that you stay compliant with minimum wage, overtime, taxes, state EDD regulations, and the Department of Homeland Security. You may or may not offer health benefits, etc. But, at this point, you don’t need an HR professional on staff. You need services. There are services that offer payroll, onboarding, and benefits. The rates for these services vary, as do the services they offer.
You may also need a service to provide periodic advice. The key is knowing what you don’t know so that you can ask before you get in trouble. You can ask your attorney, which is expensive but much less expensive than having an employee or finding out too late that you violated an employment law.
Beware: There are organizations that will take all of the paperwork off of your hands and basically employ your employees and rent them back to you. You still recruit but the employee is on their payroll vs. yours. I recommend against using this type of company at this stage. The only time I might consider it is if you have a very dispersed workforce across multiple states. If you have people working in multiple states there are laws that you need to comply with for each state and you need to set up business in each state. If you are in this situation. A PEO may be a temporary answer. Keep in mind if you are using a PEO you will pay a significant premium on your employee pay.
The scaling start-up (Some HR functions needed)
When you have 25 employees on payroll some labor laws kick in that you will want to know. Keeping up-to-date with those rules and regulations is important from both a federal, state, and sometimes city or county standpoint. You will want to have someone either on staff or on retainer to keep you updated. Your state and local Chambers of Commerce are good for keeping you updated on legal and regulatory changes. Join them.
Between 25 – 49 employees you will want to have a person who keeps all of the paperwork in order. A word of caution: Do not give this person an HR title. The title of Administrative Assistant – not attached to a department called “HR” is probably best at this point. Have this person report to the CEO, COO, CIO or someone who is able to maintain confidential information.
You will, however, want a “Culture Champion.” When you were small, you created a culture that you loved. You want to make sure that you are maintaining that culture as you scale. That could be the CEO, who is the ultimate champion of culture, but having someone who has a job of ensuring that the culture is being maintained or consciously changed as you scale is important. Maybe the CEO and another designee work together to monitor the culture.
The small business start-up
By the time you have 50 employees, you will need a strategic HR professional. Do not underestimate the benefit the right person can bring to your organization. You will need someone to make sure that there are policies in place, that employee practices are consistently applied, that there is an employee development plan. You will want someone who can help you plan your growth, monitor and train people to interview correctly. You will want someone to help managers be good managers. And, if you are like most start-ups you will promote people to management positions who have never managed before, so you will want an individual with skills to help them manage. At this point you will want one strategic HR Manager and HR Assistant. If you look for one person who can do both, you will likely not find that person. The assistant can do payroll, hiring paperwork, keep records straight, etc. but you definitely want someone who can help maintain the culture you set out to create.
At StartupHR we love answering simple questions and providing advice on dealing with employee issues. We will not hesitate to advise you to consult with your attorney for more complicated or potentially legal issues.