Whether it’s recruiting, retaining or training employees, or maintaining compliance with federal and state guidelines, human resources departments play a critical role in all businesses. But not every company needs a dedicated HR staff. In fact, many small businesses can do—or have already done—without a formal HR department.
No matter the size of your business, you can’t ignore the HR function altogether. But there are options for handling HR-related issues and tasks, and a formal HR department may not be the best solution for everyone. Consider the following questions to help you evaluate the best HR approach for your business.
Do I have a dedicated contact person for my employees?
Employee engagement drives profit. That is clear from all the business research. And we know the most critical component of engagement is simply paying attention to your employees. The human resources role has grown to being responsible for the “the life cycle of an employee”—from candidate development to separation of employment. You need to have someone who can be focused on employee issues and career development if you want an engaged workforce.
Where can I put HR?
In many small organizations, HR is a hybrid function within finance or operations departments. Sometimes it’s an outstanding office manager or administrative person who handles HR. Wherever it’s housed, HR ideally should have a direct reporting line to the organization’s president or chief executive officer. The significance of this is to ensure that HR is focused on organizational goals rather than those of a particular business unit. HR is changing rapidly, so one person in the organization should be tasked with ongoing education in the field of human resources and compliance.
Do I have workforce issues?
If you have particularly high turnover, trouble recruiting workers, confusion with compliance or difficulty determining the right compensation package to offer, you may need external help. These are complex areas of expertise that should not be left to a person who is more administrative in nature. But, it doesn’t mean you need to outsource the whole function. Supplement your internal human resources professional with experts. This also allows for growth and development of the internal resources.
What are my employee costs?
As you create your organizational budget, pay attention to how many line items exist or rely on human interaction. You may be shocked to see how large a percentage of your expenses are employee related. It’s common to see 40 to 70 percent of organizational budgets focused on employees. How can you leave this large a portion of your organization to someone without expertise? Seek feedback from employee-facing vendors such as your payroll provider or benefits consultant to get ideas on how they might suggest you tackle HR issues.
Can I leverage technology?
A vast majority of the HR function is administrative. Today, the advantage of outsourcing payroll processing is the high degree of automation that is contained in the systems’ technology. For a minimal increase in cost, you can remove the majority of your paper process. The benefit systems align with payroll and will provide streamlined information and data access for employees.
Can I handle compliance issues on my own?
Compliance needs constant attention in businesses of all sizes. State and local agencies are moving full speed ahead to create regulations that impact their citizens. This is especially complex if you operate multiple operations in various jurisdictions. Regulations exist for recruitment advertisements, new hire paperwork, employee files, treatment of employees, social media and a whole lot more. And that doesn’t even include healthcare reform.
Can HR help me meet my business goals?
Highly functioning HR professionals are focused on and expected to contribute to achieving organizational goals. They have an understanding of the business, industry, mission and strategic initiatives. Human Resources must add value by creating programs that drive business results and keep the workforce motivated and operating effectively.
Decide what is right for you
Your answers to these questions can help you get a better sense of your HR needs. Several resources also can help small businesses evaluating HR. The Society of Human Resource Management has helpful tools, services and roundtable groups for anyone handling HR. Access to various HR databases and websites can be provided at low cost through your benefit vendor or payroll service. HR Topics offers courses to help you learn more or stay up to date on HR topics.
Whatever solutions you decide to implement, make sure they add value to your business and fit the culture of your organization.
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