Hyro Blog

Do small businesses really need HR?

I don’t know if its because social media is so prevalent these days that I feel that we have significantly increased in small business ownership over the last 5 years, or small business formation has actually significantly increased over the last 5 years. Either way, there are lots of start ups, mums and dads, and general small businesses popping up in my space.

The delay with releasing this new blog is due to, you guessed it, working on small business HR and talent consulting (shameless plug).

What is considered a small business?

Fair Work Australia considers a small business as 15 or less employees; this is important to note because obligations and rules can vary when you operate as a small business. You might be thinking, I can terminate without cause if I have less than 15 employees, but believe me, its not always just about sacking someone. You can’t be saved by bullying claims, ethics, perceived discrimination etc, and you more than likely can’t just ‘do it all’.

Lets get the obvious ones out of the way. If you do not have any employees, there’s clearly no need for a HR department or any HR involvement in your business. If you have a few (2-4) employees, probably also the case. However, if you have 2-4 employees and your start-up is some top secret, I am going to change the world with my AI and other tech stuff, you’ll likely have a lawyer who can assist you with some industrial relations type work, should that come up.

What happens when you’re in the 5-15 employees stage. This really depends on what you are doing, where you are, and where you are going. Let’s look at some pros and cons of having a HR role or team in your small business:

PROS:

1. Compliance – ensure that your business complies with relevant employment laws and regulations, and good practices reduce the risk of legal issues.
2. Talent – assist with finding the right fit for the role. Often in small businesses, you are trying to fill multiple gaps in one role, so a good recruiter may help you match particular duties correctly, so you’re not always looking for a unicorn.
3. Employee Engagement – we just love the fluff, so let us do it for you!
4. Learning and development – facilitate training, career conversations, and performance management/development, leading to increased productivity.
5. Conflict resolution – acts as the mediator, especially if it’s quite a small team.
6. Takes Pressure Off – the small business owner, who is likely the manager, the recruiter, the CFO, the social media manager, and the coffee pod replacer.
7. Company Culture – support your brand and employees.

CONS:

1. Cost – Maintaining a HR role or team can be costly.
2. Time consuming – HR activities can be time consuming, taking up your time, your staff’s time, and time costs money, especially when its all in house.
3. Lack of objectivity – If HR is a part of your business (not outsourced), relationships will be formed, potentially impacting conflict resolution or other biases.
4. Limited scalability – Again going back to where you are and where you want to be, as your business grows, your small HR role / team may struggle with the demand required.

It also all depends on your view of the HR field. If you think it’s a nice to have, time wasting, paper pushing type role that has no impact on the growth or potential of your business and just adds to the long daily to-do list, then I would say don’t waste your time (or the HR professionals time).

If you consider HR as essential to your business growth, then you might have your answer. Growth can happen slowly or quickly. It can also be stagnant at times. If you want to succeed, you need to follow the pace or lack of it. So it might be best for you to integrate a HR function at the same pace as your growth, or at least following that pace.

Human resource issues can arise at any business size or stage. If at the time it seems too costly or you’re just not there yet, consider the cost of ethical or legal issues. Usually lawyers are brought in when an issue has become too messy to solve in house, which will cost you a lot more money than outsourcing your HR function.

Small businesses may benefit from outsourcing their HR or recruitment function. Yes, we all know about external recruiters and the bomb they charge for a placement. If you have a HR/talent expert or business on retainer or on a pay as you go arrangement, you can keep your risks low, increase productivity, and monitor the costing. It could be a great way to support your business and its growth while in its infancy or maturing.

Of course, its going to cost you more per hour than hiring your own HR staff member, but if you are only accessing on an as need basis, the savings can really be worthwhile without impacting your productivity. You might just want some help with new role creations, performance development, setting up a framework, facilitating employee surveys, or just some ad-hoc coaching.

A lot of small business outsource their payroll. Why do you think they do that? It supports their business, it keeps them compliant, it ensures people are paid on time. It’s the same with outsourcing your people operation. Keeps you honest!

What do you think? Is there room for HR in small business?

Tell us in the comments!

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