Do Small-Medium Businesses Really Need HR?
While larger companies typically have well-established HR departments, small to medium-sized enterprises (SMEs) often performed by the business owner or another employee who takes on HR responsibilities on a part-time basis.
This approach can save costs, but it may not be sufficient to meet all HR needs effectively.
When does a company need HR in the UK
In the UK, there is no legal requirement for a company to have a dedicated HR department or professional. However, businesses must comply with employment laws and regulations, which can create the need for HR expertise. Whether or not a company needs HR depends on several factors, including size, complexity, and workforce needs.
When does a company need HR depends on how small and how skilled the leader is. Usually as a company starts to exceed a total staff of about 50, the tasks that require some specialised HR knowledge and skills build up to take on the equivalent of a full-time job for someone.
Normally the owner hires (and fires, etc.) up to about 30 staff or so, but before that, the owner is going to want to avoid the tasks of signing people to paperwork for payroll, any benefits, tax forms, etc. So the admin assistant typically does those, but again at some point there is more work in that area and both the owner and admin assistant want to spend more of their time on other tasks related to running the business and less on HR-related admin.
Why even small to medium businesses would benefit from HR
One of the biggest reason even smaller businesses need HR is, just like bigger corporations, they rely heavily on employment laws and regulations.
UK employment law can be complex and is constantly evolving, which can make it challenging for organisations to maintain compliance.
HR can help companies stay abreast of the latest developments and mitigate legal risks. It is vital to stay up to date with recent legislative changes, such as the new system for calculating holiday entitlement for workers with irregular hours, effective from April 2024. Engaging specialised HR services for SMEs can assist small business owners in staying abreast of legislative changes and maintaining compliance at all times.
Staying compliant with these laws is crucial to avoid legal issues, which can be complex and time-consuming.
Key functions of HR in a business
HR’s primary responsibilities include recruitment, onboarding, compensation management, and employee development.
They manage the hiring process by sourcing candidates, conducting interviews, and selecting the right fit for the organisation.
HR ensures smooth onboarding by introducing new hires to company policies and fostering a welcoming environment.
They also handle employee benefits and compensation, including payroll, leave, and benefits administration, ensuring packages are competitive and compliant with industry standards.
HR initiatives can help shape a positive organisational culture, which is key for fostering employee engagement and retention. Strategies like clear communication of company values, regular feedback mechanisms, and professional development opportunities. Every business needs a strong company culture that allows staff to feel like a valued member of the team, and HR will always play a major role in developing this culture and driving employee engagement.
Alternatives to a traditional HR department
If having a full HR department isn’t feasible for your SME, there are several cost-effective and efficient alternatives to consider:
Outsource HR functions
Outsourcing HR tasks to specialised external HR companies can be a practical solution for small businesses. These providers offer flexible, tailored services, such as recruitment, payroll, compliance, and employee relations. This allows businesses to access professional HR expertise without the overhead costs of an in-house team.
Leveraging HR software and tools
HR technology can simplify and automate many HR processes. Software solutions often include features such as:
* Payroll and benefits management
* Applicant tracking and recruitment tools
* Employee performance management systems
* Time tracking and compliance support
These tools enable small businesses to efficiently manage HR tasks, even with limited resources.
Hiring a fractional HR professional
A fractional HR professional works part-time or on a contract basis to address your business’s specific HR needs. This option provides access to a dedicated expert without the cost of a full-time hire. Fractional HR professionals can assist with policy development, training, and employee relations as needed.