An HR team might be one of the last things on your mind when you start a business. Instead, you’re worried about big-picture issues such as developing a business plan and finding investors. Most small businesses have someone assigned to HR duties by the time they start hiring employees, but when is the right time to change from “Bob does the HR paperwork” to “This is our new HR team”? We’ll break it down step by step.
Step 1: The Outside Experts
Before you have enough employees to justify a full-time HR person, you should consult with an employment attorney in your state to make sure your pay policies are legal. The Fair Labor Standards Act applies to you as soon as you hire your first employee, so be careful here. Draft an employee handbook with vacation, sick time and nondiscrimination policies, as well.
When you’re recruiting, you probably don’t need an outside expert if your focus is particularly on people you’ve worked with before, but if you need to hire someone from outside your circle, consider hiring a recruiting firm to help you out.
Step 2: The Inside Person
When you’re getting into the double digits for employee headcount, you really should have a dedicated internal person who manages human resources issues (in addition to their other duties.) But also keep in mind the number 15 — many federal laws kick into play when you hit it, such as the Americans with Disabilities Act. The person you hire at this time doesn’t need to be a full-time HR person, but they do need expertise, and if you’re going to assign a person from the senior team, pay money to get them trained.
Step 3: The Full-Time Expert
Reaching 50 employees is when many companies find having a real expert on board is critical. Additional federal laws activate at this point, such as the Affordable Care Act and Family and Medical Leave Act. Hire from the outside, and look for someone who has experience in small-business HR. It might be tempting to hire the hotshot from a neighboring Fortune 500 company, but keep in mind that HR people typically wear a single hat in enterprise companies: they either hire or they fire, but not both, or they do compensation or employee relations, but not both. In a smaller business, one person is much more likely to do it all, so you need someone with that type of experience.
Step 4: The Team
Once you have more than 50 people, it’s time to start thinking about the team. This will vary from business to business. Someone has to handle the regulation side of things, but what about employee development? Are your people looking to get promoted within the organization? How is your turnover? If you’re losing more than a handful of employees each year and you’re not in an industry like retail or food service, you need someone to help develop better policies, train your managers, and play a business-partner and employee-relations role. And if you’re expanding rapidly, you need a dedicated, experienced recruiter. Take a look at where you’re lacking, and base your decisions around that as you build your company’s HR team.
Suzanne Lucas spent 10 years in corporate human resources, where she interviewed and hired employees, managed the numbers and double-checked with the lawyers. Her writings have appeared in Inc. Magazine, CBS MoneyWatch, US News, Readers Digest and other publications. She focuses on helping businesses nurture great employees and helping employees enjoy great careers.