Does my small business need a human resources professional?

From paying the bills to finding and attracting the best talent, small businesses have a host of pressing challenges. Among all those concerns, it can be easy to overlook the importance of HR.

But does a small business need human resources? What are the benefits of HR teams for small businesses? And what options do you have for building a small business HR function? Read on to find out.

Does a small business need human resources?

In the UK, there is no legal obligation for businesses of any size to have a human resources department or to outsource HR to a third party. So the simple answer is: no, a small business doesn’t technically need an HR function.

However, any business with more than a handful of employees needs some way to manage human resources-related matters, such as:

• Supporting continued professional development
• Developing a positive, inclusive company culture
• Managing the performance review process
• Handling paid leave and sickness-related absence
• Overseeing remuneration and non-salary benefits
• Ensuring the business is compliant with employment laws
• Hiring and retaining talent

But human resources is about more than dealing with a handful of core tasks. With that in mind, let’s take a look at some of the key benefits of human resources for small businesses.

4 benefits of HR teams for small businesses

Keep team members focused on key responsibilities

Clearly, without a dedicated HR department, all of the work listed in the previous section will need to be handled by someone. Often, the business owner will take responsibility for these important tasks. But there are problems with this approach.

First and foremost, focusing on HR-related responsibilities takes business owners away from the myriad other vital tasks they perform, from meeting with potential customers to planning future business strategy. These distractions can ultimately damage the chances of achieving your business goals.

Beyond this, human resources is not a hobby, or something that can be worried about between other tasks. Without a dedicated HR function, key responsibilities may be overlooked or performed poorly. As we will go on to discuss, this can lead to a range of problems, from damaging retention to hiring the wrong people.

Boost employee engagement and retention

Again, at small businesses, the sizable task of listening to and understanding employee needs often falls to the owner. But they may not be best placed to deal with complaints or figure out which issues should be addressed first. Furthermore, employees may not feel comfortable addressing grievances to the person who pays their wages.

This isn’t about giving employees a platform to vent for the sake of it. If employees do not feel they are being listened to, they are more likely to quit. By hiring a dedicated HR professional, small businesses can feel confident that employee needs will be heard, thereby improving engagement.

Not only that, but human resources also takes the lead on various other activities that are conducive to building an engaged workforce, from creating training and development programmes to improving communication and giving recognition for strong performance.

Hire the right talent for your organisation

Without the right talent in place, small businesses are unlikely to achieve their growth plans. What’s more, hiring the wrong people can cost them vast sums of money.

According to the Recruitment and Employment Confederation, a single poor hire at the equivalent of mid-manager level, with a £42,000 salary, could cost a business more than £132,000 in wasted training, lost productivity, and increased turnover. This is an unnecessary outlay that few small businesses can afford.

It therefore makes sense to mitigate the risk of a bad hire by handing responsibility over to an HR professional, who is best placed to ensure you choose the right person for the job.

Build a positive workplace culture

Every business has a workplace culture, but it takes time and effort to craft a positive, inclusive, high-performance culture. HR professionals have the skills and experience required to build a company culture that aligns with your mission and values.

The benefits of a positive culture are wide-ranging. For instance, research from Glassdoor found that 77% of adults would consider a company’s culture before applying for a job, while 56% believe culture is more important than job satisfaction when it comes to job satisfaction.

Furthermore, 63% of UK employees cite company culture as one of the main reasons for staying in their current job, and 71% would look for a new job if the workplace culture deteriorated.

3 approaches to building a small business HR function

By now, it should be clear that human resources can offer significant benefits to small businesses. In this section, we will look at three strategies for implementing your first HR function.

Hire an HR professional

The most obvious approach is simply to hire a full-time HR professional to handle all the work. There are positives and negatives to this approach. On one hand, it allows businesses to manage key human resources tasks in-house, while ensuring there is always someone on hand to deal with HR issues.

However, the smallest businesses may lack the budget for a dedicated HR professional. Also, as with any role, human resources professionals have their own strengths and weaknesses. It may be difficult to find a genuine all-rounder capable of fulfilling all your HR-related needs. Even if you find the right candidate, you may not be able to afford them.

Want to know how much hiring HR professionals will cost? Download our most recent Salaries and Skills Guide to find out.

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Outsource HR management

Another option is to outsource HR to a third party. This is almost always cheaper than hiring a full-time HR professional, while still giving you access to the expertise you require. You may also be able to leverage a project-led hiring strategy, meaning you only pay for HR resources when you most need them – such as during a recruitment drive.

The downside, of course, is that an outsourced HR function will also work for multiple other businesses. This can cause delays in handling key tasks, which may have an adverse effect on your business and employees.

Invest in HR software

Alternatively, you can invest in one of the many HR-related apps aimed at small businesses. Most are designed to support users with a specific element of human resources, such as onboarding, training, or hiring.

While HR software is scalable and relatively affordable, it can never replace a dedicated HR professional. Also, while it undoubtedly saves time, it still requires some human input. As we have already noted, this risks distracting your talent from adding value elsewhere.

What's next?

Looking for more insights like this? Read our essential steps to building a smart hiring strategy or download our latest salary and skills guide for HR.

Want to grow your HR function? Speak to the Michael Page Human Resources team today to start your hiring conversation.

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