When to Hire a HR Professional Instead of Using a Third-Party Vendor

When starting your own business, you wear many hats. From CEO to accountant, you do it all. But as your company grows and expands, the duties required by each one of these roles increases while the amount of time you have does not. Eventually, you need to enlist help.

One of the roles you may want to consider giving up is human resources manager (HR). While you may want to be directly involved with the hiring process to find people who are dedicated to and aligned with your company and culture, there’s much more to HR than hiring. 

HR professionals also handle payroll, track vacation time, understand employment laws, and manage benefits, among other things. Once your business expands, this easily becomes a full-time job and you may want to consider hiring a third party or internal HR professional. 

Not sure what the best option is for handling your company's HR operations? Here are a few questions to ask yourself and some guidance for how to deal with each one.

How much of my time is currently dedicated to HR duties?

Are you spending a lot of time handling employee travel, expenses, benefits, payroll, and tax filings, all on top of hiring new employees? Once HR activities are taking up so much of your time that it’s distracting you from running your business, it may be time to find help. 

How many employees are currently employed at my business?

The number of people your company employs is very important when determining how you should handle HR operations.

With less than 50 employees, you could potentially handle everything yourself. However, it might become overwhelming once you have more than 10 employees. At that point, using a third party would likely be the most cost-effective option, as the average HR professional’s yearly salary ranges from $48,000 to $60,000 according to ZipRecruiter. 

Once you have 50 or more employees, laws at the local, state, and federal levels start to affect your business. These laws include, but are not limited to, FMLA (the Family and Medical Leave Act) and the Affordable Care Act. Many of these laws are complicated and carry penalties if not properly complied with, so you may want to enlist professional assistance for interpreting them and ensuring you are compliant. 

Upon reaching the 100-employee mark, hiring an experienced HR professional onto your full-time staff will become more important. Having more employees means more HR work, so hiring your own person who can manage these duties will become more cost effective than using a third party.

Am I planning to hire more employees? If so, how many?

HR professionals—either a third party or internal—have knowledge and experience with hiring. This knowledge includes recruiting, writing offer letters, managing background checks, and onboarding. Furthermore, they are well versed in laws regarding hiring practices.

If you are planning to hire a few employees and your company is relatively small, you may be able to handle these responsibilities yourself. You could also use a third party at this point to recruit talent. A third party can work well if your company has a stable workforce with low turnover.

However, if you are looking to hire several new employees, are experiencing high turnover, or are looking to hire and promote from within, hiring your own internal HR professional will likely be more cost effective than using a third party.

This person will be able to save you time by reviewing and filtering resumes and handling the paperwork involved with the hiring process. Also, as an internal employee, this person will have a better handle on company culture than a third party and should be more accurate when selecting candidates. 

Do I know enough to stay legally compliant?

Not being well versed in employment laws and regulations can cause considerable liability issues for your business, as noncompliance can lead to penalties and fines. Conversely, being compliant can reduce costs and the likelihood of legal risk. HR professionals are well trained in employment practices and can keep your business safe by ensuring you are compliant.

Sources

https://www.forbes.com/sites/theyec/2016/03/25/five-reasons-its-time-to-hire-an-hr-professional/#55e2123875e5

https://www.entrepreneur.com/article/283054

https://www.inc.com/suzanne-lucas/5-signs-that-you-should-hire-an-hr-person.html

https://www.bfscapital.com/blog/small-business-hr/

https://blog.inovapayroll.com/when-to-hire-an-hr-pro

Marikar, S. (2018, March/April). How did you know it was time to hire a human resources manager? Inc., 34.

https://fitsmallbusiness.com/hr-manager-recruiter/