All businesses have an HR department, right?

Actually, it might surprise you to know small businesses don’t always need a dedicated Human Resources department. In fact, some forgo one entirely to save on costs and resources.

But that doesn’t mean some form of HR function isn’t necessary. Successful businesses can’t grow without the ability to handle employee conflict, development, hiring, and many other crucial HR issues.

Read on to learn more about how HR functions in a business, why you need HR policies, the responsibilities of the HR function, and HR department alternative solutions for small businesses.


Does my business need an HR department?

The need for an HR department relies heavily on the size of a business. For example, a company with 25 employees may not require an entire HR department because there just may not be enough work for full time HR staff. Or for instance, if you work in a small, established business environment, you may not need even one dedicated employee because chances are you have a lot of long-term employees and don’t do much new hiring.

If you have trustworthy resources—like an HR consultant or other professional—you can probably get away with not having a dedicated HR department for your business.

What does the HR department do?

Before we get into HR solutions for your small business, it’s worth addressing what the HR department actually does. As the name suggests, its key role is in supporting the people within your business. Other HR tasks include:

      1. Recruiting new employees
      2. Fostering a safe work environment
      3. Managing employee relations
      4. Administering Payroll
      5. Managing compensation and benefit packages
      6. Handling disciplinary needs
      7. Ensuring compliance with labor laws and regulations
      8. Overseeing training programs
      9. Supporting employee development
      10. Assisting employees


Balancing these elements is critical in maintaining a smooth-running, successful business. For more detailed information on the roles of HR representatives, click here.


What HR Department alternatives are available for small businesses?

Smaller companies often employ a team, or even a single individual, dedicated to HR. Some businesses outsource their HR needs to have an expert handle employee issues when they arise. Alternatively, a company might request some employees take on certain HR duties in addition to their professional roles. Other options include using a Professional Employment Organization (PEO) or HR software to help with HR tasks like payroll, hiring platforms, and onboarding tools.

Tip: Consider consulting a career coach for help tailoring strategies to use when specific situations arise. Career coaches may engage in mock conversations via scripts and conduct other exercises with you to prepare you for possible scenarios.

Where can I find more information?

Selecting the right HR solution for your company can be challenging. The good news is there are plenty of resources out there to help guide your decision. You can try to:

      1. Contact your local chamber of commerce. Many have small business resource centers where SBOs like you can share experience and knowledge with other business owners.
      2. Consider subscribing to the Society of Human Resource Managers (SHRM). You’ll gain access to member-exclusive sample policies, legal and compliance resources, HR news, free webcasts, HR Magazine, Ask an HR Advisor service and more.
      3. Consult an employment attorney to audit your business and advise you on ways to strengthen your HR function.
      4. Consider reaching out to a third-party HR organization or staffing company for expertise on management, benefits, compliance, payroll, and more.


So, do I need an HR department?

Ultimately, you get to decide which HR function is right for your company and how your time is best spent. For some business owners, HR responsibilities end up consuming too much of their time and energy. For others, the additional role isn’t as huge a commitment. As a business owner if you choose to personally handle HR duties, a good rule of thumb—and this goes without saying — if you notice a marked dip in your or your employees’ productivity levels it might be time to outsource.


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