When Do I Need an HR Department?


Whether it employs 50 people or 5,000, every company must manage certain basic issues related to human resources. These generally include recruitment, interviewing and hiring of employees, orientation and training for new hires, maintenance of personnel records and compliance with Equal Employment Opportunity Commission guidelines and reporting requirements, and the administration of salary reviews, increases and health benefits.

In the early stages of development, such matters tend to be handled by principals of the firm or designated staff. As the company grows, the increasing size of the workforce creates pressures for a more professional and consistent approach to personnel administration. To determine whether your company should consider establishing an HR department, think in terms of the ratio that would result. How many HR personnel would be needed to manage your workforce? According to national statistics, the median ratio of HR staff to employees across all industries is 1-2 per 100; this number represents the total HR staff size, including professional, technical, secretarial and clerical employees.

Related: [Free Download] Example Employee Handbook

While the actual ratios for each company vary according to a number of factors, including geographic location, type of product or service and company size, it is a useful guide for determining whether your organization is large enough to support a separate HR staff. Generally speaking, if you have fewer than 200 employees, it may not be cost-effective to create a department which might include, at a minimum, one professional and one clerical or secretarial employee. An alternative solution might be to add clerical staff in the various units of the company to manage the paperwork associated with personnel administration. If your workforce is larger than 200, it may be time to create an in-house HR function.

In recruiting for the first human resources position, it is a good idea to look outside the company. You will want someone who already has HR experience and training and will be qualified to manage the growth of the department as the company itself continues to grow. The best candidate for this position will be well-qualified, but not too much so; be careful not to go overboard in establishing the qualifications for the job, or you may be deluged with resumes from over-qualified candidates who possess more experience than you need or can afford. An organization’s first HR staffer should be experienced in the basic functions: employment, compensation, benefits, records, maintenance, employee relations and training and development. One to two years’ experience is adequate if it is from an organization comparable to yours, and the ideal candidate would be one who had already started an HR department at another small company.

How did you hire your first HR employee?

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Rick Gossett

Rick Gossett

Rick Gossett has been COO of Tarkenton Companies for more than 20 years and is an expert in business operations, responsible for business software development, unique partnerships, business educational content, consulting, and more. Rick was the originator of Tarkenton Companies’ consulting services and, initially, personally answered every question. Before joining Tarkenton Companies, Rick owned and operated a private practice as a CPA. Prior to that, he was a Senior Manager at Pannell Kerr Foster in tax and audit, as well as Principal in Ernst & Young’s small business advisory group.