Determining When to Establish an HR Department: Key Considerations and Guidelines

The decision to establish a dedicated Human Resources (HR) department is not one that should be taken lightly. It involves careful consideration of multiple factors, including the number of employees, the nature of the work, growth plans, and employee needs. This article aims to provide you with a comprehensive guide on when to consider creating an HR department and what the key steps are.

The Optimal Number of Employees Before an HR Department is Needed

The optimal number of employees before needing a dedicated HR department can vary based on the organization's structure, industry, and specific needs. However, a common guideline suggests that companies with 15 to 50 employees may start to benefit from having an HR function. This range marks the transition point where the complexity of managing HR tasks becomes significant.

Employee Count Considerations

Up to 15 Employees: For small organizations with a team size of up to 15 employees, leadership can effectively handle all HR tasks. These tasks include onboarding, benefits administration, and general human resource management. The workload is manageable and can be covered by the leadership team.

15 to 50 Employees: As the organization grows, the complexity of HR tasks increases. At this stage, it can be beneficial to have at least one HR professional or consultant. This individual can help manage day-to-day HR responsibilities, ensuring compliance with employment laws and regulations, and providing support to employees.

50 Employees: By the time an organization reaches around 50 employees, a dedicated HR department becomes essential. This is necessary to effectively manage recruitment, compliance, employee relations, and benefits. A dedicated HR department ensures that all HR tasks are properly addressed and that the organization is in compliance with employment laws.

Other Considerations

The nature of the work and the industry also play a significant role in determining when to establish an HR department. Industries with high turnover rates or those subject to strict regulatory requirements may need HR support earlier. For example, in the healthcare or technology sectors, where turnover is high and compliance with regulations is crucial, having an HR department can be beneficial even at smaller employee counts.

Growth Plans: If rapid growth is anticipated, establishing an HR function sooner rather than later can help manage scaling effectively. An early presence of an HR department can ensure that the organization is prepared for growth, providing a structured approach to managing employees and maintaining compliance.

Employee Needs: If employees express a need for support with issues such as benefits, training, or conflict resolution, it may indicate that HR resources are needed. An effective HR department can provide such support, improving overall employee satisfaction and retention.

The Evolution of HR Support

As the organization grows, the role of HR support evolves. In a small organization, a single individual may handle the basics of employee onboarding, benefits administration, and initial HR tasks. However, as the organization expands, the nature of these tasks becomes more complex, requiring supervision and oversight.

Stage 1: Basic HR Support: For organizations with up to 25 employees, a single HR professional can effectively handle initial tasks such as onboarding, benefits administration, and initial HR tasks. This individual can also help with candidate screening and basic HR policy development.

Stage 2: HR Supervision: Once the organization reaches about 25 to 60 employees, you will need someone with supervisor or manager skills to oversee the HR tasks. This person should have a solid understanding of HR laws and approaches to help write and review HR policies, rules, and procedures.

Stage 3: Full HR Department: Once the organization grows to between 60 and 80 employees, a full HR department becomes necessary. At this point, you should have at least two distinct individuals: one to manage the day-to-day HR tasks and another to oversee the HR processes and ensure compliance. The HR department should have the authority to implement policies and procedures that are respected and followed by all supervisors and managers.

Conclusion

The decision to establish an HR department should be based on the specific context and needs of the organization. Carefully evaluate the number of employees, the complexity of the work, growth plans, and employee needs. By doing so, you can ensure that your organization has the necessary HR support to thrive and maintain compliance with employment laws.