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Avoid HR growing pains: Hirewell’s advice on when and how to expand your HR department

By Bill Gates Vice President - HR & Admin Recruiting

As your business grows, so do the needs and responsibilities of your Human Resources department.  Outlined below are the recommendations we give our clients that want to expand their HR department affordably and efficiently. To get an idea of your current recruiting spend, check out our new tool. 

Company size: 1-50 Employees

Many companies operate without a dedicated HR person during the beginning stages of the company, and the Human Resources responsibilities are handled by a founder or administrator with no real HR background.  This can work well for a while, but as the business starts to grow and things like compensation and benefits start to take up a large percentage of time, these leaders need to pass off these tasks in order to free up time for their core responsibilities.

At this point companies should consider hiring one of the hundreds professional employer organizations (PEOs) in the U.S. PEOs become the legal employer of the staff and handle all the HR functions, including payroll and benefits.  Firms do lose some flexibility in the coverage they can offer, but PEOs generally offer smaller companies Fortune 500-level benefits packages, which is often needed to attract the best talent.  

In terms of costs, PEO prices will vary depending on the company.  Two good methods to estimate are taking about 2 percent to 11 percent of total wages, or measuring per employees, which can run between $500 and $1,500 per employee per year. For very small companies with only two to five employees, some PEOs might price their services at a flat fee of $150 per month.  Therefore, when considering if a PEO is right for your organization, it is important to try and estimate the total cost of your HR functions and the opportunity costs of the firm’s leader spending time on HR.

Company Size: 51-150 employees

PEOs are generally still very efficient at the lower end of this range.  As the number of FTEs starts to grow, we recommend hiring a dedicated FTE to design and administer HR policies and procedures that cover two or more of these critical functional areas; performance management, compliance, benefits, leadership development, payroll and talent acquisition.  This HR leader must also be comfortable handling the “administrative” aspect of the role (employee relations and onboarding). They also need to be able to work within all levels of the organization and create HR value quickly.

Title: HR Generalist (with strong administrative and tactical expertise) and/or a HR Business Partner(tactical + strategic). Experience: 3-5 years Compensation: $55-90k

Company Size:  80-300 employees

As the company continues to grow, an HR leader is needed to oversee one area of the HR function, and can manage 1-3 HR associates.  In a smaller organization, this leader may oversee all functions and be responsible for budgeting, managing employee relations issues, negotiating with insurance vendors, developing training, recruiting plans, compensation and policy development.  At this level, the HR leader must have a blend of tactical experience and strategic vision.

Title: HR Manager Experience: 7-10 years Compensation = $80-120k Company Size: 200-5,000 employees

The HR leader of a company this size must be able to oversee the entire HR function, and will usually manages 3+ direct reports, each of which specializes in one aspect of HR.  Therefore, he/she should be an expert at managing people and providing strategic vision for the organization. 

Responsibilities include budgeting, strategic planning, managing severe employee relations issues and providing direction in each function.

Experience: Years = 10+ Title: HR Director Compensation = $120 - 180k (base)

For additional hiring advice, check out our posts onextending an offer and how much equity to offer employees.

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