Should You Be Hiring an HR Manager or Outsourcing Such Needs?

Many small businesses have an in-house human resources manager that will handle the nuts and bolts of interviewing prospective employees, overseeing payroll, dealing directly with any employee issues and/or questions, and making sure the office keeps rolling along smoothly.

Other companies, however, either outsource such needs or even try and do things if you will on the fly. Without a person on the scene to handle HR needs, things can get dicey at times.

So, which route is best for your small business to take? Should you hire someone full-time in-house to oversee the HR needs of the company or should you outsource such responsibilities?

In many cases, companies sporting 50 or fewer employees will not include a formal HR department. Oftentimes, the responsibilities that typically are directed to the person in charge of human resources will be moved along on to various heads of departments, i.e. finance team gets to handle payroll, department heads would oversee any internal issues related to their employees such as complaints, questions regarding health insurance coverage and the like.

As many companies discover over time, however, shuffling those responsibilities along to different managers can become a problem.

Among the potential problem spots:

  • There is uncertainty at times among department managers if they are passing along the right information and resources to employees;
  • Employees could find themselves questioning management if  they are receiving the right information;
  • Departmental managers, who oftentimes are saddled with enough tasks, begin to tune out the HR issues, therefore leaving many unanswered questions or problems;
  • The potential for lawsuits increases in the event someone who is not properly trained and informed on HR matters passes along bad information. That information an employee relied on to make an important decision in the workplace ends up harming the individual financially, leading them to in turn come back at the company from a financial stand point.

In the event your small business is looking to hire someone to head up an HR department, what are the qualifications you should be seeking?

First and foremost, compile a mission statement as it relates to the individual that will oversee your HR department:

  • What do you want from them and the role?
  • What are the assets and any liabilities that having an in-house HR manager will bring your company?
  • Will it be cost-effective to have your HR on site or will it be better to outsource the role?

The key factor is finding an individual who is comfortable with an entire plate of responsibilities. This is important given that you have doers and followers. If someone is not in tune with overseeing an important department like this, pass on them. You need an individual that is not only well-versed in HR practices from a legal point of view, but is not afraid to hire and fire as needed

Finally, be sure you clearly get the pros and cons of the hiring in-house or going the outsource route.

Your human resources individual or team will be one of the most important facets of your small business.

Make sure you are resourceful in making the right decisions so that your business is the better for it.

Photo credit:

Dave Thomas, who writes on subjects such as HR Outsourcing and payroll services, writes extensively for San Diego-based

Views: 1599

Comment by Russ Recruits on May 9, 2012 at 5:38am

Interesting piece - I have just joined an SME in the UK to handle recruitment and HR. 3 Weeks in and we had an inspection by UK Border Agency to ensure we were compliant, as we employ skilled migrants.

Cue a desperate 24 hrs of filling in the gaps, putting together HR files for all staff etc etc. Glad to say we passed with flying colours - but if I hadnt have joined when i did, different story.

It confirms to me that all companies need to have a dedicated in-house / external HR function, regardless of how small. Leaving it to individual managers leads to an uneven and un-kept HR function.

Comment by Peter Ceccarelli on May 9, 2012 at 12:50pm

Companies of any size are at risk if they do not have a dedicated HR person.  It's obvious as you pointed out the legal rammifications that can and do arise, and if you're not a trained and dedicated HR professional who knows the ins-and-outs of the entire process, it's not worth the liability to the company. 


The problem with an outsourced HR role is typically that person is not tuned in to the company and employee dynamics, therefore they are most often clueless when it comes to balancing and supporting the culture, initiatives, etc.  The security for managers who have a dedicated HR person is the level of trust and confidence of the relationship as we guide them in regards to employee relation issues, annual performance appraisal process, etc.  I manage all of the HR functions for a company of 160 people and because I've been here a long time, I've literally hired 95% of the people who work here, and have guided succession planning, identifying strengths and weaknesses in order to develop our employees and work out their kinks when things go sideways.  I'm personally invested in the success of the company. 


Good article.  Thanks for bringing the subject forward.

Comment by Dave Thomas on May 9, 2012 at 12:59pm


Thank you for the comments. I agree with both of you about having a hands-on HR person on staff. We live in a lawsuit-happy world and having someone fully in charge of the company's HR needs can certainly lessen the chances of one's business being sued. Without a dedicated HR person or even team on hand, things can easily fall through the cracks.


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