When is it worthy to consider the creation of an internal HR department? From how many employees is a HR a needed internal function and how much will it cost? What is the benefit to my company?
If you ask the above questions and you are a company that has 30 or more employees, the following comparisons may be of interest to you.
In the past, it was claimed that 1 HR person is needed for 100 employees of the company. Nowadays, is this ratio inadequate. Employee care is for the companies essential and determines its success and failure.
Many companies in our economy have long been not only production sites. With booming technological development, we begin slowly, but surely, sophisticated. This development is connected with another type of employees, different entitlements than ordinary workers in the past. I am specifically talking about IT fields which is experiencing its prosperity on all fronts. Tax or Financial specialists, Traders, Manager, Lawyers, Doctors, but also Masters of craft, whatever it is.
And now to the Human Resources department (HR). The need is relatively easy to find. When we have more and more people in the company, there is always someone who needs other people and we don't really know why.
Employees also ask us how, when and by whom to apply for annual leave, what to do when they go to sickness leave, who will give them income statement for the Bank, complain that they had a poorly calculated wage. Some are getting married, and that they say they are entitled to paid leave, they want to go to training or they may be interested in supplementary pension insurance offer or even Cafeteria?
Do I get the bonus and how it’s being calculated, can I get a Home Office and what are the rules? What is our corporate culture? What are my goals and who will assess them? I'm not doing my job great, I want an advice. I want to grow, what options do I have?
If you are facing above mentioned question, perhaps, there is time to consider to build a HR department.
Personally, I recommend that you first get advice what to concentrate on, how much should you should Invest and what HR Department will bring to your company.
What a good quality HR can bring to your company?
- Lower staff turnover = lower costs.
- Order and clear process settings from recruitment to exit = Increase in value of the company, or attractiveness for investors.
- Positive presentation on the market, advertising, will be "for free" to be done by satisfied employees.
- Professional conduct of employees internally and externally, can significantly increase the number of clients and motivate existing customers for long-term cooperation = increase in turnover.
- Elimination of the public authorities findings (social, insurance, Tax Office, Labour Office, foreign police etc.) = reduction of expenditure.
- Minimizing labor-law disputes that are very expensive and detrimental to the company's reputation (Invalid termination of employment, discrimination, competition clause).
How much will it cost?
Investments in HR can vary. It is advisable to hire HR Consultant who will propose a structure, number of people, the estimated cost of recruitment, development, education, benefits, salary benchmarks, employee satisfaction surveys, audits, legislative collateral, external consultancy. You would usually get the options from which you can choose. The costs are modeled according to what do you want, what are the needs and what do you wish to achieve.
If we consider building own HR with own employees, we need to consider on the cost side: market wages, bonuses, contributions charges, care, such as benefits, work means, office direct and indirect costs. We have to count also with the succession costs, training and other cost connected.
In case of consultant, the costs are billed, cooperation is flexible, however, there care also for other clients. We must therefore consider what our expectations are.
There are many options to be consider and it is good to combine them. Below, see how it may looks like, of course, everything depends how many employees do we have and what we expect to achieve.
Option 1. External HR Consultant - the e.g. 10 hours a week, usually billed after 1/2 hours, Internal HR Administration (contracts, agreements, on-boarding, basic recruitment, attendance, supporting documents for wages, etc.), the External payroll-processing agency.
Option 2. Internal Senior HR person, Internal HR Junior on Administration (PTE*), Internal payroll admin (PTE*)
Option 3. External Agency (VIRTUAL HR), which takes care of everything from A to Z. You will pay a fixed rate or progressive according to the number of employees.
If you would like to establish a sophisticated HR function, as they have in large companies, It is good to get there step by step. For HR Seniors, small firms are not as much attractive. The solution is to consider an externals on strategic matters, junior for basic operation.
What the professional HR do not proceed:
- Sweep the legislative misconduct under the carpet (e.g. employing people on 6 different companies, pay the minimum wage and the rest give to the agreement avoiding to pay the charges)
- Adjust and edit various confirmations for the employee, e.g. for the bank (in the above case, such a poor employee will have problems to get a mortgage, pension, can not to fall ill and especially for the ladies will be complicated to get reasonable maternity or parental benefits)
- To modify the work-hours working documents e.g. in the case of an accident at work
- Terminating the employment relationship without reason or employee forcing to leave various incorrect practices.
Since I assume that the above-mentioned grey-black practices are in decline and employers understand that it is necessary to be employer of choice, I wish all entrepreneurs good quality and nice employees who will move their business to the level above.
Next time on the topic Crisis Management in HR field.
* PTE - part time equivalent, someone who works few hours a week only,