How Much of Your Resources Should Be Spent On Human Resources?

April 30th, 2014 | by Annette H
How Much of Your Resources Should Be Spent On Human Resources?

It is one of the questions that often get neglected in the early phases of a startup business getting to its feet, but eventually the staff will grow and it will become more apparent that human resources activities can no longer be micromanaged. Many larger businesses may wonder just how effective their human resources spending is for their bottom line. So, no matter whether your company is new or old, huge or small—you may be asking, how much of our resources should we spend on human resources?

Nowadays, even businesses with a smaller staff find that they could use an HR department to really thrive. Human resources serve a myriad of purposes in a business. The most common and well known matters they cover include dealing with payroll services, employee behavior issues, and the hiring and termination process. However, an effectively managed human resources department can also be a major asset in training employees and keeping motivation and morale high. These are the sorts of added benefits that a human resources representative (for smaller companies) or department can bring to the table. While it is clear to almost all businesses that some form of a human resources department can be an added value to the company, for many businesses it can be unclear as to how much of their overall budget ought to be spent on human resources. While this is a resource that your business most definitely needs, it doesn’t have to be an investment that breaks the bank. Here are some things to consider when deciding how much of your resources should be spent on HR.

Determine The Size and Complexity of Your Company

The main factor in deciding how much money you should be spending on human resources is not only the size of your company, but the complexity. While determining the size of your company is as simple as counting the number of heads in your office, determining the complexity can be more difficult. Is your payroll process simple and touch-and-go? Or, do you have a wide array of issues that need to be tackled, like payments to independent contractors and vetting business expenses? Are there frequent contract negotiations for keeping employees on board? Sometimes smaller companies will require a larger human resources department because despite their small roster of employees, they have many complex HR issues to deal with. However, some larger firms can handle having just one human resources rep, or a small team. Obviously you won’t want to jump from no department to a massive HR crew, but it could be beneficial to actually consider the needs of your company in determining the size and scope of your human resources allocation.

Consider Hiring a Professional HR Firm 

If you want to add HR services to your small business, you do not have to necessarily hire an in-house HR team. Human resources firms can allow companies to have HR services they need without taking on full-time employees. Companies can find a package that fits their budget and easily outsource their HR needs such as payroll and employee conduct training, and leave other matters like hiring and recruitment to managerial staffers. This option can be the perfect choice for businesses that, despite their small size, feel that they would benefit from the addition of more human resources services. This can also free up managers to perform other work that may have been being neglected, such as morale management.

Don’t Avoid HR For Money Reasons 

It might feel like a great money-saving choice to forgo human resources services altogether. However, companies that do this often regret it later on when something goes wrong. HR services will protect your company against employee issues down the road. If your company needs human resources, do not skip investing in HR for monetary reasons. There is a reason that companies implement human resources in the first place. Having staff on hand that know some of the important laws dealing with employers and employees can help avoid many legal issues that could arise. Furthermore, many companies fail to see the inherent value in investing in keeping employees happy. Unhappy employees lead to decreases in productivity and serious employee turnover. Constantly spending money and time on hiring new people, and losing out on productive motivated employees will cost you a great deal of money anyway. Consider the value of human resources spending before you relegate it to the lowest of your priorities for your company’s success.

There are few companies, beyond single-person operations, that won’t benefit from the addition of human resources services. However, just because you are implementing HR doesn’t mean that you have to spend a fortune. There are plenty of ways for companies to invest in HR without breaking the bank or hiring a lot of new people.

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