Does My Small Business Need HR?

November 16, 2022

A lack of HR can have a greater impact on smaller businesses. This is because mistakes and poor resource management can be more costly and have more of an impact on smaller businesses. But how do you know when your business needs HR? Below we look into the challenges facing small businesses that operate without an HR function and how they can combat this, such as utilising  HR consultancy services and other external HR outsourcing support. Formal HR support can help you balance the informality and ‘goodwill’ often associated with HR practices in SMEs with your HR compliance. Utilising a trusted HR partner to support flexibly without taking an overly bureaucratic approach to HR matters allows you to concentrate on running your business, with the comfort you are on top of your legal obligations.

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The dangers of operating without HR

There are a number of different areas which can be negatively affected when a business operates without HR.


Not having a dedicated HR function can have a negative impact on your recruitment and onboarding. When you’re recruiting, you may not have the time to properly check references and vet your applicants. An experienced HR professional will also know the most successful methods to recruit new employees, including holding effective interviews. If you don’t have the time, knowledge, or resources to investigate candidates before they’re hired, you could end up hiring the wrong person, which will create problems for your business.

A dedicated HR function in your business will also be able to properly onboard your new hires. This is an essential part of the recruitment process and helps new employees to become accustomed to the business’s culture and to know what will be expected of them. Organisations that have an effective onboarding process are usually more likely to have a higher retention rate and employee engagement. Not onboarding your new hires successfully will leave them disengaged and may lead to them leaving the company quickly.

Compliance with employment law

Having access to external HR resources for your business will help your organisation to comply with employment law and requirements. This will involve avoiding unfair dismissals and other issues that could lead to an employment tribunal if they’re not handled correctly. This could be a very expensive mistake for the business, sapping time and resources. HR will be able to avoid this by ensuring the required paperwork is in place and the proper processes are followed for both business and staff matters.

Slower HR processes

When you don’t have a dedicated HR function, you could find that HR processes are slow and inefficient. It might be that it’s the CEO’s responsibility to approve holidays – whilst this might work fine when you only have a few employees, as the business grows, so will the holiday requests. It’s likely that the staff member who’s supposed to be approving the holiday will prioritise their “actual” job over the HR processes, meaning approval time is slowed down. It will also result in the employee not being able to focus on their other responsibilities as they will be weighed down with HR matters.

Not having an available HR resource can also mean accuracy is compromised. This can cause problems in all sorts of areas, especially for payroll. On the other hand, if you use a dedicated HR professional, they’ll know how to properly undertake HR processes, so they’re done accurately and efficiently.

Lack of performance management

When a business has HR support, it’ll be able to implement an effective performance management system. This can help to identify where staff have gaps in their skillet and ensure they have the right training to fill these gaps. It helps to ensure that any staff who require additional support receive it and also any individual who is exceeding expectations gets recognised. When employees are given the opportunity to learn and develop, they are often more engaged and committed to their business. It also means that your staff has the best training and knowledge to perform their jobs to the best of their ability, making your business stronger overall. Without any HR support, you may not have the resources to dedicate to performance management, and your staff and business could fall behind.

For readers interested in enhancing their understanding of employee experience and its importance for small businesses, we recommend reading our article on “What is employee experience and how can you improve it?”. This article provides valuable insights into what employee experience is and how small businesses can improve it to create a more productive and engaged workforce.

When should a small business consider HR consultancy support?

Every small business will be different. It’s recommended that a business utilise some sort of formal HR support when they reach 15-25 staff, however, in the UK you will need to consider matters such as pensions when you have even 1 employee. Having an existing colleague pick up simple HR tasks in your small business may cover some of the basics you require from an HR function, but having on-hand, professional advice and support when you need it most through HR consultancy outsourcing proves invaluable, especially in smaller firms.

How to implement HR in your small business

Your business might need to employ a dedicated HR employee to run your HR function. You should also ensure your HR employee or team is equipped with the right tools – this is especially important if you have just one person operating HR for the entire business. Using HR software and cloud-based tech solutions can help your HR employee to streamline their processes and work much more efficiently.

It may not be appropriate to hire a dedicated HR employee for your small team or you may then need to complement your existing HR function with external HR support, especially when there is an urgent matter or larger project that your HR employee is unable to handle on their own. In that case, you can use HR consultancy. Our HR consultancy service is perfect for small businesses who need expert support in setting up their HR function, writing HR policies, or if you just need some support for a project that your current staff doesn’t have the time or skillset for.


If your company needs HR and recruitment support, Vero HR can help. We can provide you with dedicated HR consultancy services to effectively manage your workforce and assist with your small business HR requirements. Contact us to find out how we can help your business.

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