A human resources (HR) team is responsible for various tasks, from recruiting and onboarding new employees in a company, to managing payroll and benefits. The ideal HR headcount will vary depending on the size and needs of the organization. Smaller employers often report lower HR staffing ratios as they often have less complex HR needs and fewer resources to dedicate to a large HR department.
At Stratus HR, we understand the intricacies of determining the perfect HR team size for your organization. Balancing efficiency with cost can be challenging, but you do not have to navigate it alone. We can empower your business with the tools, expertise, and insights you need to optimize your HR processes. Book a free consultation with us today.
Stacey Gibson, Director of Human Resources at Stratus HR breaks down everything you need to know about how big your HR team should be.
Want to learn your ideal HR team size?
While we don’t have a direct answer to the exact size, we can offer guidelines that can help you determine what works best for your business. You can use a ratio, which should be proportional to the employees in a company.
For example, a company with 100 employees may only have a small team of 1-2 HR professionals, while a company with 1,000 employees may have a team of 10 or more HR professionals. The HR-to-employee ratio is crucial in determining the right team size.
As your company grows, you may need to hire additional HR staffers to maintain efficiency and meet organizational needs. Keep in mind that if your HR team is too small, they will be overwhelmed and unable to keep up with the demands.
Ultimately, the ideal HR headcount size will vary from one organization to another. The best way to determine the right team size for your company is to assess your needs and ensure the team can handle the workload.
To find out where your business stands and how many HR team members you should employ, check out our calculator.
Understanding HR Staffing Ratio
Understanding the HR staffing ratio is essential for ensuring that your HR team is adequately equipped to handle the demands of managing your workforce.
The HR staffing ratio is a crucial metric that helps organizations determine the optimal number of HR staff members needed to effectively manage their workforce. This ratio is calculated by dividing the number of HR staff members by the total number of employees in the organization.
A well-staffed HR department is critical to the success of an organization. It enables the HR team to focus on both tactical and strategic tasks, such as employee career growth and development, engagement initiatives, and wellness activities. On the other hand, an understaffed HR department can lead to burnout, turnover, and decreased productivity.
Ensuring the right HR staffing ratio helps maintain a balance where HR professionals can perform their duties efficiently without being overwhelmed.
HR Functions and Responsibilities in Small Businesses
Small businesses usually provide only the most essential human resources services to lower the HR headcount. However, economies of scale favor large companies, so even when cutting back, small businesses still need a higher HR ratio of staff-to-employees. More HR involvement is necessary to manage the complexities of talent acquisition and employee relations, especially during labor market fluctuations and recovery periods.
The Society for Human Resource Management (SHRM) suggests the following staffing levels for HR departments:
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1-25 employees: 1 HR person
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26-50 employees: 2 HR people
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51-200 employees: 1 HR person for every 50 employees
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201-500 employees: 1 HR person for every 100 employees
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500+ employees: 1 HR person for every 150 employees
These estimates are based on the average human resource department size as a percentage of the total workforce. A company with a more intricate organizational structure may need a larger HR department than the suggested number to manage all HR tasks effectively.
For smaller businesses, this could be a choice between securing the engineer who can make vital adjustments to their company’s next major product launch, or hiring a skilled HR professional. That HR professional can supervise compliance, handle all staff issues, boost morale, recruit and retain your top talent, and help you find a desirable benefits package.
When you need both the engineer and the skilled HR professional, your best option may be outsourcing HR to Stratus HR. Request a free consultation for more information!
Common HR Responsibilities for Small Businesses
There are many requirements for HR staff to perform, even for a small business.
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Recruiting: Drafting job postings, distributing advertisements, reviewing resumes, conducting interviews, setting up follow-up meetings, and updating applicants on their status.
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Offering jobs: Gathering data for making offers, dealing with manager and applicant negotiations (as well as the back and forth), and ensuring pre-employment tests are taken.
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Preparing for new employees: Setting up their email, badges, and other technological and security needs, providing paperwork, conducting training, and orienting with the workplace and coworkers.
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Scheduling employees and processing payroll: Keeping track of employee hours worked, communicating with upper management for necessary approvals, issuing payroll deductions and checks, adjusting withholdings as needed, and fielding inquiries from workers about their pay.
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Taking care of benefits: Benefits administration includes searching for and implementing new plans, holding open enrollment meetings, administering enrollments, setting up employee deductions, reconciling benefit plans, communicating with a broker, and answering employees’ questions.
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Managing employee relationships: Researching conflict management in various contexts, updating the employee handbook, developing and implementing procedures for conflict reporting, holding meetings with staff, supervising performance evaluations and related record keeping, and providing ongoing staff and professional training.
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Keeping everything in compliance: Guaranteeing compliance with employment laws, informing employees of any changes to these laws, assessing your staffing levels in light of the new rules, crafting systems to track your progress toward compliance, and filing all required reports on time.
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Encouraging morale and employee engagement: Making sure your employees are happy and healthy and implementing programs, surveys, and other measures to boost morale.
Factors Affecting HR Team Size
Several factors can influence the size of your HR team. Understanding each of these can help you determine the optimal HR staffing for your organization.
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Industry: Different industries have varying HR needs. For example, industries with high employee turnover or diverse roles needs may require larger HR teams to manage recruitment, compliance, and employee relations effectively.
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Organization Size: Larger organizations tend to have more complex HR needs, necessitating larger HR teams to handle the increased workload and ensure all HR functions are covered.
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Location: Organizations with multiple locations may require more HR staff to manage the workforce across different regions, ensuring consistent HR processes and support.
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HR Technology: The use of HR technology can significantly impact the size of the HR team. Advanced HR software can automate many tasks, reducing the need for manual labor and allowing a smaller team to manage a larger workforce efficiently.
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HR Processes: The complexity of HR processes, such as recruitment, training, and employee relations, can affect the size of the HR team. More intricate processes may require additional HR staff to manage them effectively.
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Employee Ratio: The number of employees in the organization directly impacts the size of the HR team. A general rule of thumb is to have at least one HR staff member for every 100 employees, but this can vary based on specific organizational needs.
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HR Involvement: The level of HR involvement in the organization can also influence the size of the HR team. Organizations with higher HR involvement in strategic planning and employee engagement may require larger HR teams.
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Budget: The budget allocated to the HR department can impact the size of the HR team. Organizations with limited budgets may need to prioritize their HR needs and allocate resources accordingly, potentially leading to a smaller HR team.
By considering these factors, organizations can determine the optimal size of their HR team and ensure they have the necessary resources to effectively manage their workforce.
Minimizing HR Costs For Small Businesses
It’s important to understand where costs come from so that you can keep HR manageable for your small business. The main categories that make up HR costs are salaries, benefits, training, development, and compliance.
Of these, salaries and benefits make up the largest portion. To reduce these costs, you can be strategic about hiring and offer competitive salaries and benefits packages. You can manage training and development costs by ensuring that employees are properly trained and that they have the opportunity to develop their skills. And by staying up-to-date on employment laws, you can ensure that all HR policies and procedures are compliant to minimize compliance costs.
Managing these items can be daunting and expensive for small businesses. Luckily, there are ways to keep costs manageable by outsourcing your HR. Here are four tips to help you do just that:
Use An HR Software System
There are various software systems available that can help small businesses with their HR needs. By using one of these systems, you can automate many of the tasks that would normally be done by an HR person, such as tracking employee vacation days and creating performance reviews. This can save you a significant amount of money in HR costs.
Outsource Your Payroll
One of the most time-consuming and expensive aspects of HR is payroll. Luckily, some companies will handle all of your payroll needs for a reasonable fee. This can free up time to focus on other aspects of your business.
Hire An HR Consultant
If you don’t have the time or resources to manage your HR needs on your own, consider hiring an HR consultant. These professionals can help you with various tasks, such as answering compliance questions, creating employee handbooks, and developing training programs. Hiring an HR consultant can reduce costs while getting the expertise you need.
Use An Online HR Resource
Various online HR resources can provide templates for employee handbooks, job descriptions, and more. An online HR resource can save time and money while getting the HR help you need.
Keeping HR Costs Manageable With Stratus
Stratus HR is a PEO built for and by HR professionals. We combine software made to make your life easier with a team of HR experts ready to offer support and consulting. With Stratus, you can minimize time spent doing administrative HR work and instead focus on the important people work, like employee engagement.
To learn more about how we can support your HR team and help fill in the gaps, book a free consultation with us today.
