High risk of not having an HR department.
It takes just one word to get a small business to start thinking about implementing an HR department……LAWSUIT! Unfortunately, it’s the world we live in, and as much as you’d like to go out into the world thinking people have the best intentions, that isn’t always the case. Especially when it comes to employment issues. There is nothing that can sink a small business like a lawsuit can, and the first line of defense for preventing a lawsuit is an HR department. Employment laws vary from state to state, and it is truly in the employer’s best interest to hire a professional to help them navigate through the do’s and don’ts.
Now that I’ve got your attention, there are many benefits of having an HR department. If you are just starting a small business, there are so many concerns you will have on a daily basis varying from profit to inventory to budget, etc. The paperwork required for hiring employees alone will pull your focus from these essential concerns you should be addressing. And once you’ve hired a staff, whether 2 or 10, you will need to keep on top of performance reviews, disciplinary action, training and orientation, payroll, etc. These are all things a good HR department can either take off of your plate entirely or at least help you maintain.
You don’t need to hire a full-time employee.
Luckily for small businesses trying to do this on a budget, you do not have to hire a full-fledged HR department right off the bat. You can contract out this position until your company is stable enough to warrant hiring somebody to take on these tasks. There are many options for you out there including hiring a contract HR administrative assistant to handle the paperwork for you. Again this gives you the flexibility to not jump right into having a full-time HR department and offers the peace of mind you need to focus on the bigger picture.
Sad story example:
Just a quick story to drive the point home. About ten years ago, a friend opened a women’s gym. As expected it was a struggle for about six months and then things started getting a little easier, they were making more money which meant making bigger payments on their loans. Word was spreading and it was good, memberships were up, and she started thinking she could finally breathe easy. Then the employee issues started (I won’t get into details), but without an HR department, she didn’t have the guidance to keep documentation over employee issues or what documentation was necessary so when an ex-employee filed a wrongful termination lawsuit……the business went under and she was forced to declare bankruptcy. Moral of the story: Sometimes, the upfront cost is worth the long-term payoff.