How to Structure Your HR Department As Your Company Grows

Things are getting out of hand.

Whether you’re the long-standing HR manager at a company hitting its growth spurt, or you’ve just been hired as an organization’s first dedicated HR employee, the fact unfortunately remains the same: It’s all on you.

Payroll, recruiting, compliance, even tracking vacation days all fall on your shoulders. And the workload is only getting worse.

This is you.

 

But then, relief.

Room opens up in the budget to hire some help, and just like that the “HR person” becomes the “HR department.” With the transition comes questions. How should you best structure this new HR department? How do you divide up the work? And what happens when a third, a fourth or even a fifth HR worker come aboard?

We’re here to answer these questions, but first let’s dispel a common HR department myth.

Why 1:100 Is An Antiquated Guideline

The question of how many internal HR employees you should have on staff is almost universally answered with a decades-long standing rule of thumb: you need one HR person for every 100 full-time employees.

Where this rule came from, no one really knows, but research shows organizations are falling into line. The Bureau of National Affairs found the median ratio of HR staff to full-time employees in a large sample of organizations in 2015 to be 1.1:100.

You might be tempted to follow suit, but Peter Rosen, president of consulting firm HR Strategies & Solutions, says 1:100 doesn’t reflect the current HR landscape.

“I don’t think it’s a good guideline anymore,” Rosen says. “That number goes back 30 years, and that’s before there was HR software and all this online recruiting. You may have a 1,000 person company, but it doesn’t mean you need 10 HR people. It’s so company and situationally dependent.”

For example, here are a few common situations where you may need to bring HR employees onboard at a quicker pace:

  • Facing complicated compliance issues
  • Hitting an unexpected and lengthy growth period
  • Having one or multiple remote locations or branches
  • Lacking necessary processes and systems

On the flip side, with HR software systems able to automate tasks like payroll runs and time tracking, and external agencies able to take on outsourced needs like recruiting, a dedicated HR employee may not be needed until you have well over 200 employees.

Needs vary, but Rosen offers a more modernized guideline to go by based on his experience:

Suggested HR Hiring Timeline Based on Number of Employees


 
Fifty employees isn’t an arbitrary number these days. It’s when things like the Family Medical Leave Act (FMLA) and provisions of the Affordable Care Act (ACA) come into play, making it a wise time to bring on your first HR employee.

Mikaela Kiner, founder and CEO of consultancy uniquelyHR, spent 15 years handling HR at the likes of Microsoft, Starbucks and Amazon. According to her, if you’re hitting the 150 employee mark at a high velocity, you’re going to need help.

“If you’re growing, I would say bring in that second person at the 150 mark,” Kiner says. “That rate of growth demands a lot more infrastructure and process.”

Unfortunately, any guideline you find is only going to be just that: a guideline. The truth is that your HR hiring timeline really does depend on your organization’s unique situation.

How To Optimize Your Structure in the Beginning

When it’s time to hire your second HR employee, you generally have two options for how you’re going to structure your burgeoning HR department.

1. Hire an HR assistant. In this scenario, you become the head of HR to handle strategic needs, such as employee relations and performance management. The newly hired HR assistant handles administrative tasks like managing the HRIS, filing paperwork and posting job ads.

Two Person HR Department Structure Option #1


 
Kiner says this structure can help maximize your efficiency.

“One of the failings even in big organizations can be asking your HR manager to do it all,” Kiner says. “It dilutes their time and ability. Forty to 50 percent of what they’re doing is administrative work, so they’ll want an HR assistant to offload some of that and focus on strategic efforts.”

2. Hire a full-time recruiter. This person will take charge of what’s often the most taxing function in the HR department: staffing.

Two Person HR Department Structure Option #2


 
Rosen says recruiting is often the first HR function that needs specialization, and breaking it out should save heaps of time as the company rapidly grows.

“I think the staffing piece needs to be broken out, because it’s so time consuming and such a full-time type of thing,” Rosen says. “If the volume of hiring is pretty high and consistent, either through growth or turnover, then you’re going to need a person dedicated to the recruiting aspect of HR early.”

When room opens up for your third employee, hire an assistant or a recruiter, depending on your remaining need.

Recommended Three Person HR Department Structure


 
This is recommended for most companies, but you may choose to go another direction depending on your organization’s goals and priorities. Kiner notes that many organizations, even with only 50 to 80 employees, bring in culture and leadership development experts early because they know those are areas they want to focus on.

“You can outsource that and look for outside programs, but if that’s something the company knows it wants to develop and provide to employees on an ongoing basis, I’d say over-resource and make sure either the senior-most person or the second person you’re bringing on really has the skills and ability to do that work with the leadership team,” Kiner says.

Divide By Function As You Grow

As your company grows, so will your HR department. When this happens, you can start hiring more specialists to own specific HR functions that will become more complicated with size.

Though Rosen says you may only need to outsource compensation as an occasional project to build competitive salary structures and benefits packages, Kiner recommends hiring an internal compensation expert early on who can also own your HR software systems.

“Most generalists are not deep experts in [compensation],” Kiner explains. “A lot of times you have compensation and benefits people who are often good with [HR] systems, and you can put that all under one person.”

Once you have compensation covered, your needs may vary by industry. Here is an example of what a six person HR department might look like:

Recommended Six Person HR Department Structure

In this scenario, here’s how HR duties are divided up:
 

• HR Director: Handles the strategic vision of the department and approves all high-level decisions while handling communications with C-suite.

• Recruiting Manager: Works with hiring managers to create job listings, parse through resumes, conduct interviews and extend offers while managing the applicant tracking system (ATS).

• Employee Relations Manager: Handles onboarding needs, coordinates performance management efforts and manages employee disputes while recommending policy changes for approval.

• Compensation Manager: Develops competitive pay and compensation structures within predetermined budgets, manages core HR software systems and ensures error-free payroll runs and benefits administration.

• Training Manager: Works with department managers to develop effective training courses that enhance skills, creates materials and assessments and manages any learning management platforms.

• Compliance Manager: Ensures that the company is up-to-date with all health, employee and safety regulations, while managing necessary employee certifications.

This department format ensures that all core and strategic HR needs have an owner, and the flat structure allows the HR Director at the top to remain in-the-know on important projects and discussions.

Things To Keep In Mind As You Grow

Underneath your five managers above, you may have many assistants and specialists. You could also have a co-HR director by your side, or decide to break up the workload by office location or country.

It’s your department, and you should structure it in whatever way you think will generate the best results that align with organizational goals. Here are a couple of final best practices to keep in mind as you grow your HR department:

• Don’t shove square pegs in round roles. It’s tempting to take the people you have and retrofit them to your needs, but if someone isn’t a great fit for a new role, don’t force it. Kiner sees companies try to turn their recruiter into the head of HR all the time, and it usually ends disastrously.

Invest in software early. With the rise of HR platforms aimed at even the tiniest start-ups, there are now a number of affordable options to help businesses automate necessary tasks like tracking clock-ins and running payroll—saving money on hiring costs and lightening the overall workload. Rosen recommends companies start looking at software solutions around the 35 employee mark.

Want to learn more about HR software? Head to our helpful HR buyer’s guide to compare systems, functionality and real user reviews for over 350 systems.

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