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 and 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 comes 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 used to follow a decades-long standard of one HR person for every 100 full-time employees. But research from the Society of Human Resource Management (SHRM) shows this is insufficient and the number differs based on the organization size. Smaller businesses have a greater number of staff, with an average employee-HR ratio of 3.4 to 1.

The need for HR staff decreases as the employee size increases because large enterprises tend to have more HR staff than small businesses do. They may need to add HR employees only when the need arises, such as when:

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

That’s why small businesses often go without an HR team as well. Plus, HR software systems automate tasks like payroll runs and time tracking, while external agencies can handle outsourced needs like recruiting. Sometimes, small business may not need a dedicated HR employee until they have well over 200 employees.

However, business needs vary. For example, a wise time to bring on your first HR employee is when you’re dealing with the Family Medical Leave Act (FMLA), the Affordable Care Act (ACA) or the CEO pay ratio reveal. Peter Rosen, president of consulting firm HR Strategies & Solutions, offers a more modernized guideline to go by based on his experience:

Suggested HR Hiring Timeline Based on Number of Employees

How to structure HR dept 2.png

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

However, guidelines aren’t always hard and fast rules. Your HR hiring timeline depends on the current state of your business. In this article, we’ll show you how you can structure your HR department when your business starts to grow beyond the 100 mark.

How To Optimize Your Structure in the Beginning

You’ve grown past 100 employees and your HR generalist/staff is finding it tough to balance everything on their own. It’s time to hire your second HR employee. This gives you generally two options 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

Mikaela Kiner believes that this structure could boost your efficiency. An HR assistant would allow the manager to offload some of the administrative work. This way, the manager would focus only on strategic efforts and not waste up to 50 percent of their time on repetitive tasks.

2. Hire a full-time recruiter. This person will take charge of one of the most taxing HR functions: staffing. Peter Rosen recommends this structure to save tons of time by using a specialist for recruiting. After all, recruiting requires specialization to hire lots of at a fast pace during the growth stages.

Two Person HR Department Structure Option #2

“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 structure is recommended for most companies. Many organizations bring in culture and leadership development experts when they reach 50-80 employees because these are vital focus areas. But you could outsource these needs too if they’re not on your list of priorities. Kiner agrees:

“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.”

Divide By Function As You Grow

As you grow your HR department, you should hire specialists to own specific HR functions such as benefits or employee relations. These functions will become more complicated with size. Our experts differ on this. Rosen says you can outsource compensation occasionally to build competitive salary structures and benefits packages. Kiner is for hiring an internal compensation expert early on who can also own your HR software systems.

Kiner explains, “Most generalists are not deep experts in [compensation]. 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

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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. In her 15 years of experience handling HR, Kiner has seen companies unsuccessfully trying to turn their recruiter into the head of HR. That never works.
  • Invest in software early. HR platforms can be used by even the tiniest start-ups as there are numerous affordable options. These solutions 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.

The best way to see who fits the role best is to assess people’s abilities first. This can be done using HR software features such as performance review, career development planning and employee lifecycle management. These features help you identify the top performers and their abilities. It’s a great way to know whom to depend on when you need a particular skill set.

To know more about HR software and its various features, you can read our buyer’s guide, which gives you an overview of the kind of HR solutions a particular type of buyer needs. Once you’ve understood the market, the next step is to compare solutions and their pricing with our free HR pricing guide. You can also read our guide on the essential HR features and how you can save money while searching for the right software.

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