October 14, 2019
The Average Cost Of Hiring A Full-Time HR Professional
Looking to build an in-house resource department? Or do you want to outsource HR functions? These decisions can be better be weighed when you know the true cost of your HR operations.
However, most business owners and C-suite executives only have a surface level knowledge of these expenses. The only see the HR costs that can be deciphered from the financial statements of the corporation. So one simply goes line by line, adding up costs like outsourcing payroll, workers insurance, and taxes from the Profit and Loss Statement, and add up the total.
But while these are the hard costs of having a workforce, they don’t give you a complete picture. There are still many hidden costs to factor in before you decide to bring a full-time HR professional on board.
HR Salaries
Firstly, you need to determine who is actually doing HR in the company. Traditionally, you have an HR manager or a head of HR, with some support staff as well. In this case, all these salaries become the cost of human resources in your company.
This is easy to calculate, but things get more complicated when there isn’t an exact demarcation on the roles and JDs in a company. For example, what if the CFO of the company also handles HR matters along with financial tasks? This is not an imaginary scenario, but that is true for a lot of small to mid-size companies.
In this situation, you need to calculate how many hours you do in the CFO. If he says he divides half his time between HR and finance, and his salary is $100,000 per year, then $50,000 should be assigned in the total HR expenses.
Other Hidden Costs
Dig deeper, and you will find other ‘soft’ costs as well and you can’t always put a number them. For example, what about the loss of time in dealing with HR related matters at the expense of revenue-generating procedures. This creates a lack of efficiency, leading to a loss in revenue. While such activities hamper the growth of a company, they are rarely factored in the real cost of a company’s HR.
The Cost of Expertise
Even if you rake up the cash to bring a full-time HR person, are you really paying them for expertise? You see, the nature of this job role is such that it is easy and quite normal for even the most experienced HR professional to be lost under a pile of transactions while also juggling regulation changes that have been to managed regularly.
If we honestly evaluate the situation, we don’t just have a person managing employees, but someone who needs to deal with multiple vendors. These include insurance providers, labor attorneys, and vendors. And an HR professional has to deal with all these vendors while also trying to keep the company compliant with the ever-changing labor laws.
Other in-house tasks even include reporting to senior management. There’s a lot on an HR professional’s plate, way beyond their expertise.
These are all the factors you should consider when calculating HR costs. But along with the financial question, there’s another important point to explore.
Know When to Hire a Full-Time HR Professional
There’s so simple answer to when a business should bring a human resources manager in the workplace, This depends on your particular industry, as well as your existing workload and growth rate.
However, you should consider hiring a dedicated HR manager or head of HR when business roles start to become specialized. Considering the CFO example above, as the business grows, you should pay someone to perform specialized tasks like HR.
Such a move also makes sense when the business grows to a certain number of people. Rule of thumb suggests that as the company approaches 100 employees or more, it’s a sign that specialized HR personnel are required.
One more thing, as you calculate HR costs, do a comparison between hiring in-house staff and professional employer organizations (PEOs). Outsourcing human resource functions to the latter is not only cost-effective, but allows you to focus on your core competencies while having experienced professionals dealing with issues like compliance, retention, and employee development.
