What Are The Costs of Not Having HR?

Fact, 70% of companies who employ 5 to 50 employees are allocating HR responsibilities to employees with no HR experience. Many employees who partake in recruitment, HR planning, HR administration, and creating policies and procedures aren’t prepared for the job

Should every business go and hire an HR generalist, coordinator, or manager? That’s not feasible for everyone. The Society of Human Resources Management (SHRM) recently release a study that shows the average HR-to-employee ratio in a business is 2.60, which averages down to one HR expert for every 38 employees.

I believe a good rule of thumb would be as follows

5-49 Employees – Hire an HR consultant

50-149 Employees – Hire an HR expert

150+ Employees – When you reach 150 employees consider hiring a 2nd HR expert or consultant

There is a direct ROI for having an HR expert on your team. What are the costs of not having an HR expert? A conservative estimate of replacing the average employee will cost an employer about 1.5 times their annual salary. If an employee makes $40,000, you can expect to lose $60,000. The overall costs look at such factors as

  • Lost revenue of productivity
  • Costs of promoting the job, reviewing, screening, and interviewing applicants
  • Costs of training and onboarding
  • Costs of fixing mistakes made by inexperienced employees
  • And other hidden costs such as possible shifts in culture and brand

The average employee stays at the same employer for 4 years. That’s down from 10 years only a few decades below. To try and keep your employees implementing a strong brand and culture is more important than ever.

Welcome to the World of Social Media and an Instant Bad Reputation

When you are not performing and operating at your best an unsatisfied employee can resign in anger and the chances of them sharing their unpleasant experience is very high. Thanks to sites like facebook, twitter, LinkedIn, Glassdoor, etc. former employees have a giant platform to share or tell people about their bad experience. Suddenly that upset employee is influencing the opinions of hundreds of other potential employees who are researching your company and deciding whether or not they want to work for you. It can quickly snowball.

In a very competitive work world with a shortage of qualified workers the importance of doing it right is more important than ever. You need to compete so be sure you hire an expert to help. Employee turnover is just one performance indicator, but it’s an important one that ties in with many other metrics at your organization. It can reduce costs related to productivity and training, and even change your company’s culture and morale. Working with an HR expert increases your chance of keeping employees engaged and create or protect your employer brand.

Feel free to reach out to People Stuff if you want to chat about any of your HR needs. We offer a free Discovery Meeting and recommendation report to help you on the right path to improve your HR processes. Send me an email today chad@peoplestuffnl.ca