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Does Your Modern Company Need an HR Department?

Human Resources departments wear many hats within traditional companies. From hiring to mediating conflicts, keeping employees updated on changes in benefits, and planning employee gatherings, HR teams generally work to balance the legal and the personal in a workspace. But many newer companies—chiefly startups—are opting to move forward without a centralized HR department.

What are some of the costs and benefits associated with utilizing an HR manager or team? What about going without? Deciding to forge ahead without an HR team may lead to an employee lawsuit down the line, but can also help manage costs when you’re getting on your feet.





No matter which route you choose, compare business insurance quotes with CoverHound to make sure your company is protected through every stage of its growth.

Cost of Human Resources

Your company’s size may dictate whether you can afford dedicated human resources. If your business has not hit the 50-employee benchmark yet, it may be out of the question to add another salary to the payroll if management can still handle most of the tasks.

The average cost for human resources per employee was $1,569 back in 2009. If that price tag sounds too hefty for where your business currently stands, consider modern alternatives like HR software or delegating certain HR tasks (like hiring) to certain qualified managers until you can justify the expense. Just be sure to cover all your bases in the meantime!

Risk of a Lawsuit

According to GoCo, 60 percent of companies have faced an employee lawsuit in the last five years. Each one costs companies $250,000 on average. If the U.S. Equal Employment Opportunity Commission audits your company, you may be in serious trouble if a trained professional hasn’t been handling your paperwork and employee affairs. The costs you save by not implementing an HR department can quickly dissipate in the event of costly litigation against your company. For instance, with the future of our national healthcare system up in the air, your company will need someone who knows employee benefits inside and out, and better yet, can explain it clearly to your employees over time.

Handling Sensitive Subjects

One of the core functions of an HR department is to help mediate employee conflicts and hear employee complaints. Workers who have no outlet for conflicts and complaint may bottle up their issues over time, affecting their work performance and how they feel about your company in general. Human Resources means more than just a place to vent; it can give employees valuable advice, conduct investigations on tough topics like sexual harassment, and document everything in writing to keep your company safe for all.

Leading Company Culture

As the Wall Street Journal points out, some companies believe that a traditional HR department “stifles innovation and bogs down businesses with inefficient policies and processes.” Others depend on their Human Resources department to take the lead on company culture by organizing group events and opening the lines of communication. Only you can decide what’s best for your company, but make sure your “open door policy” isn’t in name only.

Having an HR department can help protect your company against lawsuits and facilitate important communications with employees. It can also cost too much for a fledgling company to afford right off the bat. Carefully consider how to outsource or delegate HR tasks to keep everything running smoothly if you choose to go without a formal HR expert.

Looking to further protect your business? Compare business insurance quotes with CoverHound and make sure you’re getting the coverage you need at a price point that works for your growing company.

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