When Should You Outsource HR for Your SME Business?

When Should You Outsource HR for Your SME Business?

This one’s for you, fellow SME business owners, who may be at the stage of wondering when you should outsource your HR. You’ve built your empire from the ground up, excelling in what you do best. But as you expand and hire more team members, the complexities of managing human resources start knocking on your door. The big question on your mind: “When should I bring in HR professionals, and what’s the cost?” 

Well, as not only an SME ourselves who’ve walked this path before you, but also an HR consultancy firm: we can offer you some insight and professional guidance on the matter.

In this blog we’re going to help you understand: 

  • At what stage of growth you should bring onboard HR professionals
  • How to mitigate some of the associated costs
  • What the benefits are to starting earlier than you’re legally required to
  • Why working with an outsourced HR firm could be the right choice for you

So let’s dive into this together and shed some light on the journey of outsourcing HR.

People gathered around a computer in an office of an SME business discussing whether to outsource HR

The Dilemma of When to Outsource HR for SME Business Owners:

So, when is the right time to consider outsourcing HR for your small business? Let’s break it down. We often hear this question from clients and entrepreneurs. The general consensus is that when you hit around five or six employees, it’s time to start thinking about it. 

At this stage, an online service might suffice, especially those bundled with basic HR templates in addition to payroll services.

These can be had relatively inexpensively and will keep you basically compliant. However, as your team grows, around the 15-employee mark, it’s wise to explore more robust HR solutions. 

When you’re approaching 30 employees, that’s the magic number – the signal to potentially look to outsource your HR as an SME business owner. 

The reasoning?

Government entities like the Department of Labor are well aware that small businesses might not have all their HR paperwork in order, and they are looking for gaps in your compliance. At 30 employees you become worth investigating for them and outsourcing your HR is a great way to mitigate this risk, without breaking the bank. 

In fact; outsourcing your HR should really be viewed as an investment in your SME business’ growth, as outlined in our recent blog on The ROI of HR.

The Regulatory Maze:

Navigating the regulatory maze becomes increasingly critical as you grow. We’ve been to businesses where handbooks were a decade out of date. Their policies and procedures hadn’t seen an update since before the pandemic! 

The move to outsource your HR isn’t merely there to indemnify you against future grievances against your SME business, but to protect you from past mistakes as well.

While employment at will may be the norm in most states, it doesn’t grant you the freedom to terminate employees without cause. As you hit the 30-employee mark, you’ll encounter a surge in paperwork and complexities, adding a layer of risk to your business.

White man with ginger hair leaving his office with a box of his belongings having been fired from his position at an SME business that outsourced it's HR

HR Challenges Beyond 30 Employees

Beyond 30 employees is where the challenges compound. New regulations kick in, demanding compliance with benefits provision, and if you’re multi-state, welcome to a whole new level of complexity. 

If you’re an SME business owner, odds are that you don’t have the time to devote to training up on every local and federal regulation. Outsourcing your HR is saving you time and money, purely on that basis alone.

The Importance of an Early Adoption of Outsourced HR in Your SME Business:

Now, you might be wondering, “Why start so early, around the 25-employee mark, in solidifying HR practices?” The answer is simple: it’s easier to build that foundation sooner rather than later. 

Building policies, procedures, and a culture that defines your workplace is much more manageable with a smaller staff. It’s an investment in your company’s future, creating a high-performance, competitive environment that sets the tone for growth. When you should outsource HR for your SME business also, therefore, comes down to your plans for growth. 

A diverse workforce gathered around the CEO of an SME business with outsourced HR

In short: you need to build solid foundations

Investing early allows you to set the stage for your company’s culture, addressing critical aspects like feedback, performance, and salaries. If you’re asking yourself when you should outsource HR for your SME business, odds are the time is now!

As you reach the 50-employee milestone, having a solid foundation in place ensures a smoother transition into the more complex realm of HR management, including the provision of benefits.


In conclusion, the question of when you should outsource your HR as an SME business owner doesn’t come with a one-size-fits-all answer. However, considering factors like the number of employees and the complexities of HR management, starting around the 25-employee mark is a strategic move. It’s an investment in building a strong foundation for your business, mitigating risks, and ensuring compliance with evolving regulations. 

Remember: investing in HR early isn’t just a cost – it’s a strategic move that sets the stage for a thriving and competitive future.

So, fellow business leaders, when in doubt, consider the magic numbers, solidify your HR practices, and watch your business flourish in the hands of a well-managed and strategically aligned workforce.


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