What an in-house person actually costs
The salary is not the cost. An HR Manager on £50,000 costs you around £6,750 in employer National Insurance and roughly £1,500 in pension. That is about £58,000 before you have bought a laptop, an HR system or any training.
Add recruitment fees to hire them, and the fact that they take holiday, get sick and eventually leave.
At the other end, an HR Administrator on £28,000 comes out around £32,000 all in. Which sounds much more manageable, and that is where the trouble starts.
Work out the true cost, not the salary. It is usually 15 to 20 per cent higher than the number in your head.
The mistake that costs owners the most
It is not choosing wrong between in-house and external. It is buying the wrong level.
A business of thirty people can afford a junior HR person. It cannot usually afford a senior one. So it hires an HR Administrator or Officer, which is genuinely useful for contracts, onboarding, holiday and payroll queries.
Then a grievance lands against a director. Or someone goes off with stress in the middle of a performance process. Or a long-serving manager needs to be exited. And a capable person on £28,000, two years into their career, is handed something that would test someone with twenty years behind them.
That is not fair on them and it is not safe for you. It is also how a manageable situation becomes a claim.
When you genuinely should hire in-house
There is a real answer to this and it is not always me.
Hire someone when the volume justifies it. If you are recruiting constantly, running shifts across sites, or fielding people questions every single day, you need someone there, not someone you ring.
As a rough guide, most businesses start to need a dedicated HR person somewhere around fifty to eighty employees. Below that, an HR person is usually underused. Above it, the day to day alone will fill their week.
Hire when you want someone who knows every person by name, who can build culture over years rather than weeks, and who is in the building when something kicks off at four o'clock on a Friday.
If that is you, hire. I will tell you that on a call, and I have.
Count how many hours a week your people questions actually take you. If it is more than a day, that is a job. If it is an hour, it is not.
When bringing someone in works better
Below about fifty staff, the maths rarely works. The problems that genuinely frighten you happen a few times a year, not weekly.
The thing you are actually buying from a consultant is seniority you could not afford permanently. Twenty-five years of employee relations experience, for the few days a year you need it, instead of a full-time salary for a level of experience you cannot justify.
You are also buying independence. When a grievance names the owner, an employee on your payroll cannot investigate it. They report to the person being complained about. Someone external can.
And you are buying the ability to switch it off. In a quiet quarter a consultant costs you nothing. An employee costs you the same as always.
The comparison, honestly
An in-house HR person gives you availability, continuity and someone who knows the business inside out. That is real value and I am not going to pretend otherwise.
A consultant gives you seniority on demand, independence when it matters, and a cost that scales down as well as up. What you do not get is someone in the building every day.
So they are not really competing. They are answers to different questions. Availability, or judgement.
The businesses that get this right usually work it out by asking which of those two they are short of.
And quite often the answer is both
This is what actually happens in a lot of businesses between fifty and a hundred and fifty people.
They have an in-house HR person handling the daily reality, and someone external for the two or three situations a year that are genuinely high risk. The in-house person is usually relieved rather than threatened, because nobody wants to run their first ever dismissal alone.
That combination is often cheaper than hiring at a level senior enough to cover everything, and it is a great deal safer.
If you already have an HR person and they are out of their depth on something, that is not a reason to replace them. It is a reason to get them support.
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Frequently asked questions
At what size should I hire an HR person?
As a rough guide, somewhere around fifty to eighty employees, though it depends far more on how much people activity you actually have than on headcount alone. Constant recruitment, shifts or multiple sites brings that number down.
Is a consultant cheaper than an employee?
Usually, for a smaller business, because you only pay when you need it. But that comparison is not quite fair, because they do different jobs. An employee is available every day; a consultant is senior expertise a few times a year.
We already have an HR person. Why would we need you?
Often for independence and seniority on the rare, serious situations. An employee on your payroll cannot fairly investigate a grievance against the owner, and nobody should run their first dismissal alone.
How do I know which I need?
Count the hours your people issues take, and separate the routine from the risky. If the routine fills a week, hire. If the risky is what keeps you awake, that is a different purchase.
Key takeaways
- An HR Manager on £50,000 really costs around £58,000 once NI and pension are added
- The common mistake is buying the wrong level, not the wrong option
- Most businesses genuinely need in-house HR somewhere around fifty to eighty employees
- A consultant buys seniority and independence; an employee buys availability and continuity
- Between fifty and a hundred and fifty staff, the sensible answer is often both
Not ready to book? Just tell me what's going on and I'll come back to you. No obligation.
