The simple answer is no, a small business doesn’t technically need an HR function. In the UK, there is no legal obligation for businesses of any size to have a human resources department or to outsource HR to a third party.
However, any business with more than a handful of employees needs some way to manage human resources-related matters, such as:
- Supporting continued professional development.
- Developing a positive inclusive company culture.
- Managing the performance review process.
- Handling paid leave and sickness-related absence
- Overseeing remuneration and non-salary benefits.
- Ensuring the business is compliant with employment laws.
- Ensuring compliant policies are in place.
- Ensuring employment contracts are in place.
- Hiring and retaining talent
Does your business need human resources support?
What are the consequences of not having expert support to help you deal with employment law and employee issues?
Four benefits HR bring to any business.
So, the simple answer is no, a small business doesn’t technically need an HR function.
However, any business with more than a handful of employees needs some way to manage human resources-related matters, such as:
- Supporting continued professional development
- Developing a positive inclusive company culture.
- Managing the performance review process
- Handling paid leave and sickness-related absence
- Overseeing remuneration and non-salary benefits.
- Ensuring the business is compliant with employment laws
- Hiring and retaining talent
But human resources is about more than dealing with a handful of core tasks. With that in mind, let’s look at some of the key benefits of human resources for small businesses.
Four benefits of HR support can bring to your business by-
- Supporting your business with all employee issues.
- Keeping team members focused on key responsibilities
- Boosting employee engagement and retention
- Hiring the right talent for your organisation
- Building a positive workplace culture
How can your business access HR support, you can-
Hire an HR professional.
The most obvious approach is simply to hire a full-time HR professional to handle all the work. There are positives and negatives to this approach. On one hand, it allows businesses to manage key human resources tasks in-house, while ensuring there is always someone on hand to deal with HR issues.
However, the smallest businesses may lack the budget for a dedicated HR professional. Also, as with any role, human resources professionals have their own strengths and weaknesses. It may be difficult to find a genuine all-rounder capable of fulfilling all your HR-related needs. Even if you find the right candidate, you may not be able to afford them.
Outsource HR support.
Another option is to outsource HR to a third party. This is almost always cheaper than hiring a full-time HR professional while still giving you access to the expertise you require.
If your business does not have HR support, how do you deal with the tricky HR issues?
Dealing with these issues must take up a tremendous amount of your time, your energy and your brain power. It’s probably exhausting for you to work under that level of pressure. With so much complexity and ambiguity, do you ever find you’re not clear whether you’re doing the right thing when there’s so much to think about and what are the consequences if you get it wrong.
- The pressure’s on you to ensure people are treated fairly while the business complies with its legal obligations. It’s a thankless task, especially if you’ve got grief coming at you from all sides.
- Doubt can creep in too. Even though you’re an extremely competent professional, you might even begin to question yourself…What if you’ve got it wrong?
- You wouldn’t be human if it didn’t cause you tension, stress or even worse! How do you do it all?
Consequences of not having HR support in your business.
Employees can bring a claim against you and or your business at an employment tribunal. This can lead to-
- Expensive legal costs.
- Costs awarded to the employee if the case is lost.
- Stress in dealing with the claim.
- Time lost dealing with claim that you could spend running your business.
To make things even more difficult for small employers Under the Employment Rights Bill, employees gain unfair dismissal rights from the day they start work. In the past many employers have relied on the two-year qualifying period before employees could claim unfair dismissal. However, that’s about to change around Autumn 2026, but the practical impact starts now. Every new hire from this point forward will gain unfair dismissal rights sooner than before.
This means the two-year buffer disappears, and dismissals will be open to immediate legal challenge. Probationary periods will take on a new importance, with a new legal framework governing dismissal in the early months of employment.
Redundancy dismissals during probation will be fully challengeable, just like any other unfair dismissal claim.
Get LBJ Consultants HR assistance and legal advice whenever you need it. Our HR advisors are always available to help you fulfil your legal duties and protect your business.
We are very pleased to advise that we are now members of the HR Inner Circle.
This membership allows us access employment expertise AND practical experience from legal experts in a way that supports our consultants to be better able to support your business. You can contact us on 07375 097443 or e-mail us at enquiries@lbjconsultants.co.uk to discuss any issues that you may have.
