Human Resources is always strategic—because it’s about taking care of your company’s most valuable asset: your people. While the nature of HR evolves from simpler administrative tasks to a more complex and proactive function, its impact on business success is constant. The key is knowing how to scale your HR approach as your team grows. But how do you know when to make those shifts? And more importantly, when should you handle HR in-house versus bringing in outside expertise? At HumCap, we’ve guided countless businesses through these transitions, and we’re sharing our insights to help you navigate this critical evolution.
0–15 Employees: Laying the HR Foundation
Legal Compliance Milestones
Even the smallest businesses must comply with key federal laws:
- Fair Labor Standards Act (FLSA): Applies to all employers, covering minimum wage, overtime pay, and recordkeeping for non-exempt employees.
- Employee Retirement Income Security Act of 1974: Governs retirement and health benefit plans.
- State and Local Laws: Vary by location and must be followed, especially if you have remote employees in multiple states.
Strategic HR Focus
At this stage, your focus should be on establishing a solid foundation:
- Basic compliance: Ensuring you’re meeting legal requirements for employers
- Hiring processes: Creating simple but effective systems for bringing on new talent
- Payment structures: Setting up a reliable payroll system
- Employee Handbook: Outline the basic rules, expectations, and operating procedures for your company.
What to Outsource
- Payroll processing
- HR triage: Expert guidance to ensure you’re setting up your foundation properly
What to Keep In-House
- Direct hiring decisions
- Day-to-day employee management: You’re building the core team that will shape your company culture
15–50 Employees: Scaling with Structure and Compliance
Legal Compliance Milestones
As your team grows, so do your legal responsibilities. This is when anti-discrimination workplace laws start to kick in, along with varying local and state laws. Here’s a snapshot:
- At 15 employees:
- Title VII of the Civil Rights Act: Prohibits employment discrimination.
- Americans with Disabilities Act (ADA): Requires reasonable accommodations for qualified individuals with disabilities.
- Pregnancy Discrimination Act of 1978: Protects pregnant employees from benefit loss or discrimination.
- At 20 employees:
- Age Discrimination in Employment Act (ADEA): Protects workers aged 40 and older.
- Consolidated Omnibus Budget Reconciliation Act (COBRA): Requires continuation of health coverage after job loss or reduction in hours.
Strategic HR Focus
This is the phase where HR begins to shift from tactical to strategic:
- Employee relations: Interpersonal conflicts require more formal resolution processes
- Management development: First-time managers need training and support
- Compliance complexity: More employees mean more regulatory considerations
- Competitive positioning: Compensation and benefits must attract top talent
- Technology integration: Implementing scalable HR systems
What to Outsource
- Policy development
- Employee handbooks
- Benefits administration
- Compensation benchmarking
What to Keep In-House
- Talent acquisition
- Management coaching
- Performance management development
50+ Employees: Strategic HR and Legal Maturity
Legal Compliance Milestones
Crossing the 50-employee threshold marks a major shift. At this point, your business is legally considered a large employer, and expectations around benefits, compliance, and internal HR sophistication increase significantly.
- Family and Medical Leave Act (FMLA): Requires 12 weeks of unpaid, job-protected leave for eligible employees.
- Affordable Care Act (ACA): Requires offering affordable health insurance to full-time employees.
- COBRA: Continues to apply, with broader implications.
- Multi-State Compliance: Becomes more complex and critical if you have employees in multiple states.
Strategic HR Focus
Now you can fully embrace strategic HR:
- Performance management systems: Formal processes for evaluation and improvement
- KPI development: Metrics to measure HR effectiveness
- Succession planning: Preparing for leadership transitions
- HR department development: Building specialized internal expertise
- Voluntary benefits: More robust offerings to stay competitive
What to Outsource
- Specialized compliance support
- Advanced compensation and benefits strategy
- HR technology implementation and optimization
What to Keep In-House
- Strategic workforce planning
- Leadership development
- Culture and engagement initiatives
Warning Signs: When Your HR Foundation Isn’t Strong Enough
Watch for these red flags:
- Difficulty attracting or retaining talent
- Compliance issues or wage claims
- High turnover or disengagement
- Intellectual property loss
- Culture deterioration
The Strategic Advantage: Why HR Outsourcing Makes Sense
Outsourcing HR functions isn’t just about filling gaps—it’s about gaining strategic advantages:
- Access to expertise without the cost of a full-time hire
- Scalability as your business grows
- Risk mitigation through expert compliance guidance
- Focus on core business functions
- Cost efficiency: Avoid costly mistakes and optimize internal resources
Moving From Surviving to Thriving
The difference between businesses that merely survive and those that thrive often comes down to how effectively they manage their human resources. By strategically outsourcing certain HR functions while building internal capabilities in others, you create a foundation that supports sustainable growth and takes care of your most important asset – your human capital.
Remember: Your business deserves more than just basic HR compliance. It deserves a strategic approach that turns your people into your greatest competitive advantage.
At HumCap, we specialize in helping businesses at every stage build the right HR infrastructure for their unique needs. Whether you’re just starting out, needing a helping hand, or looking to take your established HR function to the next level, we’re here to help you navigate the journey from tactical to strategic HR excellence. Let us know how we can help.
