Risky 'ad hoc' HR costs small businesses $27B a year
- A new ADP study found that 70% of U.S. small businesses — roughly 1.5 million in number — use non-HR professionals, known as "ad hoc" HR staff, to manage the HR function in addition to their primary duties. "Ad hoc" HR managers spend more than 13 hours a week on HR tasks, according to the study.
- ADP says small businesses spend about $27 billion a year on directing business owners, accountants, finance staff and office administrators to handle HR tasks. This focus on HR tasks strains businesses' core functions, ADP notes.
- The study also found that about 75% of "ad hoc" HR managers, or aHRMs, worry about being accurate and consistent in complying with employment regulations; half of aHRMs aren't sure if their company's employees know where to get answers to HR questions; two-thirds are concerned about employees getting incorrect benefits information; and half are manually doing HR tasks with paper and spreadsheets. Despite the risks of using untrained, uncertified staff to manage HR functions, 98% of the study's 1,000 respondents don't intend to hire professional HR personnel.
Small businesses might be hesitant to hire a dedicated HR manager because of the cost and the rule-of-thumb that companies need one HR person for every 100 employees. A recent Bloomberg BNA study says that this ratio is now 1.4 to 100 among businesses studied, mainly due to legislative changes and streamlined budgets. Many small businesses have fewer than 100 employees.
But fears about the work of aHRMs alone should force employers to reconsider hiring or contracting with trained HR professionals. The U.S. Small Business Administration (SBA) offers company owners help with managing functions, including HR.
Trained, certified HR experts are among the growing number of independent contractors whose services are available to small business owners. Employers can valuable resources on contracting HR services through SHRM.
Small companies without professional HR expertise might be unaware that many HR functions are now automated. Obviously, automation isn't going to replace every single HR function in the near future, but solutions to save HR departments considerable time and energy do exist.