HR without an HR department: risks and costs

Key takeaways

HR without an HR department means the owner or office manager handles contracts, records, absence and problems alongside everything else. That is normal for small UK firms. The hidden cost is the basics that get missed, some of which carry penalties, and the hours a senior person spends on HR administration.

• Day 1: when a written statement of employment particulars is due.
• Up to £60,000 per worker: the civil penalty for employing someone illegally.
• Split HR into admin, which can be handed over, and advice, which needs an expert.
• Keep decisions about people with the owner or manager.

Who does HR when there is no HR department?

In a small business HR is usually shared between the owner, who makes the decisions, and an office manager or bookkeeper, who keeps the records. Neither is trained in employment law. It works while everything is routine and becomes risky when something goes wrong.

• The hidden costs of doing everything in-house
• The one-person department: risks and hidden costs

Which legal basics get missed?

The basics are set out on GOV.UK for anyone employing staff. These are the ones most often missed when nobody owns HR.

• A written statement of employment particulars from day one.
• Right to work checks before employment starts.
• Employers' liability insurance.
• Workplace pension enrolment.
• Accurate holiday, sickness and working time records.
• Payslips and PAYE reporting.

• Compliance admin burden: what you can hand off

What do the gaps cost?

Some gaps carry fixed penalties. GOV.UK states that an employer can be fined up to £60,000 for each illegal worker if right to work checks were not carried out correctly. Others cost through disputes: a missing contract or poor absence records make a disagreement harder and more expensive to resolve.

There is also a time cost. Owners handling HR admin themselves spend hours on letters, records and chasing that an administrator could do.

• The cost of missed deadlines for a small business

How do you cover HR without hiring?

Cover HR by separating three kinds of work and giving each a home.

• Administration: records, letters, onboarding paperwork. Hand to an administrator or managed team.
• Advice: contracts, policies, disputes. Use an HR adviser or employment solicitor.
• Decisions: hiring, pay, performance. Keep with the owner or manager.

• In-house vs outsourced HR admin for small firms

When do you need an HR hire?

An in-house HR role usually becomes worthwhile somewhere between 50 and 100 employees, or earlier in businesses with high turnover or complex shift patterns. Below that, administration plus on-call advice is normally cheaper and safer than one generalist HR employee.

• Generalist vs specialist: who should do the work?

What does HR admin take in time?

For a business of 20 people, routine HR administration typically takes a few hours a week: starters and leavers, contract changes, holiday and absence records, letters and filing. If the owner does it, three hours a week at £40 an hour is about £5,500 a year. If the office manager does it, the cost is lower per hour, but something else on their list is not being done.

• Doing your own bookkeeping: what it really costs

What goes wrong when a problem arises?

Routine HR runs on habit. Problems do not. A grievance, a long-term absence or a performance issue needs a fair process, followed in order and recorded. Without anyone who knows the steps, small firms tend either to avoid the issue for months or to act quickly and skip stages. Both make the outcome worse and harder to defend.

What should be written down?

A small employer needs a short set of documents, kept current.

• Written statement or contract for each employee.
• Disciplinary and grievance procedures.
• Holiday, sickness and absence rules.
• Privacy notice for staff data.
• A simple record of training and right to work checks.

How do you choose outside HR advice?

Look for an adviser who will learn your business, answer the phone when something happens and give practical options, not only the safest one. Fixed monthly retainers are common and usually include a helpline and document templates. Check what is excluded, how quickly they respond, and whether advice is given by a named person.

What does this look like in practice?

A pattern we see in firms of 15 to 30: contracts exist for the first ten employees and not for the last six, because the person who used to issue them left. Nobody notices until one of the six raises a query about notice.

• See client work
• BPO Solutions for UK businesses

HR basics checklist

Check these for every employee.

• Written statement issued.
• Right to work check recorded.
• Pension enrolment assessed.
• Holiday and absence recorded.
• Employers' liability insurance in date.
• A named person responsible for HR records.

• The hidden cost audit: score your business in an hour

Next step

Tell us what HR administration involves in your business each month. We will show which parts a managed team can run in a 30-minute call. For legal advice you will still need an HR adviser or solicitor.