Most small businesses need outside HR help well before they can justify a full-time HR hire. The usual triggers are crossing 15, 20 or 50 employees, hiring in a second state, or a first serious complaint or termination. An HR manager earns a median of $149,280 a year (BLS, May 2025). An outsourced retainer costs a small part of that: SimplyHR’s retainers start at $500 a month.
Headcount is only one signal. Look at who handles HR today and what a mistake on their desk would cost.
Signs you have outgrown doing it yourself
In many small companies HR belongs to the owner or the office manager, on top of everything else. That works for a while. These are the points where it usually stops working.
You are about to cross a federal headcount line. Each one adds duties you cannot see from the outside:
- 15 employees: Title VII and the ADA begin to apply, with their rules on discrimination, harassment and accommodation.
- 20 employees: the federal age discrimination law applies, and so does federal COBRA if you have a group health plan (counted as 20 employees on more than half your typical business days the year before).
- 50 employees: the Family and Medical Leave Act, with its notices, forms and job protection.
- 100 employees: the federal WARN Act for plant closings and mass layoffs.
Our guide to HR laws by employee count goes through each line in more detail. Some state laws start sooner. California’s discrimination law applies at 5 employees, and those employers must give harassment prevention training every two years.
You hire in a second state. A second state brings a second set of rules on final pay, sick leave, new-hire reporting and posters. The handbook that fit one state rarely fits two.
Something has already happened. A harassment complaint, an injury, a wage claim, a letter from an agency, or a termination you are not sure how to handle. Treat the first one as the warning.
The owner is spending real hours on it. If you are answering pay questions, chasing paperwork and settling disputes every week, that is time not spent selling or running jobs.
You are hiring fast. A seasonal business that doubles in spring needs onboarding that runs the same at ten hires a week as at one. That is a process problem, and it rarely gets solved in the middle of the season. (More on that in our seasonal hiring guide.)
What an in-house HR hire really costs
The Bureau of Labor Statistics puts the median annual wage for human resources managers at $149,280 in May 2025. For human resources specialists, the median was $75,940.
Those are wages only. Add payroll taxes, benefits, software and the time it takes to recruit and train the person, and the real cost is higher. Pay varies by region, so check local figures before you budget.
There is a second cost that does not show up on the payroll report. One person, however good, is one generalist. Your HR hire will be strong in some areas and learning in others, and they will be on vacation the week the complaint comes in.
Example. Say a 35-person company hires an HR specialist at the BLS median of $75,940. That is about $6,330 a month in wages before taxes and benefits. An outsourced retainer starting at $500 a month is $6,000 a year. The question for the owner is whether the company needs 40 hours a week of HR work, or a few hours a week plus someone to call when something goes wrong. Answer that before you post the job.
What outsourced HR usually covers
Outsourced HR comes in a few forms, and they are easy to confuse.
HR software handles records, onboarding forms and time off. It does not give advice or write policy for your state.
A PEO (professional employer organization) becomes a co-employer of your staff for payroll, benefits and some compliance. You share employer status with it, which is the point and also the trade-off.
An HR consultant or outsourced HR firm works for you without becoming an employer. The work usually includes a handbook and policies, job descriptions, classification reviews (who is exempt from overtime, who is an employee and not a contractor), onboarding and offboarding, an advice line for day-to-day questions, and help with investigations and terminations. Some also run recruiting.
How to choose
Start with what you actually need over the next year, not what a vendor sells. A few questions sort it out.
Do you need someone on site every day, handling a steady load of hiring, scheduling and employee questions? That points to an in-house hire, possibly supported by an outside partner for compliance.
Do you mostly need things built once and then maintained: a handbook, job descriptions, a classification check, a clean onboarding process? That is project work or a retainer.
Do you want another company to run payroll and benefits as a co-employer? That is what a PEO is for.
Whatever you pick, ask who answers the phone when you call, whether they know your state and your industry, whether the contract locks you in, and what you keep if you leave.
Mistakes owners make here
Waiting for the first lawsuit. The work that prevents a claim (accurate classification, a current handbook, documented performance conversations) has to exist before the problem, not after.
Hiring an HR manager to do an administrator’s job, or the reverse. A $75,000 specialist processing paperwork and a part-time admin making termination calls are both expensive in different ways.
Treating a handbook download as HR. A template does not know your state, your pay plan or your crew.
How SimplyHR works
SimplyHR is an HR consultancy for businesses of 1 to 500 employees, based in Utah and working federally and across multiple states. There is no co-employment: you keep full ownership of your business and your people. Our retainers are month to month. Foundation starts at $500 a month and covers the handbook with state addendums, job descriptions, a classification audit, onboarding and offboarding, an HR audit and anytime support by phone and email. Partner, at custom pricing, adds a dedicated SimplyHR partner and employee relations and investigations; Strategic, also custom priced, adds an annual workforce and talent plan. We also take one-time projects and hourly work, and if you already have someone in HR, we support them rather than replace them.
The simplest place to start is the free HR diagnostic: twelve questions, about two minutes, with your score on screen as soon as you finish. If you would rather talk, a 30-minute call walks your current setup and you keep what we find. For specific next steps, see our guides to first-hire paperwork, handbooks and firing in an at-will state.