Whether you hire an expert or outsource to an outside agency, human resources represents a big investment for a small business. The investment can pay dividends, however. Human resources can add value your business by aiding in recruiting and hiring the best talent, improving employee retention and engagement and keeping you out of legal trouble.

Recruiting and Hiring the Best Talent

Choosing employees is key to your business. These employees will help you run your business and represent your business to customers. A human resources manager who is an experienced recruiter knows the best websites, colleges or professional associations at which to recruit and also knows how to present you in the best light when hiring. When Rick Born first started the Born Information Services Group, in Wayzata, Minn., he invested in a human-resources director who had five years of recruiting experience. He told "Inc." magazine that attracting the best talent was critical in the competitive information technology services business. The payoff? Fifteen years later, the company had grown to seven locations and was sold to a larger company.

Retention and Engagement

Human resources managers also know and can help you implement the best practices for keeping employees happy and engaged. Committed employees perform 20 percent better and are 87 percent less likely to leave the organization, according to a study by the Corporate Leadership Council. Employee performance can be directly related to your bottom line in terms of increased customer satisfaction and higher sales. Human resources managers can encourage employees to be frank about reasons for dissatisfaction in a way that the direct supervisor cannot, thus enabling the company to correct problems before they become too costly. They also can develop schemes to motivate top performers.


A good human resources manager can add value because she understands labor law and can help you avoid pitfalls. For example, many small-business owners don't fully understand the Fair Labor Standards Act. Because of that, they may illegally try to dock the pay of one of their exempt employees, such as a manager, for a doctor's appointment or fail to pay overtime to their accounts payable clerk, a nonexempt employee. Docking the pay of an employee who's exempt from overtime makes that employee nonexempt, which means you legally are liable retroactively and going forward to pay overtime for all the times that manager may have worked more than 40 hours. An experienced human resources manager would educate you and your managers and establish policies to prevent these mistakes.

Other Labor Laws

HR managers also can help you deal with problem employees to lessen their impact on the organization. They can help you draft policies to monitor attendance without violating such laws as the Family Medical Leave Act. Because they are experts in performance policies and in labor laws, human resources managers can help you develop performance policies and disciplinary processes that can improve performance and allow you to terminate nonperforming employees without breaking the law.