A Small and Medium-sized Enterprise (SME) should consider establishing an HR function as soon as it starts hiring employees or reaches a size where managing human resources becomes challenging for the business owner and / or management. While there are no specific legal requirements dictating when an SME must have an HR department, having one in place can significantly benefit the business in various ways.
Here are some key milestones or considerations for when an SME should have an HR function:
- Hiring employees: Once the SME begins hiring employees, it’s essential to have HR personnel to manage the recruitment process, conduct interviews, and handle new employee onboarding.
- Compliance and legal requirements: As the business grows and hires more employees, compliance with UAE labor laws and regulations becomes crucial. An HR professional can ensure that the company adheres to labor laws and other employment regulations.
- Employee relations: As the number of employees increases, managing employee relations, grievances, and conflicts becomes more complex. Having an HR function can help mediate and resolve these issues effectively.
- Performance management: With a larger workforce, tracking employee performance and conducting performance appraisals becomes essential. HR can implement performance management processes and systems.
- Training and development: As the company expands, investing in employee training and development becomes necessary. HR can identify training needs and coordinate training programs.
- Payroll and benefits: With more employees, managing payroll, benefits, and compensation can become burdensome. HR can take care of these administrative tasks.
- Organizational development: HR plays a vital role in developing and implementing strategies for the growth and development of the organization, such as talent management and succession planning.
- Employee engagement and retention: In a competitive job market, retaining talented employees becomes crucial. HR can work on employee engagement initiatives and implement strategies to reduce employee turnover.
- Health and safety: As the company grows, ensuring a safe working environment and compliance with health and safety regulations becomes more important. HR can handle safety-related matters and training.
It’s important to note that the size and complexity of the SME, as well as its growth rate and HR needs, will influence the appropriate timing for establishing an HR function. Some smaller SMEs may outsource HR services to external agencies or consultants until they reach a point where it makes sense to have an internal HR department. In any case, having an HR function in place is essential for the long-term success and sustainability of the business.
