The question every founder asks once they hit twenty-something employees: do I need an HR consultant on retainer, or do I need to hire an HR Manager?
The wrong way to answer it is by headcount. We have clients with 80 people who do not need an in-house HR hire, and we have clients with 25 people who absolutely do.
The right way to answer it is by HR-event volume.
What counts as an HR event
An HR event is anything that needs structured handling and creates legal or relational risk if mishandled. Examples:
- A hire that needs JD, advert, sift, interviews, offer, contract, onboarding
- A leaver that needs exit interview, reference, IT offboarding
- A disciplinary investigation
- A grievance raised by an employee
- A long-term absence requiring stay-in-touch protocol and OH referral
- A maternity, paternity or shared parental leave process
- A flexible working request
- A redundancy consultation
- A pay review cycle
- A policy update triggered by legislation
- A complex performance management case
Each takes 4 to 20 hours of competent HR time. Multiply by frequency and you get your HR demand.
The 200-hour rule
Below 200 hours of HR work per year, an external consultant or retainer is cheaper and better-quality than an in-house hire. Above 400 hours, an in-house hire usually wins. Between 200 and 400, the answer depends on the type of work and your founder appetite to manage someone.
- 0 to 15 employees: roughly 80 to 150 HR hours a year. External almost always wins.
- 15 to 30 employees: roughly 150 to 300 HR hours. Retainer or fractional HR usually best.
- 30 to 60 employees: roughly 250 to 500 HR hours. Tipping point.
- 60 to 120 employees: roughly 400 to 800 HR hours. In-house hire usually right, often part-time.
- 120+ employees: almost always need at least one full-time HR person.
Cost comparison at the tipping point
Take a 40-employee professional services firm.
Option A: in-house HR Manager.
- Salary: £45,000 to £55,000 for a competent mid-level HR Manager in the South East
- NI, pension, tools, training: add 25 percent = £56,250 to £68,750
- Desk, laptop, software: another £3,000 to £5,000
- Total cost of ownership: £60,000 to £75,000 per year
Option B: HR retainer with us (Partner tier).
- £449 per month for the retainer including unlimited advice and included monthly hours
- Estimated additional ad-hoc projects: £6,000 to £12,000 across the year
- Total cost: £11,400 to £17,400 per year
The retainer route is between three and five times cheaper for an SME at this size.
When you should hire in-house anyway
- Culture is your competitive advantage. If your differentiation is people, you want someone owning that full-time.
- Heavy people-management cycles. Quarterly reviews, promotion ladders, OKRs.
- Founder time is the constraint. If the founder is the bottleneck on every HR conversation, an in-house hire pays for itself in founder hours regained.
The hybrid model that often wins
For 30 to 80 employee businesses, the most cost-effective and quality model is:
- One internal HR Administrator (£28,000 to £35,000), handling day-to-day admin, payroll liaison, joiner and leaver process
- External HR consultancy retainer for strategic input, complex cases, contracts, compliance, redundancies, tribunals
Total annual cost: £35,000 to £45,000 for an effective HR function. Compare with £60k+ for a single HR Manager handling everything.
How to know when you have outgrown a retainer
- You are hitting your included-hours cap every month for three months running
- You have at least one open HR case every week
- You are starting recruitment cycles you cannot manage internally
- Your line managers are coming to you (not the consultant) with day-to-day people questions
When two or more of those are true, it is time to add an internal hire. Often the right move is to keep the retainer as an escalation partner while the internal person beds in.
If you are sitting at the 30 to 60 employee mark and trying to work out which side of the line you are on, book a 15-minute call. We will give you an honest read on the cheapest competent setup for your specific situation.
About the author
Dan Caruso is the founder of Beagle HR, a Surrey-based HR consultancy supporting UK SMEs. CIPD-qualified, Theo Paphitis #SBS award winner, and a regular contributor to small-business HR commentary. Dan has spent 15+ years running HR for fast-growing UK businesses, the last 5 of those founding and running Beagle HR.
