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When people think about human resources, they often picture large corporate offices with dedicated HR teams. But HR expertise isn’t just for big players. Small businesses, even those with a handful of employees, can benefit immensely from engaging HR consultants.
As a general counsel (Nicole Harvey) and an HR consultant (Amy Gladding), we’ve helped small businesses manage people-related challenges. Here’s why HR consultants are a smart investment, even for businesses with one or two employees.
The challenges small businesses face
Nicole: Small businesses often lack the resources to handle complex employee issues. Business owners call me for help with handbooks, investigations, unemployment claims, or hiring processes. While legal counsel is essential in some cases, many challenges are better addressed by HR experts who set up systems to prevent escalation.
Amy: That’s where I come in. When small businesses don’t have HR infrastructure, even basic tasks like onboarding can become overwhelming. I work with business owners to establish policies that create clarity and consistency, reducing confusion and turnover.
Knowing when to involve legal counsel
Amy: One of the most overlooked benefits of working with an HR consultant is the ability to identify when legal counsel is truly needed. For example, if a small business faces potential litigation due to an employee complaint, I can guide the owner on whether to escalate the matter to an attorney.
Nicole: And when a business does need legal support, having an HR consultant already familiar with the company is invaluable. They can provide critical context, such as past policies, employee history, and actions taken to address concerns, which can significantly strengthen the defense and risk management strategy.
Amy: HR consultants bridge gaps, ensuring businesses are prepared when legal intervention is necessary while reducing the frequency and cost of such situations.
Mitigating risks through insurance coverage
Amy: HR consultants can add value when it comes to risk management, particularly with Employment Practices Liability Insurance. Many small businesses don’t know what it is or why they might need it. I help owners understand the importance of EPLI for covering risks like wrongful termination, discrimination, or harassment claims.
Nicole: As an attorney, I’ve seen cases where the lack of proper coverage turned a manageable issue into a costly crisis. An HR consultant who understands your business can guide you in shopping for the right policies, ensuring the company is adequately protected without overpaying for unnecessary coverage.
The financial case for HR consultants
Nicole: Turnover is a major financial drain for small businesses, costing 50% to 200% of an employee’s annual salary. For a $40,000-a-year employee, turnover could cost $20,000 to $80,000. These costs are especially painful for small businesses.
Amy: A proactive HR approach reduces turnover by fostering a stable, supportive work environment. For example, addressing conflicts quickly and fairly helps maintain positive team dynamics, while employee-centered policies promote belonging and security.
HR support on a small business budget
Nicole: A common misconception is that HR consultants are a luxury. But hiring a full-time HR professional isn’t always realistic for small businesses. Engaging a consultant provides expertise without the overhead of a salaried employee.
Amy: Consultants like me offer flexible solutions tailored to each business’s needs. Customizable HR packages let businesses choose services based on budget and priorities — like recruitment, policy development, or compliance support. This approach allows businesses to scale HR support as they grow, avoiding unnecessary costs.
Building stability and culture
Nicole: Beyond compliance, HR practices set the tone for operations. Clear policies and processes build trust and professionalism. Employees who know what’s expected of them are more engaged and productive.
Amy: Clear policies and processes are critical cost-saving tools that drive growth. They can minimize turnover and legal risks and improve employee performance and efficiency, trust, professionalism, and accountability. They can also reduce costs, boost efficiency, and create the foundation for sustainable growth.
A collaborative approach
As professionals in complementary fields, we’ve seen how partnerships between legal counsel and HR consultants benefit small businesses. Legal issues often stem from unclear policies or guidance — problems that can be prevented with effective HR systems.