Fractional HR vs. Internal HR: Which Is Best For Your Business?

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As your business grows, and it becomes challenging to wear multiple hats throughout your developing departments, you will be faced with important decisions regarding who you should add to your team, and when. You are probably wondering, “do we need to make an internal hire for our marketing, finance, administrative, and/or HR department, and if so, what can they add to my team right now?”.

Companies that want to grow faster will often bring in Fractional support to help accelerate growth with expert advice. Others who aren’t as eager to scale will wait until they need to hire a full-time person, which is usually a ‘junior’ version of the role.

In this video, Tom Nickalls – Founder and CEO of Castle HR, will discuss the differences between Fractional HR and Internal HR, and detail when (and why) your business may benefit from either option.

While we cannot tell you what the best choice is for your business, we would like to lay out the options available to you.

When it comes to your HR department, Fractional HR is a solution that can help your company scale and establish processes and strategies before you make your first internal hire.

What are Fractional HR and Internal HR?

Fractional HR

Fractional HR lives up to its name– you get a fraction of a professional’s time, but only pay a fraction of the cost of a full-time hire.

Fractional HR allows companies to bring in experts that save leadership’s time by tackling specific tasks when you don’t yet have the budget or headcount to bring on a full-time employee.

Internal HR

An Internal HR hire comes at a higher price tag, but they are boots on the ground in the office – either remotely or in-person. This means they will interact with your team more closely and tackle more responsibilities.

Why do companies choose Fractional HR vs. hiring internally?

In order to understand which option is best for your business, it’s important to consider:

Fractional HR

Budget: Fractional HR comes at a fraction of the cost.

Headcount: If you want the impact of HR strategies, but don’t yet have 50+ employees, Fractional HR can handle most of your needs.

Expertise and Impact: You will have a senior HR expert on your side offering expertise and high-impact strategies until you make your first internal HR hire. Your Fractional HR partner can even help you “Supercharge” that hire as they ramp up with you.

Internal HR

Budget: If money isn’t a concern for you, an internal hire might make sense!

Headcount: Teams with 50+ employees can usually justify an internal hire – but fractional is still an option in some cases.

Expertise and Impact: If you’ve found an amazing HR person that aligns with your company culture and goals, investing in them means your employees will have face-time with an HR contact. However, the process of hiring, and potential turnover, is time-consuming and costly.

How can Fractional HR help your business?

Approaches to Fractional HR vary between firms, so we can only speak for ourselves here at Castle HR when we outline what Fractional HR can do:

Our Fractional HR can help you:

  • Have an HR expert to turn to for advice whenever situations arise.
  • Put policies in place to protect what you’ve created.
  • Foster a winning culture.
  • Hire top talent without paying recruiting fees.
  • Retain top performers with modern performance reviews.
  • Set up your HR Tech Stack.
  • Have peace of mind knowing that we will start within a week and that we are not going to take a vacation or quit on you.

Our Fractional HR does NOT include:

  • Payroll functions.
  • Processing benefits.
  • Offer in-office services – most Fractional HR teams function 100% remotely.
  • Additional recruiting fees.

How can Internal HR help your business?

Internal HR can:

  • Be an investment in your company’s growth.
  • Provide a full-time team member with the opportunity to grow and learn alongside your business and the rest of your team.
  • Offer a sense of continuity and security; you’ll know your internal hire and what they’re capable of, and can rest assured that they’ll adopt your company culture and focus solely on you and your team.
  • Handle a variety of tasks, including payroll and benefits, other HR-related duties and day-to-day operations.
  • Allow employees to have face-time and connect with HR as needed.

Fractional vs. Internal HR: Which one is right for you?

It really depends on your company’s budget, headcount and level of expertise your current policies, practices and procedures require.

Fractional HR may be the solution for you if you are looking for processes that will help your company scale fast, if you want to save time, and if you are not yet ready to invest in an internal hire.

At Castle HR, our modern approach to Fractional HR includes the key processes and playbooks startups and SMBs need, including:

Alternatively, Internal HR may be the solution for you if your company has grown beyond 50 employees. Along with this, if you aren’t limited budget-wise, and if you’re confident that your culture and current HR strategies and processes are well-established, you may wish to consider making a full-time hire.

And, if you’re hoping to get the best of both worlds, you’ll be pleased to learn that there are companies who opt to hire a junior HR professional and work with a Fractional HR expert for a period of time. Companies will do this to help establish policies and strategies, and allow their internal hire to get acquainted with their role without sacrificing the quality and impact of certain HR processes!

If you’re unsure where you stand, or, would like to discuss your business goals, schedule a call with us today!

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