HR & people ops
Outsourced vs. In-House HR for a Small Business
Outsourced vs. in-house HR for small businesses: what each covers, the real costs, where the break-even sits, and which model fits a growing team under 50.
Most founders don't need a Head of People at fifteen employees — they need someone to make sure onboarding doesn't fall apart, records stay straight, PTO is tracked, and nothing creates a compliance problem. That's HR administration, and the question isn't whether you need it. It's whether to hire it or outsource it.
Here's how the two models compare on cost, coverage, and fit, with U.S. salary ranges (medians, not quotes) and a clear line for when to switch from one to the other.
HR administration vs. strategic HR
The word “HR” hides two very different jobs, and conflating them is what leads to a premature hire.
| HR administration | Strategic HR | |
|---|---|---|
| Examples | Onboarding, records, PTO, compliance | Recruiting, performance, culture |
| Mostly process work | ✓ | — |
| Outsource-friendly | ✓ | — |
| Needed from day one | ✓ | — |
| Justifies a full-time hire early | — | ✓ |
Almost every small business needs the administration handled long before the strategic side becomes a full-time job. That gap is exactly what outsourced HR fills.
What in-house HR really costs
A first HR generalist typically earns $60K–$90Kin base salary. As with any hire, that understates the real cost — payroll taxes, benefits, PTO, and the HR software you'll still buy add another 25–40% on top.
Outsourced vs. in-house, side by side
| In-house HR hire | Outsourced HR | |
|---|---|---|
| All-in annual cost | ~$98K | A fraction of a salary |
| Covers onboarding & records | ✓ | ✓ |
| PTO & compliance support | ✓ | ✓ |
| You manage the person | ✓ | — |
| Coverage when they're out | Gap | Continuous |
| Turnover / key-person risk | ✓ | — |
| Scales up and down | — | ✓ |
Compare an HR hire to a managed team
See what an in-house HR hire really costs all-in, and what a flat-fee back office covering HR, payroll, and admin would run instead. Free, no email.
Run the cost calculatorWhere the line sits
Outsource HR administration while the work is real but partial — which is most companies under ~40–50 people. A back-office team can own onboarding, offboarding, employee records, PTO tracking, and compliance support without a salary or the key-person risk, and it folds neatly together with payroll and the rest of your back office instead of being a separate vendor.
Hire in-house once the people function is unmistakably full-time and the center of gravity shifts to strategy: active recruiting, performance systems, culture, and complex employee relations. At that point a dedicated HR leader earns their salary. Before it, you're usually paying for a seat you can't keep full.