When Should You Hire Your First HR Person?

Where the “1 per 100” rule came from and why it misleads small companies

You have probably heard that a company needs 1 HR person for every 100 employees. It gets repeated in board meetings, in budgeting templates, and in the first Google result you see when you type “how many HR staff do I need.” It sounds like a rule. It is not.

The 1-per-100 figure is a rounded average pulled from surveys of companies of every size and industry. Big companies pull that average down. A very large manufacturer can spread one HR generalist across a lot of payroll because most of the work is repeatable and the company has systems for it.

Your company does not work that way. At 25 employees you still have to run payroll, handle a leave request, write an offer letter, answer a benefits question, respond to a City notice, and keep the handbook current. None of that shrinks because you are small. It just lands on fewer people.

MRA, a Midwest employer association, calls the 1-per-100 rule a myth for exactly this reason. Ratios vary widely by industry, and smaller firms run higher ratios than larger ones. Using the big-company average to plan a 50-person company will leave you understaffed.

What the benchmarks actually say

The most current large survey comes from SHRM, the Society for Human Resource Management. In its CHRO benchmarking report published in July 2025, SHRM found a median of 1.98 HR staff per 100 employees. That is up from 1.58 per 100 in 2017.

Two things stand out. First, the median is closer to 2 per 100 than to 1 per 100, so even the “average” company runs double the old rule of thumb. Second, the ratio was higher in 2025 than in 2017, even as HR software got better. It dipped to 1.11 per 100 in 2022 before rising again.

Here is the practical takeaway. If you run the SHRM median against a 50-person company, you get about 1 full-time HR person. Against a 25-person company, you get half a person. Nobody hires half a person, which is why so many small companies end up with an office manager doing HR on the side, or with nobody doing it at all.

The signals that you need HR help now

Ratios tell you what other companies do. Signals tell you what your company needs. Watch for these.

Your first hire in another state. The moment someone works from New Jersey or Delaware, you have a second set of withholding, unemployment, and leave rules. If you are in Pennsylvania, even a hire in the next township can change local tax withholding. The Act 32 guide explains why.

Your first termination. Letting someone go is where small companies get sued. You need documentation, a consistent process, a final pay plan, and someone who knows what not to say in the meeting.

Your first leave request. A pregnancy, a surgery, a sick parent. Federal, state, and Philadelphia rules can all apply at once, and the answer depends on your headcount and where the employee works. Getting this wrong is expensive and it damages trust with the whole team.

Your first benefits renewal. Renewal season brings rate increases, plan changes, open enrollment, and a stack of required notices. Someone has to own it, and it should not be the founder the week before a product launch.

A notice from the City or the state. A letter from the Philadelphia Department of Revenue, the Pennsylvania Department of Labor and Industry, or a local tax collector means a deadline is already running. If nobody on your team knows who should open it, that is your signal.

If 2 or more of these hit in the same year, you are past the point where HR can be a side job.

Hire, outsource, or hybrid: what each looks like at 25, 50, and 100 employees

Here is a rough picture of how companies in the region tend to handle HR at different sizes. This is what we see in practice, not a benchmark, and your industry and growth rate can move these lines.

Around 25 employees. Most companies this size do not have a dedicated HR person. HR sits with the founder, the controller, or the office manager. Many pair that person with an outside provider for payroll, benefits, and compliance questions. A PEO, or professional employer organization, is common here. So is an ASO, or administrative services organization, which handles the same tasks without co-employment. Co-employment means the provider becomes the employer of record for tax and benefits purposes while you keep control of the work.

This is the stage where people start to feel the strain. In our experience, the need for real HR help usually shows up somewhere between 25 and 50 employees. That is an observation from working with companies in this range, not a rule from a survey.

Around 50 employees. This is where we most often see a first dedicated HR hire, usually a generalist. The compliance load tends to step up around this size too, as more federal and state rules start to apply. Many companies keep the outside provider for payroll and benefits administration and have the new hire manage the relationship. That hybrid setup lets one person cover more than they could alone.

Around 100 employees. By now you likely have 1 or 2 people in HR, and the SHRM median suggests 2. The conversation shifts from “do we need HR” to “what should HR own in-house.” Some companies bring payroll inside. Others keep it outsourced and use their HR team for recruiting, manager training, and retention. Both work. The wrong answer is letting the team drown in transactions.

The choice is not hire or outsource. At every size, the strongest setups combine a person who knows your business with a provider who knows the rules.

What a first HR hire should own (and what they should not)

If you decide to hire, be clear about the job before you write the posting. A first HR hire fails most often because the role was defined as “everything people-related,” which is not a job.

They should own the employee experience from offer letter to exit. That means hiring process, onboarding, the handbook, manager coaching, performance conversations, and the first line of response to employee questions. They should be the person who knows every employee’s name and every manager’s weak spot.

Onboarding deserves special attention. A structured first 90 days is one of the highest-return things a small company can do for retention, and it is exactly the kind of work that never happens when HR is a side job.

They should not own the technical compliance layer alone. Multi-state tax withholding, benefits plan documents, workers’ compensation audits, and unemployment claims are specialized work. A generalist can coordinate them. A generalist should not be your last line of defense on them. Keep a provider, a broker, or an attorney behind your HR person for that layer.

They should not be a glorified administrator, and you should not need to hire one to get the department. HRO, done fully, runs payroll, recruiting, and compliance under your own name, so a first HR hire can own the people work instead of the paperwork. If your first hire spends the day processing payroll and filing forms, you paid a salary for work an outside provider can take on, and you got none of the judgment you were hiring for. RX2 Solutions makes this case in HR as a Strategic Operator. The short version: HR earns its place when it shapes how the company hires, manages, and keeps people, not when it pushes paper.

A simple test for the job description. Write down every HR task your company does in a year. Sort them into “requires knowing our people” and “requires knowing the rules.” The first column is the job. The second column is what your hire manages, with help.

How to decide

Start with the signals, not the ratio. If you have hit 2 or more of the signals above, you need HR capacity this year, one way or another.

Then take a hard look at your size. Under about 25 employees, an outside provider plus a sharp internal owner usually covers it. Between 25 and 50, in our experience, the strain becomes hard to ignore, and this is where most companies make the first dedicated hire or upgrade their provider relationship. At 50 and above, the SHRM median says you should already have at least 1 person on it.

Finally, decide what you want that first person to be. If the answer is “someone to handle the paperwork,” outsource it and save the salary. If the answer is “someone to help us build a company people want to work at,” hire, and give them a provider to lean on for the rules.

There is no legal trigger for your first HR hire. There is a business one, and you will probably feel it before any ratio tells you it is time.