Small business owners often view human resources professionals as an unnecessary expense. But as recent cases show, not having HR expertise can lead to devastating financial and legal consequences. Let’s examine real cases where having an HR professional could have saved businesses hundreds of thousands of dollars—and in some cases, their entire operation.

You might be thinking, my business is too small or we don’t have the financial resources to hire a full-time Human Resources professional, but there are ways to get the expertise you need and not have large cost or any at all.

For many small businesses, hiring a full-time HR professional might seem out of reach financially. However, this doesn’t mean you have to navigate the complex landscape of employment laws and HR management alone. Hiring a human resources consultant can be a strategic move that provides expert guidance without the overhead of a full-time salary.

Why Consider an HR Consultant?

1. Cost-Effectiveness: HR consultants offer flexible arrangements, allowing you to pay for services only when you need them. This is a cost-effective solution compared to the salary and benefits of a full-time HR employee. The cost of fully outsourced HR services typically ranges from $50 to $1500 per month, depending on the level of service and expertise required.
2. Expertise and Experience: HR consultants bring a wealth of knowledge from working across various industries and companies. They are up-to-date with the latest regulations and best practices, ensuring your business remains compliant and competitive.
3. Scalability and Flexibility: As your business grows, an HR consultant can adjust their services to meet your evolving needs. Whether it’s handling recruitment, developing HR policies, or managing employee relations, consultants can step in and out as required.
4. Risk Management: With their expertise, HR consultants can help identify potential legal pitfalls before they become costly issues. They can conduct audits, provide training, and implement systems to ensure compliance with employment laws.

Real Cost Savings

Consider the potential savings: avoiding just one lawsuit could save your business thousands in legal fees, settlements, and lost productivity. With HR consultants, you gain access to professional guidance that helps mitigate these risks. The average settlement for employment discrimination claims is about $40,000, not including legal fees and other associated costs. By investing a fraction of this amount in HR consulting, you protect your business’s financial health and reputation.

The Rising Tide of Employment Lawsuits

First, let’s understand the scope of the problem. According to recent surveys, nearly 40% of small business owners faced lawsuits from employees in 2023. These aren’t just minor inconveniences—research shows that legal battles collectively cost U.S. small businesses over $100 billion every year.

Case Study #1: The Costly Pregnancy Discrimination Mistake

In a recent case that shook the small business community, a company faced a discrimination claim that took 318 days to resolve and resulted in a $160,000 settlement. The issue? A manager terminated an employee shortly after learning about her pregnancy, claiming “performance issues” that weren’t documented. An HR professional would have:

• Ensured proper performance documentation
• Provided manager training on pregnancy discrimination laws
• Implemented clear policies and procedures
• Created a paper trail of any performance issues before termination

Case Study #2: The $1.675 Million Disability Discrimination Verdict

In a stark example of how badly things can go wrong, a jury recently awarded $1.675 million in a disability discrimination case. The company failed to provide reasonable accommodations for an employee with a disability and then terminated them. An HR professional would have:

• Recognized the legal requirement for reasonable accommodation
• Facilitated an interactive process with the employee
• Documented all accommodation discussions and attempts
• Ensured compliance with the Americans with Disabilities Act (ADA)

Case Study #3: The Wage and Hour Nightmare

In New York, Chipotle workers won a massive $20 million settlement for labor law violations. While Chipotle is a large corporation, similar violations occur frequently in small businesses. The violations included improper scheduling practices and failure to provide proper sick leave. An HR professional would have:

• Ensured compliance with local labor laws
• Maintained proper time and attendance records
• Created compliant scheduling policies
• Properly calculated overtime and sick leave

The Hidden Costs

Beyond the direct legal costs, studies show that workers failing to comply with employment laws cost businesses close to $1.6 million annually. This includes:

• Legal fees and settlements
• Lost productivity
• Damaged reputation
• Employee turnover
• Time spent dealing with litigation

When Should You Hire HR?

The Society for Human Resource Management recommends hiring an HR employee once a company reaches 15 employees. This isn’t arbitrary—it’s the threshold where many federal employment laws kick in. According to the EEOC, businesses with 15-19 employees must comply with laws prohibiting discrimination based on:

• Race
• Color
• Religion
• Sex (including pregnancy, sexual orientation, or gender identity)
• National origin
• Disability
• Genetic information

The Alternative: Outsourced HR Solutions

For businesses not ready for a full-time HR professional, there are options. The cost of fully outsourced HR services for small businesses typically ranges from $50-$1500 per month, far less than the potential cost of a single lawsuit.

The Bottom Line

Even a seemingly minor infraction can lead to lawsuits, hefty fines, and even the closure of your business. The average employment discrimination claim takes 318 days to resolve, during which time your business suffers from:

• Legal costs
• Management distraction
• Employee morale issues
• Reputation damage

The message is clear: investing in HR expertise, whether through a full-time professional or outsourced services, isn’t just about compliance—it’s about protecting your business’s very survival. When you consider that the average settlement for employment discrimination claims is about $40,000, plus legal fees, the cost of proper HR support suddenly seems like a bargain.

Remember, it’s not just about avoiding lawsuits—it’s about creating a workplace where both employers and employees understand their rights and responsibilities, leading to higher productivity, better retention, and sustainable growth.