From 10 to 200 Employees: How HR Needs Change at Every Stage

When a business first launches, HR is rarely the priority. It’s often little more than an afterthought. Payroll lives in a spreadsheet. PTO is handled over group chat. Onboarding consists of a warm welcome and a few shared folders.

But as the employee count rises—from 10 to 25, to 50, 100, 200 and beyond—those informal systems start to break down. What once worked smoothly becomes a source of confusion, inefficiency, or even liability. The evolution of HR isn’t just a back-office concern. Handling people matters effectively is what makes or breaks a company in the long run. “You don’t build a business. You build people, and people build the business,” author Zig Ziglar famously said.

As your business grows, so should your HR capabilities. Here is how HR needs change at every stage of growth, and why many companies turn to outsourcing HR and other scalable HR solutions to keep pace with growing complexity.

At 10 - 25 Employees: Informality Rules, But Risk is Real

In 1983, The Harvard Business Review (HBR) offered what is now considered a classic five-stage framework for small business growth. The first stage is simply “existence.” At 10 employees, you’re already in Stage 2, however: survival mode. You’ve got yourself a business; now can you generate enough cash flow to keep it?

At this stage, HR is often DIY, and everything feels personal. Founders are likely either still handling HR tasks or delegating them to an office manager who also stocks the fridge and books team offsites. Communication is easy: everyone’s in the same room or chat thread.

The danger at this stage? Noncompliance creep. Even with a tiny team, employment laws still apply, like wage and hour regulations, anti-discrimination policies, even labor posters.

Many small businesses begin looking at outsourcing HR here, not because they’re growing fast or have deep pockets, but because they realize they can’t afford to make a mistake, and they understand the quality of their workforce and employee relations is crucial to future success. A trusted partner or PEO can provide compliant onboarding, manage payroll taxes, and help build foundational policies at pricing that’s often right sized for small business budgets.

At 25-50 Employees: Policies Take Shape, Compliance Gets Serious 

Here, at this stage, companies are looking for success through delegation, according to HBR’s five-stage model. “Among the important tasks are … to develop managers to meet the needs of the growing business,” HBR writes. “This second task requires hiring managers with an eye to the company’s future rather than its current condition."

Indeed, this stage is the first major turning point in a company’s lifecycle, especially when it comes to employee issues. As companies hit 25-50 employees, they begin triggering thresholds for federal and state laws like FMLA, COBRA, EEO-1 reporting, and ACA coverage requirements.

Internal dynamics shift, too. The founder no longer interviews every hire. Without formal processes, disparities in pay, performance expectations, or discipline can emerge. Workforce-related strategy looms large as an imperative of future success.

This is the moment when your HR function needs its first true professional or a trusted partner providing scalable HR services. But this transition isn’t easy, especially for leaders who still think of HR as “just paperwork.”

The forward-looking business owners who understand HR as strategic will start embedding it into their company growth strategy: not just for protection, but to foster fairness, reduce turnover, and improve performance. Here, outsourcing can itself turn more strategic. With more resources and deeper pockets, companies might opt to keep parts of its HR operations internal, while outsourcing the rest. That way, they can combine expert guidance with tools to scale operations without yet needing a full in-house HR team.

At 50-200 Employees: Scaling Systems and Culture

At this size, HR can no longer be handled as a side job. HBR refers to this stage as the “take-off” stage. Change management, employee engagement, and corporate branding become ever more important, even as employee relations become significantly more complex. State-by-state regulations create a compliance maze. And managers, often promoted for technical skill rather than leadership ability, require training and support.

Employees expect more, too: better benefits, more professional development, clearer growth paths. HR must become proactive rather than reactive.

If you haven’t already invested in outsourcing HR or hired an HR generalist or manager, now is the time. This is also where many companies make their first significant investment in HR technology, be it in an applicant tracking system (ATS), performance management software, or an HRIS that combines multiple functions in one.

Whether in-house or through a partner, HR now plays a pivotal role in aligning people strategy with business goals. Outsourcing HR still provides value, especially in managing compliance, tech integration, and complex payroll needs, while in-house leaders focus on culture and engagement.

Choosing the Right HR Model as Your Business Grows 

As your business grows , the complexity of HR increases dramatically. Understanding which HR model fits your needs can save time, reduce risk, and provide access to better benefits. 

Download our PEO vs. ASO vs. Payroll Provider comparison guide to see how each model supports HR, compliance and employee benefits, side by side. It's a practical resource to help growing companies make informed HR decisions as they scale.

At 200 Employees and Beyond 

At this level of resource maturity, HR is a fully embedded function—and often still evolving fast. This is where mature programs take shape: structured compensation bands, leadership development pipelines, robust DEI initiatives, and workforce analytics.

Yet, this stage of the business lifecycle is often the most challenging of all: you have the resources but what about the evolving vision, the flexibility, and the internal alignment to make it all work with maximum effectiveness? This stage also reflects a moment of strategic reckoning:

• How will the company scale sustainably?
• How do you maintain culture across distributed teams?
• How do you retain top performers in a competitive market?

At this stage, the most successful organizations integrate HR into every facet of business planning, from budgeting to M&A strategy. The need for scalable HR is greater than ever, and outsourcing HR (either partially or fully) remains a powerful way to keep the HR function lean, expert-driven, and aligned with long-term strategy.

Even companies with in-house HR staff often continue outsourcing HR tasks to a trusted partner who can offer both tactical execution and strategic support. A scalable HR partner helps integrate payroll, benefits, and compliance systems while providing expert guidance on best practices and emerging risks.

Why Scalable HR is the Backbone of Company Growth

Too many founders and executives assume they can “figure out HR later.” But as businesses grow, the cost of missteps—missed compliance deadlines, a misclassified employee, a preventable harassment complaint—grows exponentially.

That’s why scalable HR is essential to any successful company growth strategy. It means putting systems in place that can flex with your workforce. It means having access to expertise when you need it, without overbuilding when you don’t. And it means being ready not just for the next hire, but for what comes next.

What’s clear is this: HR can no longer be treated as an afterthought. It’s a lever for strategy, a source of stability, and (when done right) a driver of lasting success.

To learn more about what a trusted PEO partner like CoAdvantage can do for your business wherever it’s at right now, read more about our HR Administration services.

**The information provided on this website is for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy and completeness of the information, we make no guarantees about its correctness, completeness, or applicability to your specific circumstances.  Laws and regulations are subject to change, and you should consult a qualified legal professional before making any decisions based on the information provided here.