Fractional HR vs. a Full-Time HR Hire

Quick answer

If you have roughly 15 to 150 employees and the founder, COO or office manager is still answering the HR questions, fractional HR is usually the better first move. At 5 or 10 hours a week it costs less than a fully loaded full-time hire, it starts in days instead of months and it builds the systems your first full-time HR person will eventually run. Past about 150 employees, a full-time HR hire is usually the better long-term buy.

The rest of this page shows the math, the signs for each path and a worked example.

What fractional HR is

Fractional HR is a senior HR leader who works for you part time, on a fixed monthly fee, doing the same work a full-time HR leader would do: building the handbook and policies, running hiring and onboarding, handling employee relations and investigations, setting up performance and pay practices, and keeping you compliant. The difference is hours, not seniority. You get someone who has run HR at scale for 5 to 24 hours a week instead of 40.

It is not a payroll and benefits provider. A payroll and benefits provider handles payroll, benefits and co-employment (they share the legal employer role). It does not sit with a manager who wants to fire someone on Friday and walk through what the file actually supports. Many companies run a payroll and benefits provider and fractional HR at the same time.

It is not an HR software subscription either. Software stores the policy. Someone still has to write it, apply it and defend it.

What each option really costs

Question	Fractional HR (DMD)	Full-time HR manager	Founder does it
Annual cost	4 monthly tiers, 5 to 24 hours a week; priced on a free 20-minute HR check	Salary plus about 43 percent for benefits and taxes; a $100,000 salary is roughly $143,000 all-in	No invoice, but paid in founder hours and in mistakes
Recruiting cost to fill it	None	$20,000 at a typical 20% agency fee; $5,000 to $12,000 flat fee per role ($12,000 for roles paying $150,000 or more)	None
Time to start	Days	Often 60 to 90 days to recruit and ramp, in our experience	Already started
Seniority	Senior (a leader who has built HR functions before)	Depends on who you can afford; often a generalist at this size	Whatever the founder knows
Commitment	3-month minimum, then month to month	Annual salary, severance risk if it is the wrong hire	Ongoing
Best fit	15 to 150 employees for monthly tiers. Under 15, one fixed-price project from $2,500, or a Flat-fee Search.	Over 150 employees	Only while HR questions are rare.

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Where the full-time number comes from: the national median wage for HR managers was $149,280 in May 2025, according to the U.S. Bureau of Labor Statistics. A first HR hire at a 40-person company is often a generalist or HR manager paid less than that median, so the table uses $100,000 as a conservative example. Wages and salaries are about 70 percent of what private employers spend on compensation; benefits are the other 30 percent (BLS, June 2026). That is why a $100,000 salary costs about $143,000 once benefits and payroll taxes are in.

Signs fractional HR is the right call

You have 15 to 150 employees and nobody’s actual job is HR.
The founder or COO is the default HR person and it is eating hours every week.
You do not have a current handbook, or it was downloaded, not written for you.
Managers are making termination, discipline or pay calls without a consistent standard.
You are about to make several hires and your hiring process lives in someone’s head.
You need senior judgment on a few hard situations a month, not a full-time seat for routine work.

Signs you need a full-time HR hire

You have passed roughly 150 employees and HR work fills a full week, every week.
You are hiring 20 or more people a year and need someone in every loop.
You operate in several states or countries, with compliance work that never stops.
Your culture or operations need a person on site every day.
The systems already exist and what you need now is someone to run them.

That last point matters. The best time to hire full time is after the foundation is built, not before. A first HR hire who walks into a clean handbook, a working hiring process and documented pay practices is productive in weeks. One who walks into nothing spends their first year building what a fractional leader could have built in a quarter.

A worked example

A 40-person services company. The COO spends about 8 hours a week on HR: offer letters, PTO questions, a performance problem that has gone on too long. The handbook is three years old and was written for 12 people. They plan to hire 6 people next year.

Option 1, hire a full-time HR manager now. $100,000 salary is about $143,000 a year all-in. Add $20,000 at a typical 20% agency fee to fill the seat, and 60 to 90 days before that person is up to speed. First-year cost: about $163,000.

Option 2, fractional HR now, full time later. On a Core retainer (up to 10 hours a week), in the first quarter the fractional leader rewrites the handbook, builds the hiring process for those 6 hires and resolves the performance problem with a documented path. The COO gets the 8 hours a week back. When the company is ready for a full-time HR leader, DMD runs that search at half the flat fee for the role ($2,500 to $4,500 for roles under $150,000, and $6,000 for roles paying $150,000 or more), and the new hire inherits a function that already runs.

How to decide in five minutes

Count employees. Under 15, begin with one fixed-price project, like a handbook or People Audit, from $2,500, rather than a monthly retainer. You can still hire with a Flat-fee Search. 15 to 150, start fractional. Over 150, look hard at full time.
Count HR hours. Track one week. If HR is taking a leader more than 5 hours a week, it is already costing you more than you think.
List the next 12 months of hires. More than 20, lean toward full time.
Ask what exists. No handbook, no hiring process, no documented pay practices: build those first, fractionally, then hire.

Or take the 2-minute fractional HR quiz. It asks six questions and tells you which bucket you are in.

Frequently asked questions

How many hours does fractional HR include?

DMD’s monthly fractional comes in 4 tiers, from 5 to 24 hours a week, with a 3-month minimum and then month to month.

Can fractional HR handle investigations and terminations?

Yes. That is where senior judgment matters most, and where a part-time leader with years of employee relations work is worth more than a junior full-time hire. Legal questions go to your employment attorney; fractional HR works alongside counsel, not instead of it.

What happens when we outgrow fractional HR?

You hire full time. DMD’s Bridge option runs the search for your full-time HR leader at half the usual flat fee, and hands over a function that already runs.

Is fractional HR the same as a payroll provider?

No. A payroll and benefits provider covers payroll, benefits and co-employment. Fractional HR covers the leadership and judgment work: policy, hiring, employee relations, performance and pay practices. Many companies use both.

Where should we start if we are not sure?

Start with the $2,500 People Audit. We review your offer letters, handbook, classification, records and pay practices, then hand you a written report with every gap ranked by risk and the fix for each. A 45-minute walkthrough and a fixed-price plan are included. Delivered in 10 business days. Your $2,500 is credited toward any engagement of $3,500 or more, or month one of a monthly plan, signed within 30 days of the readout.

Not sure yet? Compare the costs in the HR cost comparison or take the 2-minute quiz.

Sources: U.S. Bureau of Labor Statistics, Occupational Outlook Handbook, Human Resources Managers (median wage, May 2025); BLS, The Economics Daily, “Compensation costs for private industry workers averaged $46.89 per hour worked in June 2026.”