HR functions can be a huge headache for many small businesses. However, outsourcing can be a great solution for many. Keeping up with changing federal and state employment laws can be a full-time job. An HR outsourcing company, whose job is to stay on top of these changes, can remove this burden from you and your business.
Expertise
HR matters require a certain level of expertise that most small businesses don’t have in-house. While some owners attempt to delegate this work to an administrative assistant or office manager, the problem is that they often need more time and training to deal with the complexities of payroll tax filings, new hire reporting, benefit deductions and time-tracking. In addition, staying up to date with dynamic employment-related laws at the local, state and federal levels is a full-time job for HR professionals. PEOs stay on top of these changes to help their clients avoid costly fines, claims and other issues that could affect employees. By outsourcing the responsibilities of HR, business leaders can focus on core operations and customer-facing tasks. In addition, they can save money by only paying for contract fees rather than a full-time salary and benefits. And by leveraging the size and expertise of their HR partner, they can also gain access to perks that they would otherwise be unable to offer their team. It includes retirement plans, health insurance and other bonuses that may need to be more affordable for smaller companies.
Time
Keeping up with HR-related issues can take valuable time away from revenue-generating activities. The best HR outsourcing services can help a small business automate processes, streamline resources and provide specialized support to increase the productivity of an in-house department. Outsourcing companies can also save a company money on labor costs by providing supplemental services as needed. They may assist small enterprises in avoiding costly errors and guaranteeing adherence to regional, national, and international legislation.
Many HR tasks must be completed daily, including payroll processing and tracking employee data. Using an external service provider can free up HR employees’ time to focus on more strategic contributions to the business, such as improving employee communication or offering unique employee benefits. When an HR team spends too much time on administrative tasks, it may be a sign that the company should consider outsourcing. HR professionals deal with sensitive and private information, from employee medical histories to bank account numbers for direct deposit. Choosing a partner with a strong security system can protect these vital details from hackers or other unauthorized individuals.
Cost
Many small businesses find it cost-effective to outsource their HR functions. This way, the company can save on costs associated with employee benefits, payroll processing and salaries for full-time HR professionals. Software and hardware improvements are often included in the service provider’s budget when a business employs an outside company to handle some or all of its HR duties. It keeps the company’s HR programs current with new technology that can improve efficiencies, such as applicant tracking or onboarding tools.
Another cost-saving advantage of HR outsourcing is the ability to scale up or down as needed quickly. For example, if your company expands into a new state, your outsourced HR department can source and recruit staff to meet the demand. A full-service PEO partner can also provide a more comprehensive solution for your business, such as hiring and onboarding, worker’s compensation coverage and developing policies for personnel management. In addition, a PEO can help reduce the amount of money that goes toward overhead expenses like salaries and training sessions for your employees. It can free up funds for other areas of your business.
Compliance
Keeping up with the myriad of state and federal laws related to human resources can be daunting, especially for smaller companies without dedicated HR staff. Non-compliance can result in steep fines or even lawsuits. Outsourcing your HR functions can ensure compliance and minimize risk for you and your employees.
For example, HR professionals must deeply understand wage and payroll tax laws and be up-to-date on any changes. They must also process employee paychecks accurately every pay period and be able to document any leave time taken. Outsourcing your payroll to a specialized firm can ensure everything is handled correctly and complies with the law.
Another important function of HR is addressing workplace issues, including employee disputes. When HR experts handle these issues, they can help to resolve conflicts and improve morale. It can lead to higher productivity and better overall company performance. It is one of the top reasons many companies outsource their HR functions to a professional employer organization (PEO), which handles all HR activities but does not employ your workers.
Flexibility
Many small and mid-sized companies find that having an HR department on-site takes away time and resources from growth-related initiatives. Plus, having an on-site HR team increases company overhead expenses by requiring salaries and office space. Outsourcing HR to a PEO allows your business to shift focus back to expansion, development and growing market share. When outsourcing any business process, the most important thing is to ensure that the company selects a vendor with a reputation for excellent service. It’s also crucial that the company establishes clear expectations about what they expect to receive from the vendor in terms of response times and overall performance. When hiring an HR firm, choosing a provider that treats confidentiality seriously is vital. After all, these professionals are privy to sensitive employee information – everything from medical histories to bank account information for direct deposit. Ensure your HR provider has multiple security measures and they take compliance with data protection laws very seriously. Then, rest assured that your sensitive employee data is in good hands.
