In the U.S., there are over 30 million small businesses employing over 58 million people.
The government defines a small business as one with 500 employees or less making revenue of $1 million dollars per year.
Small businesses face challenges their larger counterparts handle in-house. HR issues such as how to handle payroll or find new hires are sometimes best left to outside HR providers.
Are you thinking about outsourcing your HR?
Read on for 10 good reasons you should outsource your human resources services.
What Does a Human Resources Department Do?
If you’re operating a small business, you might not think you need an HR department. Or you might not have the resources for one.
Most small businesses have an HR department of one: the owner.
But in today’s litigious environment, there’s a lot to know and understand when it comes to handling your employees.
Leaving things to chance and hoping you never run into an HR issue is foolish. In the event you handle something wrong, it could even lead to you losing your business.
Even if you only have a few employees, they’re your best asset. Outsourcing HR instills a level of professionalism that employees can rely on and respect.
There are many complex HR issues, such as payroll, insurance benefits, and compensation. Businesses also carry lots of liability when it comes to their employees. And it’s not only physical liability.
Companies must meet many government standards. Most people have no idea what those standards are. And combing through the regulations is a full-time job.
By outsourcing HR, you can put your focus where it belongs, on growing your business.
1. Reduce Overhead
One of the biggest reasons for outsourcing your HR department is reducing overhead. An HR department means increased staffing of trained and experienced HR professionals.
If you go with an in-house department, you’ll also need more office space and computers. There are also many types of software necessary for fulfilling HR duties. Payroll software alone is a big investment.
A good HR department saves you money in the long run. But it’s a back-office expense that doesn’t generate revenue.
Outsourcing HR is a cost-effective option. You’ll save on insurance premiums, recruiting fees, and other related employee expenses.
The costs of hiring an outside source vary. You can start small and scale up as necessary.
2. Attracting the Right Employees
It’s not easy finding and retaining top talent. It takes both time and money.
If you’re not experienced recruiting and interviewing prospective employees, you might not end up with the best people.
A new hire is a big investment. If you don’t get it right the first time, the costs of hiring, training, firing, and re-hiring add up.
How do you make sure you’re getting the right employee the first time? By using an experienced professional employer organization (PEO).
The PEO is your co-employer. Their employees handle the hiring process. They have in-depth knowledge of the recruitment process.
They know how background screenings work. They’ll take any legal worries about the hiring process off your shoulders too.
Once you’ve got a new employee, let your outside HR handle the onboarding process as well. A structured onboarding process is important when it comes to employee retention.
High employee turnover drives the cost of doing business up. The better your training and onboarding process is, the longer your employees stay.
3. Training and Education
You know your business better than anyone. But that doesn’t mean all the training should fall on your shoulders.
Training and education are other areas where a PEO can help. Even if training is only a small part of your business, it often pays to outsource it.
Training resources aren’t cheap. There’s training software, computers, and printed materials.
Of course, you’ll do a lot of on-the-job training. But outsourcing some of your training is another way to free up resources for growing your company.
4. Developing Employee Policies
Your company policies should be in the form of a written document. But many small businesses fail to put together a policy manual.
Without written policies, you’re leaving your company vulnerable to lawsuits. An outside company can help you with this process. They can also help you develop good company policies.
A PEO has vast experience with many different types of companies. They can guide you when it comes to the types of policies your company needs.
A comprehensive written company policy helps reduce liability. And speaking of liability…
5. Dealing with Risk and Liability
Are you familiar with labor laws? Think you don’t need to worry about them because your company is small? Think again.
There are a plethora of labor laws, and they’re changing all the time. How do you keep up?
If you outsource your HR department, you don’t have to worry about that. They’ll have trained professionals on staff whose sole purpose is keeping current with employment law.
They’ll make sure you’re in compliance with the law through policy audits. They’ll also help you manage the diversity of cultures in the workplace.
Employee law deals with everything from hiring, to benefit regulations, to insurance claims. It’s easy to run afoul of the law when you don’t even know you’re breaking it.
Ignorance isn’t a good defense. And you can end up paying serious financial penalties.
There are also lots of health and safety standards that must be met in the work environment. These standards also fall under labor laws.
Good third-party HR professionals can also help when it comes to psychological issues. They recognize burnout versus normal stress. And they can step in and deal with problem employees.
6. Dealing with Payroll
Payroll is one of the most well-known HR issues that many companies outsource. Outsourcing payroll is much cheaper than keeping payroll staff in-house.
Have you ever had to stop what you’re doing so you could deal with a difficult employee payroll situation? Then you know outsourcing payroll saves time, energy, and money.
Having an outside source handle your payroll saves you money on software and technology as well. If employees have payroll questions, steer them to your PEO.
7. Health Insurance
Health insurance rules and regulations are a burden for every business that offers health benefits. If you’re a small business, you don’t always have the array of choices the bigger companies have.
But if you go with an outside company, they have access to a wide variety of employee benefits. These are benefits that wouldn’t otherwise be available to you.
Included in these health plans are major medical plans.
8. Liability Insurance
If you’re running a small business, health insurance is only one facet of the insurance dynamic.
There are so many other types of insurance you need to understand. Have you heard of employment practices liability insurance (EPLI)? Your PEO has.
There are several different types of liability insurance in today’s workplace. You also need workers’ compensation insurance.
There’s commercial insurance and professional liability insurance too. It’s difficult navigating the many ways a business gets sued. You need an in-depth understanding of all types of insurances. Then you can choose the best option for your business.
Even a small business needs big insurance. And a PEO can offer you options that would otherwise be too expensive.
9. Administering Retirement Plans and Other Perks
Retirement plans are a huge incentive for recruiting and keeping the best employees. But administering retirement plans is no small feat.
Talk about liability and HR issues! There are many laws governing 401ks and other retirement incentives.
Outsourcing this to a PEO alleviates a lot of headaches.
There are other perks you might want to offer your employees but don’t know how, such as employee discounts and affinity programs.
Using a PEO maintains company efficiency and productivity. PEOs have the resources that streamline the HR process. They utilize up-to-date technology for payroll, benefits, and compliance.
What’s more, outsourcing frees you from back-office work that doesn’t generate revenue. You can then focus on more productive areas of the business.
Alleviate HR Issues by Outsourcing the HR Department
You can alleviate a lot of onerous HR issues by outsourcing the HR department. Reduce costs and overhead with an appropriate PEO company as your co-partner.
Payroll isn’t the only HR function ripe for outsourcing. Payroll is only a small part of what a great PEO company can do for you.
Let the experts handle recruiting and interviewing for open positions. Onboarding and training are other areas you should consider outsourcing.
Your time is important when it comes to growing your business. Don’t waste it working on the company policy manual. And if you’re worried about developing the right policies, a PEO can help with that too.
Compliance with employment law is huge for any company. It takes time, effort, and expertise to keep up with the ever-changing laws.
Don’t endanger your company by unwittingly breaking labor laws. Let the PEO guide you.
By outsourcing HR functions to a PEO, you’ll also get more healthcare options. This helps with recruiting and retaining high-quality employees.
Looking for a great PEO partner? Let us help you!