It is not an insurmountable task to outsource HR for small business. In fact, outsourcing human resources can help smaller firms streamline their business functions and reduce expenses, just as they do with larger organizations.
In today's economy, small businesses need to also consider the other practical benefits of outsourcing. Here are some of the advantages this strategy offers:
The ability to focus on business productivity. Instead of spending time handling routine administrative tasks, employers and their HR teams can focus on more strategic functions of the business with greater potential rates of return.
An enterprise-class solution. Small businesses may be able to enjoy enterprise-class benefits from HR outsourcing, which can help them save costs and compete more effectively with other small businesses and their larger counterparts.
Help with compliance. Many small businesses struggle to keep up with changing laws pertaining to hiring, insurance claims management, and benefits regulations. Failure to comply with these regulations can lead to serious financial consequences. Outsourcing HR functions to a trusted provider can help business owners understand and take action to comply with these laws and regulations.
More effective recruitment efforts. In a 2017 Paychex survey of approximately 100 HR professionals, more than one in five survey respondents said they didn't believe recruitment and interviewing was as efficient and effective as possible. They contend that employing HR outsourcing companies to help staff businesses may not only save money but also increase the quality of candidates in the job queue. In conjunction with hiring managers and human resources, outsourcing recruitment can contribute to making HR professionals more efficient and saving them time.
What HR professionals are saying
HR professionals who participated in the 2018 Paychex Pulse of HR Survey identified the five toughest HR challenges they face:
- Keeping up with laws and regulations (38 percent);
- Tracking employees' time (38 percent);
- Complying with laws and regulations (35 percent);
- Offering competitive benefits (33 percent); and
- Retaining talent (31 percent).
Outsourcing a small business HR solution can help your company with each of these areas. They may also be able to assist with retirement planning, executive development and coaching, compensation-plan administration, risk management, and training programs. By shifting the focus from administrative tasks to strategic efforts for the company's mission, your HR team could make broader, more lasting contributions.
Coping with the big HR challenges
How do you know when it's time to outsource HR solutions for your small business? These are some warning signs:
- Your HR team's entire focus is administrative. When HR staff spends most of their time on data input or forms processing, this may be a signal it's time to look at outsourcing or upgrading to more robust HR systems. Limiting your team to predominately administrative work takes members' focus off strategic contributions.
- Employees lack access to self-service. HR managers no longer need to conduct every aspect of benefits enrollment, updating employee information, retirement plan information, or employee training. Leading HR technologies provide employees with self-service portals that help them complete many basic tasks themselves, such as updating their mailing address or adjusting retirement plan contribution amounts. A self-service portal can free up HR staff time, and many employees find the process more convenient, since they can access the portal anytime and anywhere.
- Your HR system doesn't support mobility. With many firms promoting remote work and telecommuting opportunities, mobility for key HR services such as time and attendance reporting is essential. Cloud-based solutions that support off-site access to the company database are becoming the norm. If your employees can't complete essential functions from their smartphones or tablets, your HR technology may need an update.
- HR is becoming a cost center. Ideally, your HR team should function as a key strategic asset, not a liability. It may be time to ask yourself whether external expertise or better technology can help.
- You struggle to keep up with regulatory and statutory requirements. Your HR team needs to understand any current federal, state, and local laws and regulations that may affect your business. Companies lacking in-house expertise in this area may want to outsource their HR technology and operations. Having HR consultants available can help you comply with applicable laws and regulations to help protect you from costly penalties and fees.
Awareness of your business' current HR needs and challenges can lead to recognition that now is the best time to partner with a skilled third party. Companies seeking to improve their performance may reap rewards when they let experts manage compliance, employee benefits, and payroll processing.
Help with workplace conflicts
When personnel disputes arise in the office environment, employees often look to the HR department for help. However, these HR professionals are often swamped with the need to recruit and train new employees, as well as manage benefits for an entire workforce. Handling conflicts is sometimes too much for HR teams already stretched thin and who are unable to re-prioritize their workload as needed.
Outsourcing payroll and other administrative tasks, like benefits management or certain aspects of new-hire onboarding, is one way to give HR departments more time to devote to important issues requiring their attention. When conflict arises, employees want HR professionals to have the necessary resources available to effectively address their concerns.
Costs and benefits of outsourcing HR
Understandably, many small businesses feel they cannot afford the expertise of an in-house HR professional. But as Paychex senior HR generalist Jessica Davis points out, "the extra cost associated with an additional headcount may not be necessary to provide HR support for a company, regardless of the size."
Having a strategic business partner work with your company on a consulting basis can be a great solution. The many potential benefits to outsourcing your human resource administration include:
- No additional headcount for a full-time HR professional
- Direct link to an assigned consultant who knows you and your business
- Ongoing updates of local, state and federal regulatory changes
- Expertise in many key areas of HR and safety
- Cost-saving programs that address high turnover and low employee morale (i.e., training, proper hiring techniques, EAP programs, etc.)
- Flexibility to work with a company's schedule, whether on-site or by telephone
- Expanded product knowledge of HR-related products and services (i.e., 401(k), health and benefits, FSA, and more)
In addition, many small businesses want to learn more about managing employees and HR functions on their own in an effort to reduce costs.
"Outsourcing HR has proven to be a wonderful partnership opportunity for do-it-yourself owners and managers," Davis notes. "With guidance provided by a consultant, those responsible for the HR functions become educated on best practices, and provided with a 'life-line' for HR-related situations that occur frequently in the business world."
Having an HR outsourcing partner to educate and guide an employer through the turbulent waters of regulations and employee relations allows a business owner to focus more on the business. With the experience and expertise that comes with outsourcing HR, a business can:
- Elevate customer service relationships both internally and externally
- Potentially minimize costs associated with turnover and poor employee morale
- Pursue more active forward thinking in their business
All this can be accomplished without the expense of an additional headcount while still providing the knowledge and partnership necessary to be successful.
What a dedicated HR professional can do
A dedicated HR representative can work with you and your team to provide hands-on guidance throughout the employment cycle. In regulatory compliance, for example, this individual consults on applicable compliance requirements so you can make sure your employment and safety practices adhere to federal, state, and local laws, as well as the requirements of numerous agencies — including, but not limited to, the Employment Equal Opportunity Commission to the Department of Labor.
Assistance can also be provided in these critical areas:
- Problem resolution of employee issues and management
- Employee benefits (it's so much more than orientation)
- On-site HR training sessions for your managers and employees
- Guidance with selection of policies to develop your employee handbook
- Ensuring workplace safety
- Designing workflow and staffing analyses
- Assistance with all facets of the employment life cycle, from interviewing and hiring to employee discipline and termination
Perhaps one benefit that small businesses may not realize about HR outsourcing is that it enables companies with minimal resources to use cutting-edge technology that could otherwise be costly to maintain on their own. With an outside expert running some of the functions, businesses can enjoy the rewards of newer and more innovative HR technology systems without having to purchase this technology on their own.
The ability to outsource HR for small business is available here and now. Having access to dedicated HR services support that is both scalable and cost-effective can help small businesses as well.
To learn more about expanding your HR team, download this in-depth whitepaper.