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Human Resources Outsourcing Guides the Way to Compliance and Innovation

Human Resources

Companies of all sizes face increasing HR complexities as the number of employment laws and regulations are on the rise, and the risk of penalties for non-compliance has perhaps never been greater. When developing HR policies and procedures, business owners should know, for example, that:

  • An employer must be in compliance with all applicable federal, state, and local laws and regulations.
  • A business may be subject to an audit from an enforcing agency that may levy fines and penalties for non-compliance.
  • Not knowing or understanding your compliance obligations is not an acceptable legal defense.
  • A lawsuit settlement can bankrupt a company.

Many businesses choose to outsource certain HR functions to help mitigate these potentially costly HR pitfalls. Doing so can mean having access to experienced professionals who have in-depth, up-to-date knowledge of federal, state, and local government regulations.

Small businesses, however, may be hesitant to go this route, and assume that having a limited budget won’t make human resources outsourcing feasible. There may also be the perception that outsourcing is designed to help only larger operations streamline their business functions and cut down on costs. But there is an increasing need for small businesses to consider the financial and other potential practical benefits of outsourcing HR functions to a trusted provider.

Potential Cost Savings

In many cases, HR outsourcing can help save costs and alleviate administrative burdens. Outsourcing can also help in-house staff focus their efforts on core business functions, a move that many HR teams increasingly see their role shifting towards. In fact, a 2017 Paychex Pulse of HR Survey revealed that HR professionals at small businesses see their role evolving from administrative duties to a more strategic function.

On-Hand HR Expertise

This is one area where many small businesses struggle to keep up, especially with the changing laws pertaining to hiring, insurance claims management, benefits regulations, and more. The greatest challenge is that failure to comply with applicable laws can lead to penalties, loss of business license or lawsuits from employees or former employees, etc. Outsourcing HR functions to a trusted provider can help business owners better understand the laws and regulations that apply to them.

Access to the Latest Technology at Manageable Costs

Perhaps one benefit that small businesses may not realize about HR outsourcing is that it allows companies that may have 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 may enjoy better and more innovative technological systems without necessarily having to own them.

If HR teams at small businesses are looking to focus their efforts on areas of the business that have a direct impact on the bottom line, outsourcing HR functions may be a worthwhile consideration. Without the compliance knowledge, depth of expertise, and technological advancements that a professional HR outsourcing service can provide, small business owners could be at an increased risk for non-compliance, costly employee lawsuits, and other HR challenges.

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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