On average, small businesses spend one day a week or more1 on human resources related tasks. When combined with the average employee wage, it’s estimated that a total of $27 billion per year2 is spent handling HR tasks within the small business market. This can drain resources needed to grow your business and negatively impact your company’s success. To help you get more out of your efforts, consider some of the advantages of outsourcing your human resources.
HR departments are responsible for undertaking a variety of tasks within an organization. When you’re a small to medium sized business, this consumes a lot of time and resources that could otherwise be spent growing your company or fostering customer relations. Some of the HR functions that can be outsourced include the following:
The human resources department is responsible for making sure that your business stays compliant with dynamic employment laws and regulations on the local, state and federal level. This requires a degree of expertise and an ongoing commitment to research and adaptations. Many HR outsourcing companies can provide best practice guidance to help your company avoid harsh penalties or hefty fines, but it’s important to make sure your agreement with them includes such services.
Similarly, HR departments are responsible for dealing with internal complaints and employee concerns. They also need to be responsive to claims of alleged workplace harassment or discrimination. These can be complex situations that require HR best practice resources and guidance to assist in your employee relations, response to and handling of any such claims and management of these types of situations.
No company can function without a comprehensive payroll processing system that serves their employees. Outsourcing to a third-party HR department means that compensation, wages, payroll taxes, and deductions are taken care of in a timely manner that complies with the appropriate laws and regulations.
Part of the compensation for full-time employees includes various benefits. Outsourcing HR gives you the chance to offer your team access to big company benefits, which can include retirement plans, health insurance and other non-traditional offers.
If an employee is injured on the job, it needs to be handled appropriately. Some workers’ compensation issues can include paid sick time, disability and policies that will cover medical care in case of an emergency. Outsourcing HR allows you to streamline this process and reduce issues should something occur.
1. Save Money on Administration Costs
While outsourcing your HR needs comes at a cost, it’s negligible when compared to the value HR expertise can bring. Standard HR departments have many responsibilities requiring significant staff to fulfil them. As your company grows, your HR department needs to grow alongside it. When you outsource with a PEO, you’ll receive access to scalable HR professionals and experts that expand with your workforce. Outsourcing can provide a substantial savings on overhead cost. Some of the areas where you may find savings include payroll processing, training and salaries of the HR expertise you’d otherwise have to employ.
2. Offer Employees More Services
Small to medium-size businesses don’t always have access to benefits or employee services. This can create issues when recruiting and retaining top talent. When you work with a PEO, you gain access to comprehensive big company benefits that your employees deserve. This includes traditional and non-traditional benefits. Access to benefits can also extend beyond medical, to dental, vision, life, disability, retirement, transit and other voluntary benefits that help improve an employee’s compensation satisfaction. This can decrease employee stress, improve productivity and strengthen retention.
3. Stronger Risk Management
One of the most difficult aspects of running a business is staying up to date with dynamic employment related laws at the local, state and federal levels. While some changes or updates may be small, you may still need to make adjustments within your organization to stay compliant. Outsourcing HR strengthens the approach of risk management by providing you with best practices to help you avoid fines, claims or devastating penalties. PEOs can provide HR experts who are well versed in ongoing changes to laws and regulations at all levels to help keep your policies and procedures up to date. This not only benefits your organization, but it also helps to protect your employees.
4. Efficient Performance Management Tools
Effective employee performance management is a critical component of HR. However, every employee is different and responds uniquely to feedback. When you outsource HR, you’ll gain access to a variety of performance management tools and modern practices that can help you conduct feedback loops and gain insight on how to retain employees by improving their overall experiences. Some examples of tools that can be used for this include engagement surveys, exit interviews and even onboarding questionnaires. This not only helps improve your overall organizational efficiency, but it also communicates your investment in your employees’ growth and overall happiness. Outsourcing HR does not mean that your employees will be managed by an external team. You are still responsible for this, but you will gain the tools and best practice support to help make the process more adaptable and efficient.
5. Increased Efficiency
One of the most notable benefits of outsourcing your HR is the time saved within your organization. When you have an in-house team, they need to navigate piles of paperwork, HR compliance, risk mitigation, employee benefits, processing payroll, employee complaints and other important HR functions. Outsourcing allows you to free up this time and increase the overall efficiency of your company. This gives you the capacity to hire a workforce that spends their time advancing your company’s strategic goals, growing your revenue stream and improving customer loyalty.
6. Faster Ramp Up Time for New Employees
If you decide to expand to new geographic markets, certain PEOs have the HR expertise to help you onboard new employees in any state and assisting you with navigating the complex process of hiring and onboarding outside of your typical locations —all while helping you adhere to local, state and federal employment laws and regulations. Organizations with a strong onboarding process improve new hire retention by 82% and productivity by over 70%3. In addition, you need an HR partner to have technology programs that make it easy to manage HR in real-time, from employee onboarding capabilities on mobile apps and desktop to analytics about the workforce to help you with informed decision making.
7. Ongoing Training and Development
Employee retention is an important part of organizational efficiency and productivity. Excessive turnover leads to wasted time, money, effort and lost expertise. When you work with an external HR team, you’ll have access to tools to help you gain a better understanding of how to foster a people-centric workplace that helps build employee satisfaction. You’ll also have the resources to offer your employees practical training on best-practices, business skills, software skills, and diversity, equity and inclusion that encourages both personal and professional development. This can help set up your employees for success and communicates your interest in employee development programs and your commitment to creating a diverse and inclusive workforce.
8. Access to Expert HR Consultants
Overall, outsourcing offers unbeatable access to expert HR consultants. As such a rich and complex department, you want to make sure they have the skills and knowledge to properly help you with your HR responsibilities in the most effective manner. HR outsourcing is the solution to this problem. Working with a PEO provides you with a team of experienced HR professionals who understand the intricacies involved in processing payroll, benefits administration, risk management and various other aspects of people management.
TriNet is a professional employer organization that offers full-service HR solutions to SMBs across various industries. To learn more about how our HR experts can help your business succeed in a competitive market, contact us today.Understanding the HR services that can be outsourced already provides a clear view of the benefits. For more information, consider how an external HR solution like a professional employer organization (PEO) can benefit your business.
1 HR Daily Advisor, “How Much Time Do You Devote to People Paperwork?”
2 ICSID, “Small Businesses How Much Time is Wasted on HR?”
3 Brandon Hall Group, “The True Cost of a Bad Hire”