How to Optimize Outsourced HR Services for Small Business

As soon as your company starts hiring employees, you take on a wide range of human resources responsibilities. Many small businesses grapple with these common problems:

• HR administration can be overwhelming for a small business that lacks the resources for a full-fledged in-house human resources department.
• Time spent on routine HR tasks takes away from time that could be spent on core company objectives.
• A small company may not have the in-house expertise to deal with unexpected and complex HR challenges and concerns.
• Small businesses often struggle to keep up with changes in regulatory requirements.
• Compliance issues may keep on cropping up.
• Top-shelf employee benefits plans may be out of reach.
• Employees want, but don’t have, the convenience of self-service access to their HR records and benefits information.

Outsourced HR services for small businesses focus on addressing these concerns. They provide much-needed expert assistance with both day-to-day HR tasks and strategic services that can positively impact your entire company, streamlining processes, enhancing employee productivity, mitigating risk and driving small business growth. By doing so, they can help transform administrative burdens into competitive advantages.

Key HR Services That Can Be Outsourced

When thinking about which HR services your small business could outsource, consider these popular choices:

Payroll processing

With HR payroll processing outsourcing, you’ll get access to enterprise-level HR technology without the expense of buying and maintaining an in-house payroll system. You will benefit from the outsourcing firm’s experience, expertise and technology resources.

HR outsourcing providers can help automate routine payroll tasks for consistency while helping to reduce the administrative burden on your staff. With the time that’s freed up, your staff can focus more on projects that advance your core business goals.

Working with an HR outsourcing firm can be a valuable long-term relationship. You could continue to enjoy the advantages of outsourcing as your company scales up. Payroll processing complexity may increase exponentially with growth:

• If you expand your workforce into different states , or even sometimes just into a different city, you’ll have to comply with the payroll rules and requirements of new work locations in addition to your current one.
• When you have more employees, you may start offering them a wider range of benefits, which will add to the administrative workload.
• The sheer volume of the payroll and employee records you’ll need to process, store, update and track increases as your company grows.

Working with a trusted payroll processing firm can help you sail through these changes.

While payroll processing may be top of mind when people think about outsourcing HR services, that’s just the beginning. HR outsourcing also provides much more, including:

Benefits administration

When you handle benefits administration in-house, there can be hidden costs beyond the pay of the employees that perform the work. There are the costs of hiring, onboarding and training the HR employees, as well as paying their benefits. They’ll need desk space, computers, heat and air conditioning. They'll need software that you must select, buy or lease, maintain, update and troubleshoot. Otherwise, you might face even greater costs in lost time and errors if they perform their tasks by hand. You’ll also need to develop compliance expertise in-house to keep up with changing employee-benefit requirements, or risk penalties and fines.

By outsourcing benefits administration, it may be more cost effective. And, if you work with a professional employer organization (PEO), you could gain access not only to benefits administration but also to big-company employee benefits that are typically out of reach for small businesses to offer to their employees.

Another advantage of outsourcing benefits administration is that your employees could gain anytime mobile access to an HR portal where they can:

• Get information about the benefits information available to them.
• Enroll in the plans of their choice.
• Update their employee records.

This self-service access is convenient for employees, who save time by not having to go through an HR staff member.

Compliance and risk mitigation

The compliance burden for a small business can feel overwhelming and take up time that you would rather spend on pursuing business goals. Rules and requirements on the federal, state and local levels keep growing more complex. And they can also frequently change. These compliance requirements may include workers’ compensation, workplace safety requirements, wage and hour requirements, benefits administration, payroll recordkeeping and more.

Being out of compliance in any area can result in costly penalties and/or lawsuits. A proactive approach to compliance could mitigate problems before they arise. No more scrambling to do damage control afterward. HR outsourcing providers may have specialized expertise in these compliance areas to help you navigate compliance and mitigate risk.

HR technology

When you outsource HR services, you could get access to a sophisticated human resources information system (HRIS). These systems help handle your day-to-day HR tasks simply and efficiently. They can also go above and beyond routine tasks by providing:

• Employee self-service portals that can reduce administrative overhead.
• Data-driven insights to help you make informed decision-making about your human capital needs.
• Integration capabilities to streamline multiple business processes.

What HR Services Drive Performance and Growth?

Outsourced HR services for small businesses go beyond basic “paperwork” functions to provide strategic services that can help your company grow, support the full potential of your workforce and gain a competitive edge.

Recruitment and talent acquisition

Outsourced HR services can move you beyond job posting to strategic workforce planning. Your company could gain:

• Access to the firm’s talent acquisition tools to help with hiring talent.
• Enhanced employee engagement, which could raise your employee retention rate.
• Flexibility to scale your recruitment efforts up or down based on your changing needs.

Performance management, training and development

After recruitment and hiring, small businesses can continue to benefit from outsourced HR services to manage and develop their employees. These outsourced services support small businesses with its performance management services where small businesses can focus on developing their employees.

Features of these services can include support for:

• Objective performance evaluation processes.
• Personalized training and development programs that can scale up as circumstances change.
• Creation of pathways for career growth that enhance employee satisfaction and retention.

Strategic HR consulting and workforce planning

Outsourced HR services can help you transition from a reactive style of employee management to a proactive strategy that moves you forward in alignment with your business goals.

HR consulting services can support you in:

• Your company’s growth phases plans.
• Developing a business strategy that keeps you on target with your goals.
• Creating employee handbooks and policies that scale up as you grow.
• Creating organizational structures that support expansion.

ROI and Measuring Success

You can earn a significant return on investment (ROI) for using outsourced HR services for small business. The benefits could be twofold—direct cost savings and new value creation.

Quantifying direct cost benefits

The direct costs of HR-related tasks are substantial, both in money and time. Small businesses that handle HR tasks in-house spend an average of one day per week or more on administrative HR issues. Collectively, small businesses spend $27 billion per year on these tasks. The cost efficiencies of outsourced HR services for small businesses provide much-needed relief.

All types of HR outsourcing providers can typically provide some sort of ROI. When companies work with a PEO, for example, they may be able to get an average ROI of 27.2% just on cost savings alone, based on the NAPEO research. These savings come from multiple sources:

• Outsourcing provider’s service fees may cost less than recruiting, hiring, training, developing and paying wages and benefits for in-house HR staffing.
• Outsourcing companies can help you navigate complex requirements, which may help small businesses mitigate the risk of penalties, fees, claims, and reputational damage—along with the time and costs often associated with defending against such issues.
• Outsourcing companies can optimize the costs involved with in-house technology, including software licensing, maintenance and upgrading expenses.
• The efficiency gains from outsourcing can translate into potential time savings for leadership.

Strategic value creation

Beyond potential savings from cost efficiency, outsourced HR services also could provide substantial long-term benefits. They could:

• Free up leadership and employees’ time and energy to focus on core business activities.
• Enhance employee experience, leading to higher productivity and enhanced employee retention.
• Mitigate risk of costly issues and penalties.
• Enhance scalability to align HR capabilities with business expansion.

Choosing the Right HR Outsourcing Provider

When choosing an HR outsourcing provider for small businesses, look for a company you could work with over the long term. Find an outsourcing firm that meets your current needs and budget while also having the capacity to scale up with more HR services as your company and its HR needs grow.

If you’re just starting out, TriNet can help ease the load of routine HR tasks, giving you more time to focus on your company’s growth. We also provide strategic services that are especially valuable for a young company, like attracting top talent, navigating compliance and supporting a strong team culture.

As your company grows, TriNet can be right there with you, streamlining your payroll processing, helping you navigate compliance challenges, providing access to premium benefits and boosting employee retention.

Want to know more? Download our free eGuide that shows you how a PEO helps SMBs grow.