HR Outsourcing | HR Essentials

What to Know About Outsourcing HR Services for Your Small Business

July 28, 2022 · 7 min read

Best practices from our HR experts

According to the Bureau of Labor Statistics (BLS), HR employees tend to have a median salary of about $59,180 while HR managers average $106,910.1 This is a huge financial commitment for businesses, but it can be crippling for small to medium-size businesses (SMBs) trying to sustain growth. While having an HR team is essential for the success of any organization, big or small, you don’t need to spend a fortune in your efforts to get best practices on staying compliant. Instead, consider some of the most important aspects of outsourcing HR services for your business.

What does outsourcing HR involve?

Outsourcing your HR services means that you hire a third-party company or team of people to assist with some of the responsibilities that would otherwise be performed in-house. Due to the intricacies involved, outsourcing HR is more of a team effort that requires ongoing communication and understanding. This allows you to streamline your HR needs and maximize the efforts of your internal resources while working toward a common goal. Outsourcing covers many of the traditional functions of an internal HR department through an ongoing relationship that offers best practice guidance and support as you grow. When you work with a qualified team, the return on investment can be substantial and you’ll find you have more opportunities to grow your business and develop your team.

What is a professional employer organization (PEO)?

PEOs operate under a co-employment model in which employer responsibilities are allocated between the PEO and the employer. The PEO assumes certain functions such as paying your employees, collecting and remitting payroll taxes, and offering access to employee benefit plans sponsored by the PEO. PEOs may also help with tools and resources for talent acquisition and onboarding. However, your organization will maintain control over all workforce decisions, such as hiring, firing, compensation and culture. There are several PEOs operating in the marketplace, but not all are created equal. Therefore, it’s important to ask prospective PEOs several questions before moving forward. This allows you to understand what your future relationship will look like and determine whether it will be a good fit for your organization.

How can outsourcing HR services help your small business?

Outsourcing your HR services can result in a range of benefits. Some of the most notable include more time to focus on your mission, access to a broader range of employee benefits, improved employee engagement, lower employee turnover, reduced administration costs, stronger risk mitigation and a team of HR experts to help guide you with best practices when you need it. Partnering with a PEO does not mean you need to replace an internal HR manager, but it will provide them with more time and energy to focus on strategic initiatives. The overall goal of a PEO is to help your SMB grow and achieve success.

Different functions supported by HR outsourcing

The responsibilities that encompass HR management are vast and far reaching. They include everything from benefits and compliance to payroll and productivity. Some of the most common functions that are supported by an external HR department are as follows:

Recruiting and hiring

Hiring and recruiting takes a lot of energy and sometimes the efforts are fruitless. An experienced team of HR professionals understands and can share strategies on how to find talent that aligns with your business strategy, giving you a stronger pool of candidates to choose from.

Employee benefits

This includes both traditional and non-traditional, which can help boost employee happiness and retention.

Payroll processing

PEOs can help you process employee payrolls, payroll taxes, retirement plan contributions and more.

HR compliance

Navigating the legal sphere of employing people can be complicated, especially as your workforce grows. HR outsourcing allows you to gain access to experts who understand the dynamic nature of municipal, state and federal regulations. This includes everything from running background checks and adhering to employment laws to payroll and taxes. Partnering with a PEO can help reduce your risk of fines and legal penalties.

HR expertise

With a third-party team of HR professionals, you’ll gain access to ongoing insight and expertise regarding certain administrative or management tasks. This allows you to free up your resources while mitigating legal or HR issues.

Integrated technology

Experienced HR consultants have access to several tools and technological innovations that can help improve the effectiveness and efficiency of your day-to-day tasks. This allows you to integrate several aspects of your business and streamline your processes in one convenient place.

When to consider outsourcing HR services for your small business

SMBs face many of the same challenges as large corporations, many times without the resources to handle them. Rather than spending your time and money on managing internal affairs, outsourcing HR can help you lighten your workload and reduce the stress that accompanies compliance, hiring, retention and other administrative tasks. If you’ve never considered partnering with an external company, but are facing any of the challenges below, it’s time to examine the benefits of working with a PEO.

Heavy administrative workload

If your internal team is spending too much time navigating administrative tasks for HR, you’ll likely benefit from outsourcing. Although important, HR tasks take up a lot of time and energy. This takes away from the resources needed to drive your short- and long-term goals forward. Rather than focusing productivity on admin tasks, outsourcing can help you focus on strategy and growth. Since you’ll gain access to a network of HR experts, you’ll also save wasted time you would have otherwise spent simply trying to understand dynamic regulations and the paperwork requirements that go with them. After hiring a PEO to help manage your HR administration, you can focus on strategic planning that will help you grow your business.

Inefficient employee benefits

Creating a competitive package to offer your employees can be difficult for SMBs. Due to the size of the workforce, these organizations don’t always have access to the same benefits as larger businesses. Access to competitive benefit options can, in turn, improve overall workplace satisfaction, reduce retention rates and boost productivity in the office. By professionally outsourcing your HR administration, you’ll also validate that your workforce is set up for success with optimized training and support to continue developing their professional skills.

Struggling with regulatory requirements

There are hundreds of different local, state and federal regulations that businesses need to adhere to. These are often described using complex, legal language that requires a certain degree of experience to decipher. What’s more, these regulations can change several times per year, making it nearly impossible to stay up to date without dedicated personnel assigned to review daily. When you have an internal team trying to handle this while juggling other tasks, you increase your risk of non-compliance. By working with an outsourced team of HR experts, you’ll mitigate risks without wasting valuable time.

Expensive internal HR management

When HR administration starts getting more complex, it can require a large team of internal staff to remain effective. This can lead to high overhead costs and limited resources. Partnering with a PEO is a great investment that will provide you with both immediate and long-lasting returns. This allows you to focus your time and investment on growing your business, hiring top talent and providing your employees with competitive benefit options.

Assist HR leaders with strategic initiatives

Working with a PEO doesn’t mean you should dismiss any internal HR employees. Instead, PEOs can assist your HR managers by providing scalable support and strategic initiatives to help your company grow. They can also help your organization remain consistent during periods of change or expansion so that all of your employees are adequately supported. PEOs help create scalable HR infrastructure for growing companies.

To assist you with fostering a high performing team that’s committed to helping your organization grow, TriNet offers comprehensive HR services. Our human capital consulting solutions can help you handle your toughest HR needs while you expand your business. Through the combination of expert guidance, risk mitigation strategies and headache-free payroll, you’ll gain an HR team committed to your growth and peace of mind. Contact us today to learn more about how we can help you strengthen your strategic plans and support your growth.

1 Usual Weekly Earnings of Wage and Salary Workers First Quarter 2022, Bureau of Labor Statistics (July 2022)

By TriNet Team

Best practices from our HR experts