What to Know About HRO Services for Your Small Business

Maintaining a full-fledged in-house human resources department is a large financial commitment that can be especially tough for small and medium-sized businesses (SMBs). According to Gartner, HR accounts for 1.47% of organizational operating expenses on average and HR functions spend $2,810 per employee annually, on average. That's no small expense, and it can really add up for a company that's operating on a small budget.

Since it's crucial to effectively handle human resources functions, your company may find that HR outsourcing services (HRO services) can provide the help you need at a cost-effective price. When you outsource your HR, your company doesn’t need to strain internal resources to implement best practices to stay compliant. Let's take a closer look at this solution and what it entails.

What Does Outsourcing HR Mean?

Many companies around the world have found that business process outsourcing can be a big help. When outsourcing HR services, you engage a third-party company or a team to assist with some HR responsibilities that would otherwise be performed in-house. This allows you to streamline your HR functions and maximize the efforts of your internal resources.

Outsourcing covers many of the traditional functions of an internal HR department through an ongoing relationship that offers best practice guidance and can scale its services as your business grows. When you work with an expert team, the return on investment may be substantial and you may find more opportunities to grow your business and develop your team.

What is a professional employer organization (PEO)?

A professional employer organization (PEO) operates under a co-employment model in which certain responsibilities are allocated between the PEO and the employer. The PEO assumes certain HR functions, such as paying your employees and collecting and remitting payroll taxes for payroll processed through the PEO software and offering access to employee benefit plans. PEOs may also help with tools and resources for talent acquisition and onboarding. However, your organization will maintain control over the day-to-day workforce decisions, such as hiring, firing, compensation and company culture.

While many PEOs operate in the marketplace, not all are created equal. Therefore, it’s important to ask questions and evaluate prospective PEOs before moving forward with a rigorous vendor selection process. This allows you to understand what your future relationship will look like and determine whether it will be a good fit for your organization.

What is an administrative services organization (ASO)?

An administrative services organization (ASO) can combine robust HR software with guidance from professional HR experts. An ASO works with small and medium-sized businesses that want to outsource some or most of their HR functions. In that respect, an ASO is similar to a PEO. However, unlike a PEO, an ASO and the client company are not in a co-employment arrangement. The client company remains the employer of record for payroll tax purposes and retains full responsibility as the employer.

What is a human resources information system (HRIS)?

An HRIS is a cloud-based software service that automates HR functions. By itself, it's a software service that helps client companies handle their HR functions in-house, but it also includes HR outsourcing services. Depending on the level of service you choose, an HRIS can help you with payroll tax filing, benefits administration and some aspects of workforce management to streamline operations. An HRIS also provides technology integration with self-service employee portals and apps so employees can easily access whatever they need, whenever they need it.

How can HR outsourcing services help your small business?

The overall goal of an HR outsourcing services company is to help your SMB grow and achieve success. But more specifically, outsourcing your HR services could result in:

• Access to more time to focus on your mission and business strategy.
• A broader range of employee benefits.
• Better employee engagement, which can mean lower employee turnover.
• Reduced administration costs.
• Stronger risk mitigation.
• Access to a team of HR experts to help you with best practices.

11 Ways HR Outsourcing Can Help You

The responsibilities that encompass HR management are vast and far-reaching. They include everything from benefits administration and compliance support to payroll processing and productivity. Some of the most common functions that HR outsourcing services support are:

Payroll services

Outsourced payroll services can be a lifesaver for an operation whose resources are already stretched thin. Beyond the basics of on-time, accurate payments to employees, they can help with payroll tax administration and may remit and file your company’s employment taxes for payroll processed through their system.

Employee benefits

HR outsourcing companies can help you administer employee benefits. They provide self-service portals where employees can:

• Get information about their available benefit plans.
• Enroll in the plans of their choice.
• Make changes.

Some HR outsourcers provide SMB employees with access to premium benefits that typically are available only to employees of large companies.

Recruiting and hiring

HR outsourcing services can improve your talent management right from the start of the employment life cycle. Recruitment process outsourcing can help you generate and place ads and keep track of each candidate's progress through the application process. After you select your new hires, onboarding services help them get off to a quick and positive start.

Staffing solutions

As a company grows, it needs to know how many and what types of new jobs to create. Data analytics provided by HR outsourcing services provide valuable information for workforce planning and scalability. These HR analytics can help you:

• Pinpoint your staffing needs.
• Create job descriptions.
• Identify skill sets to bring in or develop internally.
• Generate targets for compensation and benefits based on regional industry standards.

Employee relations

Strong employee relations benefits everyone in an organization, from the entry-level new hires to the C-suite. When employees feel valued and supported, they’re more likely to be engaged, productive and committed to their roles.

HR outsourcing providers can help build and maintain positive employee relationships. Among the ways they help with this are:

• Managing accurate and timely payroll processing, which helps build trust.
• Offering tools for communication between employees and management.
• Providing HR experts who help businesses stay compliant with employment laws and best practices.

These services, and more, help to create a workplace culture where employees feel respected, heard and treated fairly.

Employee training and development

HR outsourcers can help train your workforce by creating individualized training paths. They can identify current employees who, with the proper training, could meet your needs for certain skills in new or expanding roles. This addresses the company's needs for additional skills while supporting professional growth and keeping employees engaged, motivated and loyal.

Performance management

When you work with an HR outsourcing service, it can also help with your employee performance management. It can help you track employees’ progress towards specific goals and streamline the performance review process.

HR compliance

Navigating employment-related rules and requirements can be complicated for employers, especially as their workforce grows. By outsourcing payroll processing and other HR functions, you could gain access to ongoing insight and expertise regarding compliance with the associated rules and requirements. Working with an HR outsourcing services company could help mitigate your risks of potential fines, penalties and concerns.

HR audit services, conducted by compliance specialists, can help you take a proactive approach to HR compliance. These audits review your HR processes and identify areas of concern. This allows you to identify potential concerns so you can action.

HR expertise

Small and medium-sized companies generally don’t have the budget to hire a full team of in-house experts with specialized knowledge of HR regulations, and that's OK.

When you outsource HR services, you could get a third-party team of HR professionals. They provide you with access to ongoing insight and expertise regarding HR administrative and management tasks. That will free up your resources while mitigating HR issues.

Integrated HR technology

The cloud-based software included with HR outsourcing services brings automated HR functions together to streamline data entry and provide easier access to information.

The HR technology could also sync its data with many popular business programs, such as accounting software.

Global HR

We're in a highly globalized market, which means more companies need a global workforce. But even if you want to hire workers in another state or country, you must follow the employment and other relevant laws of that other location.

Labor law compliance across borders can be a huge headache for any operation. It creates a lot of compliance complexity that is difficult for an SMB to handle alone. An HRO services company can be a big help in managing a global workforce. This kind of outsourcing often is handled by an employer of record. An EOR can hire local workers in another country on your behalf. An EOR will have its own entity in the location that it uses to hire the client company’s foreign employees. 

When to Consider HRO Services for Your Small Business

SMBs face many of the same challenges as large corporations, but often with fewer resources. HRO services could help you lighten your workload and reduce the stress that accompanies compliance, hiring, retention and administrative HR tasks.

It may be time to consider outsourcing your HR services if you are facing many of the following challenges:

Are you burdened by a heavy administrative workload?

If your internal team is spending too much time navigating administrative tasks for HR, you’ll likely benefit from outsourcing. HR tasks are important, but they require a lot of time and energy. This takes away from the resources needed to drive your short- and long-term goals forward. Outsourcing can help you focus on strategic HR initiatives and growth, rather than tending to administrative tasks.

Since you could gain access to a network of HR experts, you’ll also save time you would have otherwise spent simply trying to understand dynamic employment-related rules, requirements and accompanying paperwork.

Are your employee benefits not competitive?

Creating a competitive package to offer your employees can be difficult. Not to mention, it's tough to keep up with the shifting sands of employee benefits compliance. Due to the smaller size of their workforce, SMBs don’t always have access to the same benefits as larger businesses. 

Access to competitive benefit options can increase employee retention rates and boost productivity in the office. When people feel fairly compensated, they're more likely to stay at your company longer and contribute more to its success. 

According to a survey conducted by Great Place to Work, when employees believe people are paid fairly for their work, they are 36% more likely to say they give extra effort at their company.

By professionally outsourcing your HR administration, you’ll also validate that your workforce is set up for success with optimized training and support that helps them develop their professional skills.

Do you struggle with compliance rules and requirements?

Businesses need to adhere to a growing number of local, state and federal employment-related rules and requirements. These are often written in complex language, requiring specialized knowledge and experience to decipher. What’s more, they can often change, making it nearly impossible to stay up to date without dedicated personnel assigned to continually review them.

When you have an internal team trying to handle this while juggling other tasks, you increase your risk of non-compliance and can even risk data security breaches due to careless mistakes. By committing to an HR outsourcing strategy with team of HR experts, you’ll mitigate risks without wasting valuable time.

Is internal HR management too expensive?

When HR administration starts getting more complex, you may need a large team of internal staff to remain effective. This can lead to high overhead costs and limited resources.

Working with an HR outsourcing services company can be a great investment that will provide you with both immediate and long-lasting returns. It will allow you to focus your time and investment on growing your business, hiring top talent and providing your employees with access to competitive benefit options.

Help with Strategic Initiatives

HRO services can provide scalable support and strategic initiatives to help your company grow. They can contribute to organizational development that can ultimately help guide your organization through periods of change or expansion. PEOs, in particular, can help create scalable HR infrastructure for growing companies.

If you need help fostering a high-performing team that’s committed to helping your organization grow, TriNet offers comprehensive HR services. Our HR consulting solutions can help you handle your HR needs while you expand your business.

If you're ready to find out more about HRO services, download our free eGuide that gives a full-spectrum perspective on your HR outsourcing options: Four Types of HR Providers: Making the Right Decision for Your Company.