Should a company outsource HR?
Your business is growing. Your brand is getting recognition, sales are coming in, and the company is trying to keep up with demand. This growth is what small businesses aspire to achieve. Great work: you are well on your way to achieving small business success.
You are making Strides
While you are making strides in your business, have you started planning for exponential growth? The reality is that companies need to be intentional about their evolution to reap maximum benefits. Strategic planning allows you to look at the big picture and make plans towards achieving your goals.
Be Intentional about your growth
Being intentional about your human resources is one of the most intelligent decisions you can make as a small business. HR, when done correctly, can be the driving force that will catapult your business. However, if neglected, it can have disastrous results that significantly impede your growth. So it begs the question; should a company outsource HR?
What factors do you need to consider when deciding if you should or should not outsource your HR function?
Let’s look at the various Human Resource Management (HRM) functions and what you need to consider before deciding if you will handle the role or pass it over to someone else to manage.
Traditional HR Functions
Most companies perform these various functions:
- Recruiting, onboarding, training, and dismissal of team members
- Creating and maintaining employee contracts
- Managing and evaluating employee performance
- Administering and processing payroll
- Maintaining compliance with various employment laws at different levels of government
- Developing and managing employee benefits
- Creating and keeping guidelines for the office environment (specifically outlining policies and procedures that promote a healthy work environment)
- Handling disputes and conflicts
Each of these functions is critical to your performance as a business. Starting, it may feel possible to maintain these functions in-house. However, as time will reveal, the more employees you add, the greater the complexities of managing the team.
In addition, though the traditional functions of HR listed above are what most companies are faced with handling, there is a reality that HR must stay on top of rapidly changing laws, regulations, and employment trends in changing times. For example, as the COVID-19 era and the ‘Great Resignation’: the recent trend where employees have resigned from their jobs en masse, they need to be aware and well-positioned to respond.
Modern HR Functions:
In addition to the traditional functions, you are wise to stay on top of proactive HR measures to enhance your employer brand and give you a competitive edge to attract the best and brightest talents.
Understanding the needs of people analytics, modern HR tools, and technologies, leadership development, the competitive labor market will enable you to stay on top of the labor market.
How do you do all these tasks and still manage your day-to-day operations and the other functions your business must perform (i.e., financial, marketing, business development, customer service, etc.?)
The answer may lie in outsourcing the work to reputable business management or consulting firm.
Benefits of Outsourcing:
The benefits of outsourcing far outweigh the risks. Three main reasons to consider outsourcing include:
Reduce compliance risk:
An HR professional skilled in their line of work must have and maintain deep knowledge of the various local, state, and federal laws that can impact your business. This knowledge takes time to acquire and to keep up to date. Having an outsourced HR function places your business in the hands of specialists whose job is to ensure that you stay on top of all the legal requirements you have as a business.
Running an operation and trying to figure out which new pandemic-related regulation applies to your business or how a recent sexual harassment bill impacts your existing staff can be a task to tackle.
There is a cost that comes with non-compliance.
Save Costs:
On the surface, bringing in a third party to handle any aspect of a small business may be met with hesitation as the assumption is that the cost will far exceed the benefits. Yet, there is a real opportunity to save costs.
With an outsourced service provider, you can choose the functions you want to be managed, and you can trust that you will have less financial risk from costly mistakes.
Failing to meet regulatory requirements can cost you. According to the IRS, more than 1.8 million tax returns were audited in 2016 for businesses with income between $200,000 and $1 million, and 978,564 businesses were assessed civil penalties. (paychex.com).
Placing your business in the hands of a seasoned expert helps reduce your risk of financial loss and exorbitant penalties that will likely occur if you are unsure how to navigate the various complex employee legislation in your jurisdiction.
Furthermore, you can save costs as you will not have the additional overhead of a full-time equivalent employee. Thus, there are no other fringe benefits to pay. Instead, you pay for the work completed, and you have a better opportunity to get value for money.
Enhance employer brand:
A company is only as good as the team behind them. Does your employer brand make you stand out, make you invisible, or is it in need of repair? Modern HR firms know how to use technology, marketing, and social media to enhance a company’s brand reputation. As your business grows, you want to be a great place to work. Unfortunately, in 2021 and beyond, it will be increasingly difficult for employers to attract and retain quality employees. By outsourcing your recruitment function to a skilled company, you increase the likelihood of building a solid team that can support you as you propel your business forward.
Free up time to focus on business growth:
The most significant benefit of outsourcing is that you can take back your time. HR is a complex function that requires a great deal of specialization and focus. As a small business with a small to medium-sized staff, you risk spending a considerable amount of your daily time putting out fires or handling administration.
With a business on the growth path, you still need to dedicate time to business development, client relations, marketing, and bringing in your revenue. Outsourcing gives you that opportunity by taking the task off your hand and letting the experts do the work.
Should a company outsource HR?
We believe it is a wise decision. In the early stages of growth, having a strategic plan that considers your human resources is one of a small business’s smartest decisions. Whether you have a team of 2 or 2000, consider outsourcing your human resources for peace of mind, cost savings, building a reputable brand, and freeing up your time to keep your business growing.
Want to get help with your HR function? Contact PRIMUS Business Management to book a complimentary call to discuss your needs.
PRIMUS Business Management provides cost-effective HR services that will help small businesses maximize their employees and attract talented individuals to work for them. Our team of industry professionals has the knowledge and expertise to enhance your company’s manpower resources at an affordable rate.