HR is one of the most vital functions of your business, but it’s also one of your greatest challenges. HR is part of your overhead and generates no direct revenue. However, it can be quite costly to do, and costlier to do well.
Because of this, many small to medium-sized businesses elect to outsource HR. Should you do so? If so, how should you handle it?
Advantages of Outsourcing HR
Outsourcing HR is considered a no-brainer for many small companies, and there are a number of reasons why you might choose to do so:
It reduces costs by not having to add another full-time HR professional as your company grows. As a note, outsourcing does not necessarily replace having at least one internal HR professional.
Prevents compliance issues. Most smaller businesses can't afford to hire a full-time compliance officer, but compliance often is a full-time job. An outsourcing vendor has trained and experienced staff who will assist in making sure that you are operating at peak compliance.
Outsourcing reduces time spent on HR functions and gives you more time to spend on pursuing your company's goals. When you outsource, internal HR staff have more time to deal with tricky issues like employee morale and are no longer asking people with other jobs to perform HR functions.
You may see improved benefits if you outsource through a PEO. PEOs let you add your employees to their own master plan, allowing you to have access to better plans, more options, and additional carriers.
Outsourcing streamlines the hiring and onboarding process.
It provides access to expertise your company might not otherwise be able to find or afford.
So, how do you go about outsourcing HR right? There are several things to think about.
What Aspects of HR Should You Outsource
In general, the parts of HR you should outsource are tasks which are tedious, require high accuracy, and do not require intimate knowledge of your company and its culture. The first thing most people outsource is payroll.
Other things you should consider outsourcing are:
Benefits administration, including answering related employee questions.
Compliance. As already mentioned, keeping up on regulations can be a full-time job, but outsourcing to an HR vendor can help.
Pre-employment reference and background checks.
Unemployment claims management.
Processing and mailing W2s.
Safety program development.
Certain aspects of employee training.
A PEO is the best way to outsource all of these and potentially other HR tasks for your business. PEOs share liability and responsibility for accurate and compliant operations on the HR front. This shared liability relationship goes beyond functional aspects like training, payroll, and benefits, culminating in advantages you’re simply not going to find with a payroll processor.
Making the Transition
If you have been doing your best to manage HR in-house, it can be a challenge to transition to outsourced HR. In fact, the transition period carries with it a lot of risks. There are a few things to keep in mind in order to reduce disruption during the outsourcing process:
Make sure that you are completely transparent with your employees about what is going on. It can be particularly confusing when switching to the co-employment model. Work with a PEO that is hands-on when it comes to employee questions, orientation, enrollments, and more.
Learn the vendor's processes in full and make sure you are absolutely clear on what services they are providing and how. Make sure you know who is responsible for any compliance issues.
The most important thing is to maintain high levels of communication with your new vendor and to ensure that employees know exactly what is happening, and why.
Managing the Relationship
Once you have your relationship with your HR vendor, it's vital to manage it properly. This also starts with high levels of communication and with making sure both sides fully understand each other's protocols. It can be complicated by the fact that typically the person handling the relationship is not a vendor management professional. This is where it’s useful to read up on best practices. Make sure to monitor your vendor's performance, and don't assume everything will always go exactly according to plan. Even with the best vendor, you still have to develop the relationship at the start, which can lead to minor issues.
Make sure you keep every line of communication open and that you're ready to address any concerns employees might have, not just during the transition but as you and your vendor move forward.
One way to ensure a good relationship is to choose a local PEO like Execustaff that understands your area and industry and offers a personalized experience. These local PEOs tend to be more flexible and willing to adjust to your needs. Check out our blog for more help and advice and to find out what we can do for you.