*Today my friends at National PEO and I teamed up to talk about outsourcing HR services. Some confuse what I do with a PEO and while they are similar the models are different. Often companies find that using a mixture of a PEO solution with a consultant provides everything they need. This is a sponsored post.*
In my work with small businesses over the last several years, I have learned one very real truth. Most do not think about human resource issues until they are forced.The ones doing the forcing may be the Department of Labor, the EEOC or some hotshot attorney with an ax to grind. By then it’s likely too late. I’ve said this before and I’ll say it again, from the moment the first employee is hired, small businesses need human resource management.
They need policies, procedures, a growth strategy and someone to execute all of the above. They must ensure they are compliant with both state and federal law and that they have some mechanism to stay current as those laws change. They must establish compensation strategies, performance management procedures and recruiting strategies. Thinking about how they will handle absences from work, what benefits they will offer and how they will administer payroll are just the tip of the iceberg.
Even with only one employee, human resource management becomes a big deal.
The interesting thing is that even though there is a lot of work to be done in the area of human resources, that work rarely requires a full time professional if the business size is small. The establishment of policies and procedures may take time, but the overall administration does not require a dedicated person full time until the business is a bit larger, usually over 125 employees. Even then, there is a way businesses can ensure all of their human resource needs are met while keeping payroll and administration costs down.
Of course, I’m talking about outsourcing.
Outsourcing allows a business to feel confident that their HR needs are met while keeping cost at bay. There are several ways businesses can outsource their HR needs. One way is to utilize a PEO such as National PEO. A PEO will handle payroll processing and tax filings, benefit administration, workers’ compensation and more. Another way is to utilize a HR Consultant who has the expertise to handle all human resource needs and create strategies for future growth. Both have their merits and place with small businesses and are often successful in tandem.
There are a lot of reasons that outsourcing HR makes sense for small businesses. Listed below are four that business leaders should consider.
Compliance: I always say that when it comes to HR, leaders don’t know what they don’t know. Often times, DOL, EEOC or Legal charges do not come about because of willful negligence on the part of an employer, but of ignorance. The employer typically has no idea they are doing anything wrong, and yet they are. Unfortunately, our legal system doesn’t usually care if the negligence was willful or not. To avoid costly lawsuits and fines, employers must ensure their HR processes are legally compliant. Outsourcing HR means an expert will always be on hand to ensure the employer is always compliant.
Offerings: Small businesses have a tough time deciding what benefits and perks to offer. More than deciding on what to offer, they may struggle paying for them. Further, with changes in healthcare, small businesses may not have access to the right types of benefit plans that can help them compete for the talent they need. Outsourcing HR opens up the opportunities a small business has to offer more competitive benefits. Further, the outsourcing agent will be able to help a small businesses identify and implement programs that work best for their business size and style.
Service: Small business leaders have a lot on their plate. The last thing they need is to spend their entire day trying to figure out a payroll issue or help an employee understand why their benefits claims are being denied. Seemingly small HR issues can end up wrecking an entire day. Time a small business leader just doesn’t have. Outsourcing provides a dedicated resource employees can call with questions. This person then uses their time to fix the issue while the business leader can continue to focus on the business.
Cost Savings: While this will vary from program to program, outsourcing HR does provide a cost savings over a full time employee with benefits. Depending on services, outsourcing HR offers one fixed cost that helps businesses budget. But beyond the tangible cost savings, outsourcing HR offers intangible savings as well. If the person currently handling HR administration, also wears other hats, as an Office Manager for example, removing some of this work from their workload will decrease stress and improve morale. There is also cost associated with getting things done in a timely manner, which those wearing multiple hats often struggle with, that should be considered. Finally, the cost of mismanaging the compliance issues mentioned first can be very high. Outsourcing HR helps to mitigate the risk of having a costly lawsuit.
The absolute worst thing a small business can do is put off thinking about human resource management until it’s too late. If business leaders and support staff are inundated with HR issues and are not confident they are handling them correctly, then they are running the risk of an unhappy employee making a phone call that could lead to major trouble. Often the fines and payouts from these cases are detrimental to the longevity of a small business. Thinking about human resource compliance early and determining the best way for it to be handled removes a huge burden for small businesses.
The peace of mind that comes with knowing your business is legally compliant is priceless. The ability to pick up the phone and call an expert who can talk you through a very tricky employee issue is worth it’s weight in gold. The ability to hire and retain talent knowing that their day to day needs with pay and benefits will be met means a leader can do what they need to in order to grow the business. Outsourcing HR provides all of these benefits and more.
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