The Benefits of Outsourcing HR: How to Make the Right Choice for Your Small Business

Megan Totka
Thu, 30 May 2024 04:31:00 +0000
Advantages-of-hr-outsourcing, Benefits-of-hr-outsourcing, Company-culture, Compliance, Hr, Human-resources-management, Outsourcing, Outsourcing-hr, Small-businesses, Staffing, Startup, Human-resources

With today’s emphasis on company culture and loyalty, the role of human resources management and the types of benefits a company offers has become increasingly important for a business's future.

However, being competitive in these areas isn’t always easy for small and medium-sized businesses. Smaller companies often don’t have the budgets to support the necessary personnel, and sometimes, HR issues can be so thorny, it takes experts to navigate them successfully.

But, in many cases, even if a business is able to staff an HR department, it’s not always considered to be the best allocation of resources. If money can be saved using some form of outsourced HR, more funds will be available to invest in core activities—areas that will, in the long run, fuel success.

Also, don’t forget that some mistakes in HR management will not only hurt employee loyalty, but can lead to fines. Trusting your HR responsibilities to an employee who only deals with these issues on a part-time basis, or who isn’t sufficiently trained in HR matters, can cost you dearly.

A cost-effective and expertise-effective solution to your HR problem is turning to outside sources to bolster areas of weakness.

Ways to outsource HR for small businesses

Software-based solutions

Software as a service (SaaS) is a major player today for providing HR and related services. These range from single traditionally outsourced services like payroll, applicant tracking and employee training, to more complete packages that include a range of record keeping and reporting options.

Some benefits of SaaS—whether you use it for HR or other functions within your company—are that the SaaS provider is responsible for system upgrades, backups, and developing and offering new services as the marketplace demands them.

The bigger SaaS packages will typically include mobile apps for users. They will also integrate with some benefits, taking the pressure off your staff to handle benefits administration. However, while you can often plug your benefits into an SaaS system for the convenience of your employees and management, it can’t give you advice on the nature of your benefits package and what you need to be competitive.

Further, while it may support the reporting required to demonstrate compliance to federal and state regulations, it also can’t give you the advice you need to design the internal systems required to maintain compliance.

Compliance and benefits experts

There are employment issues and attributes beyond the scope of apps and SaaS. Some employers have union issues to handle, others have several layers of regulatory compliance to deal with, and every company should be working hard to design a benefits package that will promote employee loyalty, reduce turnover, and even turn employees into brand ambassadors.

The regulatory environment is complicated and ever changing. For example, in order to understand and navigate changes to the Affordable Care Act (ACA), human resources support experts can supply the required guidance. Of course, compliance requirements stretch far beyond the ACA—they are made up by an alphabet soup of laws: FMLA, ERISA, PPACA, COBRA, HIPAA, and more.

Firms that specialize in compliance to these regulations sometimes also offer employee benefits, consulting, and brokerage services, providing business leaders with a “one-stop” shopping experience. When tailoring your benefits package for maximum competitive advantage, a consulting firm with a depth of experience can offer a perspective that ensures your benefits are tailored to attract the employees you need.

Before you outsource...

When researching HR consultants, you will find ones that offer benefits brokerage services, consulting, optimization, and renewal management, as well as some that will take full responsibility of your HR administration. In the first case, you’re signing on with an experienced consultant who will help you design and get favorable pricing on your benefits; in the second case, you are essentially taking on a “partner” who will take over day-to-day responsibilities for the HR arm of your organization.

Before outsourcing your HR, you need to balance what you can afford with what your company needs to provide in order for you to achieve a desired position within your industry. A startup will have different needs—and use different tools to attract talent—than a somewhat mature company looking to climb the next level of its growth curve.