Exposing the Hidden Cost of DIY Human Resources

ou didn’t go into business to become a bookkeeper, a retirement plan administrator or a monitor for a government bureau. You have a vision, but too often it’s pushed aside when the tasks of administering your business takes precedence. These things need doing, of course, but business owners must take stock of hidden costs of HR before they’re forced off the path of success.

RELATED: Use the ‘Labor Burden Cost Calculator’ from Unique-HR to find your hidden HR costs.

Understanding these costs is a good first step; finding a way to keep them down without tying your organization in knots is another. There are no shortage of variables: calculating the costs of hiring an employee; letting that employee go; retraining a new employee; issuing W-2 forms; enrolling them in health care; setting up retirement planning; advising employees on benefits — the list goes on and on.

The Hidden Costs of Your Human Resources Department

The following are all “time costs” of pushing paper.

1) The Hidden Cost of Payroll:

The National Small Business Association, in its 2013 Small Business Taxation Survey, reported that nearly one-in-three small businesses spent two weeks or more administering payroll taxes each year.

The going rate for an in-house payroll administrator is roughly $37.27 per hour, and so most small businesses can add nearly $3 thousand in hidden costs per HR employee to the job of payroll tax administration.

2) The Hidden Cost of Turnover:

Replacing an employee can cost a company up to 60 percent of that employee’s annual salary, according to the Society for Human Resource Management. But businesses have options to reduce the amount of costly turnover, including:

Of course, managing people and maintaining a business are different, if complementary, skills. Having a system to perform job candidate interviews to determine a potential employee’s fit within the company and to create the right mix of employees who will work well together for the long haul reduces the hidden cost of employee turnover.

Exit interviews are also enlightening to an employer as they may reveal the dynamics affecting turnover within a company.

RELATED: Strategies to Improve Your Business Through Exit Interviews

Performing these functions without a practiced management expert can be both difficult and costly. The growing availability and affordability of outsourced recruitment has the potential to save businesses in short-term onboarding costs as well as provide a boost to long-term retention.

The Hidden Cost of Workers’ Compensation:

Workers’ compensation costs take many factors into account: the number of injuries, the usual severity of an injury, and claims history, to name a few. The most important items in determining an employer’s workers’ compensation rate are:

Monitoring risk, obtaining the right coverage and instituting safety awareness programs will ultimately reduce the overall cost of such claims.

On the other hand, neglecting to carry sufficient workers’ compensation can result in substantial fines. Businesses should hire a professional who is knowledgeable enough to give expert advice; otherwise, they should seek a trusted workers’ compensation advisor.

Growing Your Business by Eliminating Hidden Costs

Liability is costly. Fines are costly. Lawyers are very costly. But these are yet more hidden costs of running your HR the right way. Businesses would do well to seek the right guidance before investing too much into HR without a guaranteed return on investment. Relieving your business of the burden of managing these hidden costs opens the door to other options that can more quickly grow and enhance your business.

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