When it comes to building a human resources department, small businesses have three basic choices: 1) hire HR staff, 2) outsource or 3) some combination of the two.
Most companies use a combination. Even the most well funded big corporations will often use vendors for some HR services — such as a 401k, health insurance plan or corporate wellness program — rather than hiring in-house personnel to manage it.
Yet smaller companies are having more difficulties than ever bootstrapping their way from startup to stability. Thanks in part to the consolidation of health care and the financial industry and the passing of hard-to-meet labor and practice standards, small and mid-size businesses often have little choice but to rely on outside expertise for a great many things.
But that’s not the end of it. Outsourcing one problem often creates another, as relationships must be continuously reexamined to ensure high-quality service and return on investment.
In light of the trend, small business owners would do well to take stock of how the need to outsource has gotten out-of-control and consider what options they have to adjust their approach.
1. Hire In-House HR Staff:
Once all salary and benefits costs are accounted for, an HR employee can cost a business well over $80 thousand each year. This figure, even, can be swallowed if a typical HR employee were capable handling all the things that fall under the department’s responsibility.
But HR generalists typically aren’t versed in everything the department is meant to take on, meaning more employees, some of whom will be specialists, may be needed. Labor board actions, risk management, workers’ compensation, payroll administration, workplace safety, garnishment, training, benefits – these are just some of the areas that HR is tasked with handling.
Many of these responsibilities are government-mandated, and so HR departments don’t have the same luxury as other units who can get by focusing on their strengths and taking little notice of their weaknesses. By contrast, if an HR department has any blind spot, it could potentially come back to cause a penalty, a fine or worse.
2. Contract With Single-Service Vendors
In a way, once a business starts hiring employees it becomes two separate businesses: one focused on generating revenue by selling goods or services and another concerned with making sure its internal operations live up to government codes and meet employee expectations.
Employees expect things such as benefits, handbooks, and training resources; government requires building code and worksite safety checks, compliance policies, and dozens of reports and filings to be made each year; and that’s just for starters.
With so many needs to address, a roster of outsource vendors can fill up quickly, Read More Here to know how outsourcing can help you business. When every aspect of HR requires dealing with an outside party – a 401k broker, health insurance broker, voluntary benefits broker, corporate law lawyer, labor law lawyer, contractual dispute attorneys, workers compensation lawyers, workers’ comp underwriter, workers’ comp claims management company, etc. — pretty soon the complexity of so much outsourcing, with its many outlays to track and relationships to manage, becomes a full-time job.
3. Partner With Combined-Service Vendors
The need to outsource so many HR functions, combined with the difficulty of managing so many vendors, has led more small businesses to seek a simpler solution: among them, partnering with a single company to provide most of the services they would otherwise outsource to multiple vendors.
These arrangements come in two varieties:
- Professional Employer Organizations (PEOs): These firms become the employer of record for companies with whom they partner. Companies maintain control over day-to-day work activities while the PEO shoulders payroll, benefits and potentially many other HR-related tasks.
- Administrative Services Organizations (ASOs): They are similar to PEOs in that they provide a range of HR services, except that ASOs do not share liabilities nor use the co-employment model as a PEO would.
In general, PEOs provide better full-service HR solutions, while ASOs improve the efficiencies of existing HR staff.
The Right Partnership Can Be Worth Investing Into
Your small business has big needs. The good news is there’s no shortage of HR outsourcing vendors to choose from. The bad may be that too many of them are more interested in your paycheck than your partnership.
No one-size-fits-all solution can take care of all a growing company’s HR needs. Businesses still may face payroll, compliance and legal challenges even using the most robust full-service PEO. Regardless of whether your business is looking for good in-house experts, single service vendors or an end-to-end solutions provider, you should seek an honest partner who will take the time to learn about your individual needs and invest in your growth.
If you found this article helpful, may we suggest:
- For more on taking care of a growing company’s HR needs, download our Complete Guide to Human Resources.
- For more on how an HR outsourcing partnership can help build your dream, read Payroll Services & Company Growth at Texas Businesses.
- For more on what you get with an end-to-end HR provider, read What Are the HR Functions of a PEO?