As your company grows, you will find that your in-house HR team no longer has the bandwidth to deal with all of the issues. At the same time, you don't have enough work to justify (or afford) adding another full-time HR specialist.
A better choice is to outsource some of your HR functions, which allows you to get the extra help you need at a fraction of the cost. Below are a handful of the many reasons to outsource HR functions.
Your in-house team has the expertise and intimate familiarity with your company to handle more intimate matters. What you can and should outsource are the more mundane functions that do not require that intimacy. Instead, you should consider outsourcing:
Payroll is the most commonly outsourced function, and, indeed, many companies make the mistake of only outsourcing payroll. Doing payroll right requires meticulous attention to detail, knowledge of tax rules, and good software, making it a perfect target for outsourcing. Outsourcing helps you avoid common payroll mistakes and issues that can snowball into a major problem.
Just keeping up with laws and regulations can be a full-time job in and of itself. By outsourcing compliance, you get part of the time of that full-time specialist, paying only for what you need. This means you can afford the specialist knowledge to avoid major compliance issues.
Choosing the best talent for your company is a job for your in-house team. They can take into account not just needed skills and qualifications, but also "fit" and how a person will gel with your company culture.
What can be outsourced is the routine tasks such as background checks, drug screening, verifying employment history, etc. Once you have your candidate of choice, your outsourcing partner can quickly make sure everything is in order and help you start the onboarding process.
Benefits administration is another commonly-outsourced area, due to the fact that it involves answering complex questions that your in-house team might not be able to answer immediately. This is also not the best use of their time.
Handling Unemployment Claims
When you are facing an unemployment claim, you can outsource this to your provider, who already has all the information they need. Your in-house team won't have to worry about the claim and can move on to more important things.
You decide what training your employees need. Your outsourcing partner makes sure they get it. For instance, many outsourcing partners have a lot of knowledge on basics such as safety training, which they can then use on behalf of you and your employees.
So, why should you outsource these things? Here are three very solid reasons to outsource these functions:
When your HR team is over-burdened, untrained people start doing stuff like payroll. These people often inadvertently break HR-related laws and regulations, which can result in significant fines.
By outsourcing, you ensure that everything is looked over by a qualified compliance specialist who can help you keep up with rules and regulations, including across multiple states if needed.
Possibly the biggest reason to outsource mundane HR functions is to allow your team to fully focus on your core business and growing your company.
It keeps non-HR personnel from having to handle HR-related tasks instead of revenue-generating activities. Meanwhile, HR works on improving your company culture and aspects of your growth plan.
You can use your HR team's time and efforts to help develop a hiring plan that moves forward into the future and looks at skills you might need five years down the line. You can then seek candidates with these skills or train your existing employees so they will be ready to move up when the time comes.
Your HR team can also focus on ensuring that every new candidate who comes in fits your company culture and make your office a great place to work. This then helps you attract and retain talent to grow your company.
Your HR team can't possibly know everything. They may not have the experience to deal with complex benefits administration issues, weird training problems, etc. In many small companies, the HR "team" is a single person; they may be very talented, but their knowledge is obviously limited to what they have been specifically trained on or personally experienced.
When they come up against something they are unfamiliar with, they can simply call the experts at your outsourcing partner. Because these HR experts deal with issues from multiple companies, chances are they have seen the problem before and know exactly how to deal with it. Your HR team won't have to flail around looking for solutions or waste time reinventing the wheel.
Another reason companies look into outsourcing HR is to save money. The cost savings from outsourcing HR functions vary depending on what you outsource and who you outsource to. For example, payroll processors tend to have a poor or even negative return on investment (ROI).
The best ROI comes from partnering with a professional employer organization (PEO). To learn more about PEOs, download our free ebook "PEO vs. Payroll Service Provider."