According to a 2020 small business survey, roughly 70% of entrepreneurs are devoting more time to administrative tasks than they are to their core business. Moreover, 45% of small business owners estimate they spend roughly 1 day a week or more on administrative human resources (HR) issues.
Outsourcing HR is just one way to get back in the game, but many business owners are admittedly skeptical of the process. Not to worry — here are some answers to the most common questions about HR outsourcing and how it can benefit your business.
Why Do I Need HRO When I Do Payroll Myself?
You have better ways to spend your time than worrying about payroll. And what happens to your employees if you get sick or need to take an extended trip? An HRO provider can keep your employees paid and happy without adding to your administrative burden.
How Will It Affect My Employees?
In most cases, your employees will be thankful for HR outsourcing. For starters, they’ll receive their compensation more efficiently. Also, many HRO providers offer online tools that allow employees to self-manage, giving them total visibility over their sick days, vacation time, and benefits administration.
These features will help you retain quality talent and may even help you attract new applicants.
What HR Functions Can Be Outsourced?
HRO firms can handle many tasks, including:
- Benefits administration
- Workers’ Compensation Management
- Recruiting assistance and onboarding
- Employee inquiries and support
- Regulatory compliance
Basically, all of your current administrative HR responsibilities can be managed by an outsourced HR firm, which saves you both time and money.
Why Do Companies Choose to Outsource?
Companies prefer to outsource for the following reasons:
- To save time (they no longer have to handle HR themselves)
- To gain access to industry best practices and expertise
- To receive scalable HR solutions for growing businesses
- To mitigate employee-related liability
Most office managers or internal bookkeepers lack the experience or expertise to handle HR for a growing company. Outsourcing can reduce the burden on these employees while tapping into high-caliber support.
Is HR Outsourcing Suitable for my Small Business?
HRO firms can help businesses with as few as 5 employees up to companies as large as 1,000. In fact, the best way to grow your business is by outsourcing your essential functions so your staff can focus on what your company has to offer.
In fact, studies have shown that business that outsource their HR to a PEO like Focus HR grow 7-9% faster, experience 10-14% lower turnover and are 50% less likely to go out of business than businesses that don’t outsource.
How Do I Know if My Business Needs HR Outsourcing?
Most business owners are multitaskers. But studies have shown that multitasking can reduce your productivity by as much as 40%. Ask yourself the following:
- Are you finding it harder to focus on your core business activities?
- If an employee quits tomorrow, how hard would it be to replace them?
- How confident are you in your compliance with employment laws?
If any of these questions give you pause, it may be time to consider outsourcing your HR processes to a professional team.
How Can HR Outsourcing Improve Employee Retention?
No employee will ever feel engaged by a company until they’re secure in their compensation. HR outsourcing can eliminate errors in payroll and benefits administration, which allows employees to feel more comfortable and confident in their employer.
What Are the Disadvantages of HR Outsourcing?
HR outsourcing can result in:
- A change in your company culture
- Exposing your business data to third-party companies
- Less direct involvement in your workers’ compensation packages
However, these drawbacks are typically mitigated by a quality HRO provider. In most cases, a trustworthy HR provider will vastly improve your processes as well as your company culture.
What Is the Difference Between HR Outsourcing and HR Consulting?
HR consulting provides actionable advice that helps companies improve their HR processes. But in consulting, the company still handles all of its own HR needs internally. HR outsourcing, on the other hand, means a third-party provider will manage your administrative HR needs on your behalf.
What Should I Consider Before Outsourcing My HR Functions?
Before contacting an HRO provider, consider the following:
- The current amount of time and money you’re investing in HR processes
- How to communicate the change with your current employees
- Your future payroll and hiring needs
- Any industry-specific regulations you need assistance with
These considerations will allow you to partner with an HRO provider that understands the needs of your company as well as your industry.
How Can HR Outsourcing Help My Business Reduce Legal Risks?
Depending on your industry, you may have specific legal requirements and regulations that you must adhere to. An HRO provider will possess the expertise needed to meet these requirements, and the employees at these firms will keep up with trends so your company stays in compliance with evolving sets of regulatory issues.
Improving the World of Business
If you’re feeling swamped by administrative tasks, HR outsourcing may be right for you. The right provider can reduce your back office burdens so you can stay focused on your main business activities. To request a free consultation, contact Focus HR today and discover what HR outsourcing can do for your business.