HR in Small Business: It’s What You Don’t Know That Is Costing You Time, Money, & Risk

You’ve heard the old saying, “What you don’t know can’t hurt you.” When it comes to HR in small businesses, the opposite is true. Unseen problems can cost you time and money and expose you to unnecessary risk. The following represent some of the most common areas of inefficiency — and how HR solutions can help.

High Turnover Rates 

High turnover rates can be costly for small businesses. According to the financial wellness company Enrich, the cost of replacing an employee can be as much as 6 to 9 months of the employee’s salary. Gallup polling indicates that for some companies, the cost of replacing an employee can be as high as twice the employee’s salary.

One solution is to address the friction that is prompting this level of turnover, including poor HR policies and practices. If employees aren’t receiving timely payroll or are frustrated with how employee benefits are managed, they may start looking elsewhere for their next paycheck. 

Outsourcing your HR to a third-party partner can reduce this friction and help you retain your most valuable talent.

Legal Fees and Fines 

Small businesses are expected to comply with various legal and regulatory requirements. For example, the Fair Labor Standards Act requires employers to appropriately categorize their employees, maintain careful records and to pay overtime appropriately. Violations can result in fines or even prison time.

Even accidental violations of these standards can result in legal fees and fines. One of the benefits of outsourcing your HR needs is that you’ll gain access to HR professionals who understand all aspects of FLSA, the ever evolving regulatory landscape and use best practices to avoid these fees.

Low Productivity 

Poor HR practices can significantly diminish employee morale, leading to reduced productivity.

According to data published by the Society of Human Resource Management, bad hires can directly impact morale and productivity, with supervisors devoting 17% of their time to managing an underperforming hire.

This is yet another example of how HR outsourcing can improve your business processes. A good HR firm can help assist your business with better processes and technology for recruiting, selection and onboarding that will help you attract and retain the best possible talent into your organization.

Recruitment Costs 

The average cost to recruit each new hire is roughly $4,700. But this doesn’t account for the “hidden” costs, such as the time and energy required to execute an efficient, effective recruitment marketing campaign. And that’s assuming that your company even has the staffing needed to consistently engage the hiring process.

HR firms typically have greater expertise when it comes to managing recruitment strategies. 

A third-party HR manager may be able to offer unbiased guidance to help you clarify your unique value proposition or the most marketable features of your company culture. As a result, the hiring process will be smoother and more efficient than ever before, and you’ll have an easier time connecting with the talent you need.

Employee Benefits Costs

According to the Bureau of Labor Statistics, employers spend an average of 30% of each employee’s salary on benefits. Failing to manage your employee benefits program effectively can drive the cost even higher. 

For example, mis-management of your group health insurance policies can lead to higher premiums and other costs. Efficient benefits administration will also reduce friction and create a better work environment.

Of course, most small business owners often lack the time or the skills to optimize their employee benefits. However, having the help of a solid HR firm can streamline your benefits administration and help you compete better in the war for great talent. 

Brand Damage 

Your reputation is one of your most important assets, yet it’s one of the hardest things to control. Poor HR practices can increase employee dissatisfaction, and that kind of brand damage inevitably trickles down to your customers. It’s difficult to quantify the exact cost of this damage, but it can take years to fully repair your reputation.

Don’t let this happen to your small business. Get the help of an HR team who understands the needs of your business as well as its employees. With a dedicated professional at your side, you’ll be better equipped to manage your administrative needs and maintain your sterling reputation. 

Big HR for Small Business

You built your business because it was your passion. Protect that passion from waste and risk by tapping into the HR expertise your organization deserves. Focus HR can help. If you need HR advice for your small business, contact us today to request a complimentary consultation.

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