Should Your Business Outsource Human Resources?

When you outsource human resources, you can free up your time — so you can focus on growing your small business.

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How much time do you spend on payroll processing and benefits administration? And what does it mean to outsource human resources? If you’re a business owner without a dedicated human resources department, you may feel like you’re wasting your time, money, and energy on menial tasks. You would rather be networking, advertising, and growing your company.

Sound familiar? Here’s the good news: a professional employer organization (PEO) or small business HR software can tackle many (or all) of your HR responsibilities. That would leave you more time to focus on the big picture.

Why should I consider a professional employer organization?

A PEO is an outsourcing organization that provides comprehensive HR services for small and medium-sized businesses. PEOs:

  • Process and pay employee wages and employment taxes
  • Provide HR regulation compliance guidance

There are a large number of labor laws businesses must be familiar with. If you’re not up to date on them, you could find yourself on the wrong end of a lawsuit for noncompliance, even if your actions were unintentional. Common employment lawsuit issues include discrimination and harassment, non-compliance with FMLA, having an unsafe workplace, wrongful termination, payroll misclassifications, and issues related to workers’ compensation.

The truth is this: if you’re not ready to educate yourself on all the employment laws, payroll processing, benefits administration, and employee relations, you should probably outsource HR for your company. You should consider outsourcing your HR if you find yourself in one of these scenarios:

  • Managing benefits, payroll, and compliance is taking up all your time.
  • You’re having trouble attracting the best talent due to lackluster benefits packages and non-competitive wages.
  • Your employees have HR-related questions that you’re not qualified to answer.
  • You need to expand the HR services in your company beyond payroll and benefits.
  • You’re worried about being non-compliant with labor laws and regulations.
  • You can’t afford an in-house HR team.
  • You want to streamline your HR processes.
  • You want better tracking of employee data.
  • You want better performance management and tracking.
  • You want to give your employees access to their benefits packages so that they can change them when they need to.
  • You want to expand your HR services to provide training, development, and employee assistance programs.

if you’re not ready to educate yourself on all the employment laws, payroll processing, benefits administration, and employee relations, you should probably outsource HR for your company.

Why should I consider HR software? 

In the past, in order to hire and use an HR service provider, you had to visit a brick-and-mortar location, speak with the HR professionals, determine a package, and then sign up. After that, you had to mail, email, or physically take your human resources documents to the location. Thankfully, those days are long gone.

When you outsource your HR functions today, you can use HR software directly from your computer. In fact, you can usually sign up with a platform online and choose the package that best meets your HR needs. If you have questions, you can call, email, or use the chat function on the software company’s website. This makes outsourcing and streamlining your key HR functions nearly seamless.

What types of HR functions are generally outsourced?

Small business HR outsourcing is beneficial in many ways, but it’s most useful for one thing: compliance. Employment laws are constantly evolving, and it’s easier than you’d think to violate them. Non-compliant companies can find themselves in a world of trouble. Small businesses HR outsourcing also can take care of functions that don’t require face-to-face interaction. Some examples of HR functions that are outsourced include:

  • Time tracking
  • Payroll administration
  • The hiring process and staffing
  • Employee benefits
  • Employee handbook creation
  • Employee assistance programs
  • Employee health insurance management
  • Other HR administrative tasks, as needed

Responsibilities that are more hands-on, like conflict mediation, are typically kept in house.

In reality, though, nearly all HR administrative tasks can be outsourced. It’s up to you to assess your small business’ needs and make the choice that’s right for you.

How much does it cost to outsource human resources?

For small businesses, outsourcing HR through a PEO or implementing HR software can be cost-effective options.

This is because the average median salary of an HR specialist in the U.S. is $62,700 a year. The salary range is $45,000 to $83,000 a year. This expense can grow as you expand your HR department to include HR assistants and HRD professionals to develop and implement training programs.

In contrast, when you use an HR software company — like Zenefits — you can expect to pay $8 to $40 per employee per month. If you’re paying a percentage, you’ll likely pay 2% to 20% of each employee’s yearly salary per month, depending on the provider that you choose.

Here’s an example. Let’s say that you’ve decided to go with Zenefits for all your HR needs and that you’ve decided that you need every service offered. Your business has 15 employees. At $40 per month per employee, you’d pay $7,200 for a year’s HR services. That saves you $55,500 a year, when compared with the average salary of just one HR professional.

Can you outsource human resources?

the smaller your business is, the more beneficial it can be to outsource HR tasks.

Absolutely! Even the smallest companies can benefit from using a small business HR outsourcing service. In reality, the smaller your business is, the more beneficial it can be to outsource HR tasks.

When you have a small staff, you rely on each of your employees to take on a variety of responsibilities. For example, your sales representatives may also be responsible for developing and implementing training programs for new hires. Your accountants may have to do double-duty as benefits advisors, and you, as the owner, have to do all the hiring, firing, and onboarding. Now, consider how productive your staff members would be if they could place all of their focus on their primary job responsibilities.

Outsourcing key HR services with Zenefits

Your time is valuable, and it should be spent networking and growing your business — so that you can make that business even more profitable. This means outsourcing HR services so you can get back on track doing what you do best.

After all, you probably started your business because you love your industry and you have a service or product that sets you apart from the other businesses in your category. You didn’t start your business to learn HR software, to study hundreds of employee benefits packages, or to learn the intricacies of employment law. Let Zenefits, with its expertise and information in many aspects of small business, handle your business’ HR functions and risk management service so that you can focus on growing and expanding your business and its reach.

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