How Compliance Outsourcing Reduces Risk, Saves Money, and More

As a small business owner, your priorities may be focusing on business development, growing revenues, and creating an organizational strategy. Important to consider though, today’s businesses must also place emphasis on compliance, including in the Human Resources department.

The challenge is, this can be hard for SBOs due to the complexities involved. To overcome these hurdles, many find compliance outsourcing a viable solution.

Spending time wading through the United States’ compliance landscape is just about the last thing many SBOs want to do. But remaining compliant is imperative to protecting your business and workers. Outsourcing compliance means your business can avoid common pitfalls by partnering with professional, legally vetted help.

Are you an SBO thinking of outsourcing HR? Here’s what you need to know.

For whom is outsourcing compliance right?

Outsourcing HR compliance makes sense for employers who have decided not to maintain an internal HR staff and/or aren’t prepared to deal with the complex regulatory landscape. Small business owners with limited internal resources often find utilizing compliance services solves the dilemma of how to remain compliant while keeping compliance costs down.

What are the compliance management options for small businesses?

A small company has several options to consider. The most common solutions for outsourcing HR compliance include the following:

Independent HR consultant

This is an onsite or online expert who helps set up HR infrastructure at a company. Usually it’s one-time support for a fixed time period. Many SBOs need guidance from an HR outsourcing service to equip themselves to then handle things internally. Once that’s set, they’re ready to maintain regulatory compliance on their own.

HR consulting agency

This type of HR service provider offers a business either one-time help or ongoing support to create HR practices. Your business can decide which HR outsourcing services it needs, then let the HR outsourcing partner take things from there.

HR tech

In this case, the HR service provider manages the software that serves as a centralized hub for everything HR-related. The HR tech automates reporting, provides compliance information and deadlines, and makes payroll processing easy for a business.

HR service provider + tech

With this option, a business enjoys the same offerings as HR tech and also gains access to a compliance or HR team for expert advice if/as needed.

Obtaining compliance support is usually a good investment that works within small business budgets. For companies with a limited or nonexistent dedicated in-house HR team, establishing a third-party partnership with an HR outsourcing company empowers the business to remain compliant and save money.

What are the benefits?

Businesses that work with HR outsourcing companies gain peace of mind from the reduced burden and what often results in overall cost reduction. Business owners can direct attention elsewhere as experts cover critical HR responsibilities and their companies remain compliant.

Avoid compliance fees

Small businesses that outsource HR and compliance often feel more confident in their company’s compliance status. Rather than checking all the proverbial boxes themselves, outsourcing HR compliance checks the boxes while significantly reducing errors and compliance risk.

The right HR tech or provider will flag issues and prompt the employer for missing information. Avoid the headache of staying on top of compliance-related deadlines and lower the risk of being slapped with hefty fines and penalties.

Free up time and rest easy with expert help

Compliance can be confusing and time-consuming, and SBOs devote substantial energy to it each year. Yet, despite the long hours trying to understand legal requirements, many report a lack of clarity and direction. Leaving it to experienced compliance professionals liberates business owners from the drain of wasted time and frustration.

Save money on payroll processing

In many organizations the HR department handles payroll administration, an area rife with regulations and compliance requirements. And payroll costs are no small burden either.

The 2021 median pay for HR managers was $126,230 per year, or $60.69 per hour, according to the U.S. Bureau of Labor Statistics. The costs of outsourcing HR will vary depending on a business’s size and chosen payroll or HR platform or provider. Still, doing so often comes at a fraction of the cost of hiring a full-time (and possibly part-time) in-house specialist.

What HR functions can businesses outsource?

Small businesses can outsource a variety of HR compliance tasks and comprehensive HR processes to a human resources services specialty company. Here’s a look at a few of myriad examples, especially as they pertain to compliance.

Payroll services

Chief among current HR outsourcing trends, payroll software and service providers assist businesses in all areas of payroll processing and administration. Typical compliance-related functions include:

• Create, file, and format W-2s and 1099s.
• Calculate taxes with the option to pay them as well.
• Provide support for FLSA overtime pay regulations for nonexempt employees.
• Maintain overall payroll compliance and adherence to related local, state, and federal employment laws.

HR compliance

• Automate onboarding compliance, such as collecting tax information and I-9 forms.
• Provide mandatory offboarding notices, such as that pertaining to COBRA.

ACA compliance

• Handle 1095-C forms for employees.
• E-file required forms with the Internal Revenue Service.
• Monitor each employee’s healthcare coverage status.

Special compliance concerns

• Outsource specialized compliance concerns, like navigating multi-state compliance or dealing with California’s AB 5 requirements.
• Expert help simplifies otherwise daunting tasks for SBOs.

Compliance issues can be cumbersome and burden a business that lacks the financial resources or robust dedicated staff. The penalties for noncompliance can be far more costly than hiring an HR outsourcing firm to step in to ensure compliance.

Businesses often prefer having dedicated HR support

The day-to-day tasks SBOs juggle often don’t leave time or energy for the complex regulatory requirements associated with compliance. Third-party performance and oversight of HR administration helps ensure that all is in order, and often at a cost savings.

In short: Outsourced assistance for handling HR tasks can deliver what you need to run your business, honor your budget, and remain compliant.

Business has its challenges. We have solutions. Learn more about compliance, people ops, employee benefits, health insurance, risk management, and other HR and business management topics at Workest.