What Are HR Services for Small Businesses? How to Find the Best Fit

HR services for small businesses can ensure things are legal while freeing up your talent. Learn what a managed service provider does and more.

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What Are HR Services for Small Businesses?

As a small business owner, you’re focused on sustaining and growing your company. That means innovating, developing new products or services, and building and leading a team that will help you achieve your company goals.

One necessary part of ensuring business success is human resources (HR). HR duties are important, but there’s good news: many can be automated or outsourced externally.

When you use managed HR administration services, you can free up your talent to work on what they do best. You can ensure you’re operating in legal compliance, and give more time and resources back to your staff and your company.

Learn why managed services for HR may be the ideal solution for your small business. Get answers to what does a managed service provider do? Then decide if one would work for your company.

What does HR service provide?

Another benefit of HR-managed services is that they can help you stay legally compliant and avoid lawsuits.

HR services for small businesses provide growing companies with HR talent and automation. This enables you to tackle HR projects through an external third party.

Some small businesses use a human team of HR professionals; others rely on HR software. Some use a combination of people and software to manage their HR operations.

HR managed services may lead initiatives concerning:

  • Sourcing, screening, interviewing, and hiring job applicants, as well as conducting background checks
  • Creating templates for employee paperwork, such as offer letters
  • Administering work benefits, like health insurance and 401(k)
  • Organizing employment records and processing paperwork
  • Coordinating office functions like payroll, scheduling, and tax processing
  • Onboarding new hires and training employees on issues like diversity and inclusion in the workplace

Another benefit of HR-managed services is that they can help you stay legally compliant and avoid lawsuits. Business operations regulations are constantly evolving. A dedicated, expert HR team can help you stay up-to-date and provide compliant benefits to your staff.

What does HR service not provide?

Managed HR service offerings will vary depending on the provider. Generally, for direct people management issues like conflict resolution or employee performance reviews, in-house managers and leaders will manage those because they know the workers the best.

But really, you could outsource any HR task. What you delegate depends on the firm’s or software’s capabilities and the relationship between them and your team members.

How can HR administration services benefit both small business employers and workers?

For your business, HR services may make the most sense compared to hiring a professional or team in-house. You may have a small (or really small) team of just one or a few people. During the early growth phases, you may be more dependent on general HR functions like payroll and compliance to stay afloat as you strategize your business growth.

HR admin services that are outsourced eliminate the need to hire a professional and provide them with work equipment, office space, and/or benefits. You pay for the exact services you receive. When you’re small, that means you can better control your budget while you cover the necessities.

For workers, HR automation provides convenience, simplicity, and predictability. Many HR functions, like payroll and time-off requests, can move online in a single employee dashboard. Here, employees can access resources like benefits paperwork and employee handbooks. They can use technology to get their HR questions answered and get back to working on what matters for your company.

Some HR services partners work with their clients for years. Even though they’re providing specific services and aren’t full-time with a company, employees can still build relationships with these HR partners and communicate with them when they need help.

When a business has an HR department that doesn’t have experience, lacks organization, or has too many responsibilities to handle in a timely manner, that can frustrate employees and damage employee engagement. HR-managed services can scale right along with your company’s growth. You know the exact service to expect and the quality you’ll receive.

How much is it to outsource HR?

First, let’s look at what it costs to hire a full-time human resources specialist. According to the U.S. Bureau of Labor Statistics, the 2021 median pay for human resources specialists was $62,290. For human resources managers, the 2021 median pay rose to $126,230 per year.

On top of salary, you may need to account for paid time off, benefits like health insurance, office equipment, physical office space, and recruitment/hiring costs. With managed HR services, all those extra costs disappear.

Managed HR service costs will vary depending on how big your business is and what type of services you choose. Our research finds that managed HR expenses can range anywhere from $2 to $200 per employee per month. So, if you have 4 employees at your business, you might pay up to $800 a month, or $9,600 a year for HR.

That’s significant savings compared to hiring a full-time HR professional in-house. According to a 2019 study by the National Association of Professional Employer Organizations (NAPEO), professional employer organization (PEO) clients can expect an average return on investment of more than 27%, based solely on cost savings. In the meantime, you also gain a dedicated, legally compliant partner who benefits your business.

Many HR partners will provide a free consultation, so you can compare your options. Like most things in business, cheaper rarely means better. Communicate your unique business needs to determine exactly how each vendor can help your business.

According to the U.S. Bureau of Labor Statistics, the 2021 median pay for human resources specialists was $62,290. For human resources managers, the 2021 median pay rose to $126,230 per year.

How to find the best HR-managed services

There are lots of reviews on HR technology and HR-managed services online. You can start by researching firms to compare their prices, offerings, and client interaction tools so you can judge the options. You’ll want a firm that has expertise in the state your company operates in, including knowledge of state-specific labor laws.

From there, create a short list of top service providers you’re interested in. Reach out to request a free consultation. As we mentioned, most will be happy to offer one to determine if your business is a fit for theirs, as well.

Enquire about free trials or trial periods before you have to commit, especially with HR software. You’ll want to ensure you and your team are comfortable with the software interface and the people you may be working with.

Early on, ask lots of questions and provide thorough communication. Your HR-managed services provider will likely want to retain your business, so be proactive about what you need.

The right HR services partner can help you grow your business to new heights. When you need HR services, consider how an outside partner can benefit your business.

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