5 Warning Signs You Need to Outsource Your HR


Your business’s human resources chief is responsible for many critical aspects of your workforce. He or she is responsible for finding, hiring, training, and assessing the performance of your employees. Your HR person is in charge of making sure the company complies with all labor and employment laws. He may also be the overseer of payroll. And if you work with unionized employees, HR is the liaison point between the company and the union(s). To say that HR carries major responsibility for your company’s success is an understatement.

Many small businesses choose to outsource HR. It isn’t always easy to afford someone to handle HR responsibilities, especially in the case of a small start-up. When business owners try to allocate various HR tasks over several employees (such as by assigning payroll responsibilities to the finance chief or having department heads handle employee issues within their department), the results can be inconsistent at best, and chaotic at worst. If your company is growing and HR responsibilities are weighing heavily, outsourcing HR could be the solution you need.

Here are 5 signs that you should outsource your company’s HR.

1. You’re Spending Too Much Valuable Time Managing HR Problems

There is no getting away from the fact that, as a business owner, you have to take on many responsibilities in addition to providing the products or services for which you created your business. But HR problems can be very time consuming, and working on HR problems takes time away from revenue-generating activities. The more time you spend trying to learn about employment law or searching for that full-time designer you need, the less you spend doing what your business does. When you outsource HR, you pay someone else to deal with HR tasks, and you free up that much more time to work on your actual revenue-generating functions.

2. You Are Worried About, or Have Experienced Exposure to, Liability

A skilled HR person has to have a keen understanding of hiring rules, EEOC requirements, collective bargaining agreements, recruiting, and training, and has to be able to find job candidates to fill your staffing needs. Some HR managers oversee payroll as well. The HR manager must understand where you could face liability in hiring or managing workers, and if he or she oversees payroll, the risk of a run-in with the IRS looms as well. By outsourcing HR, you give responsibility to someone who is specifically trained in the practical and legal aspects of HR. The cost of just one tax reporting violation could pay for a year of outsourced HR.

3. You Need to Save Money

Outsourcing saves you in many ways. For one thing, when you outsource HR, you gain the expertise of someone you won’t have to train, and for whom you won’t have to provide benefits. You also avail yourself to that HR person’s organization and the services they provide, which may include time-intensive tasks like payroll. When you have a competent outside agency handling HR responsibilities, you spend money, but you also gain time to devote to core business functions and you reduce your exposure to legal risks. The overall effect is a healthier bottom line.

4. The HR Lines of Accountability Are Not Clear in Your Business

If your HR functions are allocated among managers and department heads, you may get all the HR tasks done, but you may be muddling the lines of accountability too. An employee may not know where to report a problem, managers may be unsure they are passing along correct information, and some HR tasks may simply get lost in the shuffle. When you outsource HR, your managers and department heads can deal with their departments without worrying about HR responsibilities, and you can be confident that you won’t face legal problems related to haphazard allocation of HR responsibilities.

5. You Can’t Respond to Changes as Quickly as You Need to

Businesses of the 21st century have to be nimble and responsive to change. That means when a great opportunity comes along, you may have to find and hire employees quickly to meet your obligations and fuel business growth. When you outsource HR, you have many more resources at your disposal for finding and hiring the individuals you need quickly. Losing an opportunity due to an overworked HR manager who suddenly has new hiring tasks on top of everything else gives the advantage to your competitors. Outsourcing HR is a great way to keep your business flexible and responsive to new business opportunities.

Photo Credit: Jennifer Kumar


Business.com Editorial Staff

Business.com Editorial Staff

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The Business.com Editorial Staff writes on topics relevant to small and medium-sized business (SMB) owners. Posts cover best practices, top tips, and studies that deliver insights specific to SMBs.

Our team has backgrounds in journalism, English, philosophy, marketing, entrepreneurship and management, providing us the opportunity to share unique viewpoints on all things affecting small and medium-sized businesses.


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5 Responses to 5 Warning Signs You Need to Outsource Your HR

  1. “It isn’t always easy to afford someone to handle HR responsibilities, especially in the case of a small start-up”. That’s really true that handling HR responsibility is not easy and need a lot of commitment and also a satisfying pay. Those signs you’ve listed are really true and must consider in planning to outsource an HR. Planning and deciding well and effectively can bring success.

  2. Honestly, our business does not use HR Outsourcing. But I am familiar with HR outsourcing because I know lots of companies that use it.

  3. Its a very helpful blog and it will definitely help our company. As we are a growing organisation and HR plays a very important role in the development and success of it. Employees must be trained and experienced to run all the functions and hiring a good employee will really be easy by outsourcing HR.

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