Small business owners wear many hats. Chief executive. Market researcher. Accountant. Financer. Salesman. Customer service representative. Janitor.
In addition to all these different duties, managing an entire human resources department might just be the straw that breaks the overtaxed camel's back.
Enter HR outsourcing. Now there are external companies that can handle some -- or all -- of that day-to-day HR work so that you can dig yourself out of that mound of paperwork.
And your business wouldn't be alone in taking advantage of such services.
In 2004, the Society of Human Resources Management conducted a survey that found 6 out of 10 organizations outsource one or more of its HR functions.
Among the most common functions that are partially outsourced (meaning the organization and vendor co-manage that function) are administration of health care and pension benefits and payroll. The most common functions that are completely outsourced are background checks, employee assistance programs and flexible spending accounts.
According to the survey, the most common reasons for outsourcing were to save money and reduce operating costs (56 percent), to control legal risk and improve compliance (55 percent), and to gain access to vendor talent and expertise (47 percent).
For small businesses that don't have the staff or resources to handle the more complicated sides of HR (legal matters, health insurance, payroll, etc.) outsourcing not only frees up valuable time, but it also puts these tasks in the hands of pros.
There are several benefits to outsourcing some of your HR functions, according to CPEHR.com -- not the least of which is allowing you to focus more on growing your business.
- Reducing employment-related expenses like workers' compensation insurance premiums, health insurance costs, employment practices, liability insurance, legal fees and HR systems and infrastructure.
- Minimizing employment risks. HR vendors are staffed with experts in a wide array of areas -- including state and federal labor laws -- which can help business owners in the event an employee files a lawsuit.
- Improved HR efficiencies. Most of the functions of the HR department -- payroll, tax filing, health benefit administration, etc. -- are necessary tasks that don't add to the company's bottom line.
- Training opportunities. Some vendors offer management and employee training on everything from harassment and safety compliance to dealing with difficult employees.
- Benefits. Vendors can help businesses offer a broader range of insurance and other benefits to employees, like 401K retirement plans and flexible spending accounts.
- Improved performance. Vendors can help employers write clear job descriptions and effective performance reviews while giving employees access to personal payroll, vacation and anniversary data, which leads to greater transparency, more employee satisfaction and improved performance.
- Better focus on business. Not having to focus on day-to-day HR duties allows a business owner to focus more on core values and growth.
- One-size-fits all solutions. Every business has its own culture attached to it and an in-house HR team would have a better understanding of the company and the people it employs. This is especially important for HR roles like job recruitment, retention and conflict resolution.
- Training. Relying on a recruitment agency to hire and train someone after an employee suddenly quits could mean that it's weeks or months before the position is filled, whereas in-house HR departments are often continuously training people in anticipation of resignations.
- Misplaced loyalty. A vendor might not have the same commitment to the company and its goals as someone who works on staff.
- Hidden costs. Businesses must be on the look out for added fees or hidden costs that were not included in the original agreement with the vendor.