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Human Resources

A qualified human resources officer can be a definite asset to a company that spends a great deal of time screening applicants, hiring, and dealing with personnel issues and benefits. Managers are often overworked and don’t have time to deal with these issues and still be effective in their jobs. Different companies will have different needs—a small business might benefit from outsourcing, or it might be more feasible to have a designated HR person in-house. This guide will help you determine which option is right for your company—adding a human resource officer and/or an entire HR department, or outsourcing these responsibilities to a third-party contractor. 


If you are spending most of your time trying to find qualified applicants to fill positions in your company, the remaining facets of your company may be suffering. One way that you can combat this is by hiring a human resources officer or developing an entire human resources department. While you may be concerned about the added payroll cost, you should consider the marked benefits of having a dedicated human resources officer.

Applicant Screening

A human resources officer can screen applicants for you. Even if you decide that you want the final say in who is hired to work for you, the human resources officer can go through resumes and applications, as well as do a preliminary interview, to ensure that only the most qualified candidates are referred to you. This can cut down on the amount of time you spend just trying to sort through applicants.

Dedicated Contact

Your employees will have a sense of confidence and security when they know that they can turn to one person for all human relations-related issues. Your human resources officer can deal with scheduling, requests for time off, and insurance issues. You will have more time to dedicate to other facets of your business since you won’t have to deal with things like updating tax information, verifying I-9 information or compiling employee records.

Job Expertise and Consistency

Once your human resources officer gets into the swing of things, you will notice a more consistent performance. Slowly, employee files and other records will be put into a specific order. If you choose an experienced human resources officer, you can expect the officer will be familiar with state employment regulations, common tax issues, insurance guidelines, and other pertinent information.

Investor Confidence

According to the University of Michigan’s Ross School of Business, Executive Education, 50 percent of a firm’s market value is tied to intangibles. One of these, the talent pipeline, is related to the use of a human resources officer. Investors will generally feel more confident about your company’s success if you have a human resources officer who is familiar with the company, and who can explain the company’s hiring process.

Human resource departments are becoming standard practice in most businesses. Even small businesses employ human resource employees to help them improve their business. However, while the benefits to human resources speak for themselves, there are also several pitfalls a business should consider.


Ongoing and Potentially Expensive Training

The human resources department of a business is an integral part of the setup, no matter how large the business. They handle many responsibilities and the work is time consuming. Training is essential for a smooth running HR department to ensure all employees are comfortable with the system. Because this training is ongoing in order to cope with changes in software and business or employee needs, it can be expensive. For a small business, HR training can be a large chunk of the overall profits.

Staff Morale

A human resources department can have a direct impact on your employees and, in turn, the success of your business. Because HR deals with employee issues ranging from tax benefits and insurance, to annual leave and payment alterations, any hiccup in the system will have the potential to hit staff morale as well as confidence in their employer. It is important your HR department be fully staffed with skilled employees who can handle the challenges of HR. Businesses who outsource their HR also risk a negative impact on staff morale, as employees may prefer an in-house HR department.

Human Error

While it is only natural for people to make mistakes, errors made in a human resources department have potentially bad consequences. With people tasked with entering important and sensitive information on to systems, it is easy for an employee’s pay, insurance or annual leave to be accidentally altered. Personal details may be lost or sensitive business or customer information may be sent to the wrong people. Skilled HR personnel will reduce this likelihood.

Continuing Costs

While your human resources department is one of your most important assets, it will also be one of your most costly. Costs for software and equipment, as well as consulting, are all essential to your businesses success. The first year is often the hardest for human resources development; after that, you will have skilled staff members who are an asset as opposed to a cost.


Investing in a Human Resources Division

From hiring employees, to determining employee benefits and managing payroll, the functions of a human resources department within an organization are vitally important. It should be no surprise that the amount of money that it takes to operate a human resources department is quite high. A small company can spend more than one million dollars each year running its human resources division, according to the Focus Business Web site.

Saving By Outsourcing

Companies can save an average of 15 percent in operating costs each year by outsourcing human resources tasks notes John Haley of Watson Wyatt Worldwide. Corporations can carefully determine which tasks they are willing to outsource. For example, companies with strict employee behavioral guidelines may decide to keep employee management tasks in-house and outsource payroll and benefit duties. Some corporations may choose to outsource all tasks to allow their employees to focus all of their efforts on creating, marketing, and planning.

Outsourcing Costs

Whether companies outsource some or all of their human resources tasks, the cost will not be cheap. However, employers do save a great deal of money with outsourcing, which is why it is becoming more popular. Most outsourcing companies work out an arrangement with clients based on the specific companies needs. The cost of this arrangement can be in the low six figures for small companies that want to outsource simple tasks, and can cost one million dollars or more for large companies who want to outsource all of their HR duties.


The most tangible benefits of having a dedicated HR officer or department will be in freeing up managers’ time—allowing them to focus on productive and profitable tasks—and in having a person or persons who can handle all duties related to taxes, insurance, payroll, and employees’ personal issues. Having trained personnel who can pre-screen applicants to find the most qualified workers increases a company’s value in the eyes of potential investors.

Human resource departments can eat up a significant portion of a company’s budget, however.  The specialized training and personnel required for HR tasks are often prohibitively expensive.  While much of the cost can be reduced with outsourcing, it still carries a high price tag.  Corporate executives will have to carefully weigh the costs versus the benefits to determine if having an HR department will increase productivity and profitability.

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