5 Ways Outsourcing HR for Small Business Can Increase Productivity

HR OutsourcingHow much time does your staff dedicate to HR related work? Ten percent? Twenty? How much of your budget is currently going toward this work? And how much are you spending on employee-related expenses like health insurance? For many small businesses, managing HR-related costs is a major challenge. It’s not unusual to dedicate a tremendous amount of time, money and effort to managing employee paperwork, only to lose even more money paying high insurance premiums and other unnecessary costs—costs you can save if you outsource your HR. Note that outsourcing HR isn’t right for every business. You have to decide based on your own business needs whether it’s a good decision for you. Here are 5 ways that human resources outsourcing can save you money.

1. Redistribute Your Employees’ Time

When you’re outsourcing human resources instead of giving it to your own staff to deal with, you can give other tasks to your professionals. Small businesses often do not have an employee on staff who is dedicated to human resources management. Instead, other staff members are forced to spend their valuable time handling tasks they do not excel at. This in turn causes their other work to languish and productivity to suffer.

Who is currently handling your human resources? An office administrator? Another managerial staff member? You? Your time, and your employees’ time, is valuable. Imagine how much more productive your employees would be if they were focusing their time and energy on tasks you actually hired them for. An office administrator may do an excellent job organizing the office, but may not do well with HR since he or she is not an HR expert. When you waste your employees’ time, you waste money. Outsource your human resources department and let your employees get back to their job descriptions. Ultimately it will save you money.

2. Reduce Your Liabilities

Another area where you may not be as well versed as a human resources expert is the arena of law. Employee lawsuits are expensive, and unfortunately even when you make your best efforts to avoid them, legal issues may still arise. State, local, and federal laws governing employment are complicated and change regularly. Instead of struggling to keep up with the shifting regulations and the complexities of employee lawsuits, why not hire an expert to help you avoid legal hassles and resolve them when they do come up? Consider the cost of a single lawsuit, and then think how much money outsourcing your HR department could save you on lawsuits alone.

3. Recruit Better Talent

By choosing to outsource staffing jobs, you can find better talent in the process. One of the many responsibilities allocated to your HR department is to bring new talent on-board that can bring value to the workplace. Finding the best candidates is often a slow, tedious process, and if you don’t have an expert on your staff, your recruiting staff may struggle to reach out to the right population of job candidates.

When you outsource HR services, you hand over your job candidate search to experts who know exactly where to post job listings and how to reach out to the most qualified professionals. Recruiting can be a time-consuming process, but you can actually cut back on your recruiting budget by merging it with your HR outsourcing budget. Another way recruiting that can take a financial toll is if you have a position that remains unfilled for an extended time period. During that time, you lose functionality and other members of your staff are forced to compensate. Cutting down on your recruiting time can enhance your company’s productivity.

4. Reduce the Cost of Labor

Another way that a professionally outsourced human resources department can help you is by reducing the cost of maintaining your employees. HR experts can look over your payroll, your benefits plans, workers’ compensation, and other aspects of your employment plan. HR professionals can spot areas where your plan could be improved and cuts could be cost without reducing the value you provide to your employees and the value which they return to you. Even for a relatively small business, this can translate to savings totaling thousands of dollars per year.

5. Reduce Employee Turnover

Employees turn to HR departments as much as employers do for solutions to their problems. If your human resources department is unhelpful or incompetent, employees can be come frustrated when they are unable to resolve issues. This can increase turnover as employees leave your company to find a company which looks after their needs. By outsourcing your HR administration, you can bring experts onboard who will have the time, resources and know-how to see to your employers’ needs and ensure that they are happy. Happy employees stay on with their companies and don’t jump ship the first chance they get.

When the human resources administration knows what it’s doing, your employees will have clear expectations regarding their duties and perform more efficiently. The HR department can also take the time to organize team building exercises and other employee activities which create a more cohesive and enjoyable workplace for everyone. When you’re relying on other members of your staff to turn away from their own duties just to manage payroll, benefits and other necessary aspects of HR management, they often lack the time they need to arrange these extras.

Are You Ready to Outsource HR?

First, take some time to learn about human resources outsourcing agencies, administrative services organizations, and Professional Employer Organizations. These are all related but different types of agencies. PEOs provide HR and other administrative services, but create a co-employer relationship, whereas with ASOs and human resources outsourcing agencies, the control over the employees rests solely with the contracting company. Figure out how much control you want over your HR functions before you hire out to another company. Also decide which services are important for you to outsource so that you can find a company which can cover your needs.

Usually it’s time to consider outsourcing your HR services once your administrative concerns become a drain on your employees’ time and reduce your overall productivity. For very small businesses, this is rarely a problem, but once you reach about 10-15 employees, you may start to notice productivity issues. Sometimes even very small companies will contract out for their HR needs, though—even companies with just a couple of employees. It really all depends on the specifics of your company’s situation. Every company is unique, so every decision will need to be made accordingly. There is no one-size-fits-all solution. You have to figure out what is best for your company.

The Final Step to HR Outsourcing

Research the cost of HR outsourcing and do a cost-benefit analysis. Most HR outsourcing firms will cost about $500-$1500 per employee per year. Very small firms may be charged a flat monthly rate for services instead. Try and figure out exactly how much money you are currently losing because of the drain on your employee resources. If you discover that the increased productivity you can expect by outsourcing your HR will outweigh the outsourcing costs, it may make a lot of sense to outsource. Even if you discover the move wouldn’t be advantageous in your present circumstances, it may be something to consider and plan for in the future.

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