Most business owners wake up one morning and realize that their working lives have been taken over. They’re still doing work—more work, if anything—but their effort is going into tasks they never pictured when they started out: payroll, federal and state compliance, shopping around for a decent insurance plan, and resolving internal disputes.
These tasks are essential to the life of a business. But they don’t add new value to the company and many small business owners resent how much time they eat up. Founders want to be doing things that grow the business, attract new customers, and give them a leg up on the competition. Not housekeeping.
For business owners tired of the day-to-day drudgery, outsourced HR can be a game changer. Outsourcing HR gives founders more options, ranging from comprehensive plans with full-service companies to simple web-based or face-to-face freelance hires. Below, we’ll explore some of the advantages outsourced HR can offer and what kinds might suit your business.
Your options for outsourced HR
Outsourced HR has quietly grown into a $165 billion industry that offers a range of services and packages.
Professional Employer Organizations (PEOs) are by far the most common of these providers. PEOs provide HR services to both small and large businesses. They basically function as giant independent HR departments. PEOs are usually suited to businesses that have at least 10 employees, usually more.
PEOs like Oasis Outsourcing or MMC HR offer combinations of services that can include administrative tasks like compliance, payroll, and benefits, as well as more strategic consulting services, including risk management and liability assessments. These services can vary in cost, generally amounting to 2–11% of wages, although smaller companies might be billed a flat fee.
For smaller businesses or those with very specific needs, there are other options available. Individual HR consultants can provide a dedicated support line, helping existing employees navigate HR responsibilities without taking them on wholesale. HR freelancers on a number of platforms can provide the administrative legwork of payroll for reasonable rates.
When choosing an outsourced HR provider, be sure to consider other factors besides services rendered and price. Do you want an arm’s-length provider who communicates mostly by email or by phone? Or would you rather have a face-to-face meeting or a scheduled visit once or twice a month?
Outsourced HR is designed to make your job easier, not harder, so make sure you choose a service that’s a match not just for your budget, but for the culture and communication style of your business as well.
The many upsides of outsourcing HR
One place where most providers already have a leg up on business owners is in their familiarity with state and local regulations and how to keep in compliance with them. Your time is pretty much wasted poring over codes and statutes, but the risks of being out of compliance are high. The bigger the outsourced agency, the broader and deeper their knowledge and the better equipped they are to help you avoid fines, penalties, and restrictions.
Another huge advantage is cost-effectiveness. All forms of HR outsourcing save you money by freeing up your time for revenue-generating activities. With smaller-scale consultants and freelancers, you maximize your ROI by paying only for what you need, which is much cheaper than doing it yourself or hiring a full-time employee. This a la carte method combines quality results with great flexibility.
PEOs can be even more of a force multiplier. Because they contract with many clients, PEOs can essentially combine a number of HR budgets to access options that those businesses could never reach alone. Nowhere is this more clear than in access to health insurance plans. While small businesses might be able to offer only one Preferred Provider Organization plan, PEOs can afford to offer dozens of plans to each of their clients.
Embrace outsourcing when it makes sense
HR is an essential part of any business, but it doesn’t have to dominate your working life. Most small business owners could benefit from the flexibility, expertise, and purchasing power that external HR providers offer.
Just remember to shop around: there is a provider out there that will fit your business. Who knows? Soon you might be wondering what else you can outsource…
Meredith Wood is the Editor-in-Chief at Fundera, an online marketplace for small business loans that matches business owners with the best funding providers for their business. Prior to Fundera, Meredith was the CCO at Funding Gates. Meredith is a resident Finance Advisor on American Express OPEN Forum and an avid business writer. Her advice consistently appears on such sites as Yahoo!, Fox Business, Amex OPEN, AllBusiness, and many more. Meredith is also the Senior Financial and B2B Correspondent for AlleyWire.