Graphic showing the different puzzle pieces of outsourcing Human Resources for startups
Image

Outsourcing Human Resources for Startups

Why are companies looking into outsourcing human resources?

For many small businesses, a common misconception is that the practice of outsourcing human resources is only reserved for large companies. The complexities of managing HR can pose a significant challenge for small companies just starting out. This can result in staff spending precious hours and energy on administrative tasks that could be spent focusing on efforts to grow the company. When you rely on HR outsourcing, a third-party provider oversees and handles HR functions on behalf of the business, in turn minimizing these challenges and giving you peace of mind.

What are the benefits of outsourcing human resources?

By choosing to outsource HR, a business becomes directly linked to an HR professional with expertise in a wide variety of key areas that is equipped with the tools and resources to tackle any issues that may arise. The provider will also have access to the latest technology and products necessary to keep up with an increase in HR needs, a costly expense to maintain. HR professionals are well-versed in state and federal laws and regulations, including keeping up with any ongoing updates to ensure that businesses are in compliance within the frameworks. Most importantly, your small business will receive guidance and support from someone who will get to know the inner workings of the business and the HR functions it can benefit from based on your financial limitations.

In the long run, all of the mentioned benefits cost less on average than implementing an in-house HR team.

Most importantly, HR is vital to improving employee morale and productivity, and when you care for your employees, you avoid turnover and are more likely to attract new talent to your team.

Should a small business outsource human resources?

There are several factors to consider when determining whether you should be considering HR outsourcing for your small business. Most startups do not have the means to hire top HR experts right away and instead try to handle tasks in-house. You may have the ability to staff an in-house HR department, but that can quickly become costly in more ways than one in a time where resources are limited and can be best allocated to other vital functions of the organization. You may also find that you end up spending more time on HR than other business needs, the already limited number of employees must take on additional responsibilities in carrying out these duties, and most importantly you are exposing the business to potential lawsuits and liabilities.

This is why HR outsourcing has become a popular and very doable option for startups. Depending on which outsourcing arrangement you opt for, your business can access industry professionals without having to break the bank!

What can HR outsourcing provide my business?

HR services have the ability to cater to the unique needs of small businesses and help them grow and boost their efficiency.

Outside HR professionals can assist in critical areas of:

  • Healthcare and retirement benefits administration
  • Performance management
  • Payroll processing
  • Problem resolution
  • Employee counseling and assistance programs
  • Employee benefits management
  • Law and regulation compliance
  • On-site HR training sessions
  • Developing best policies and practices aligned with company values
  • Workplace safety programs
  • The employment life cycle (interviewing, hiring, discipline, firing)
  • Reference and background checks
  • Talent acquisition
  • FSA management
  • Workers’ compensation

Types of HR Outsourcing Providers

There are a few varieties of approaches when it comes to HR. It’s important to understand the three most common types of HR outsourcing providers to see what each can offer you.

  • Professional Employer Organization (PEO): Becomes the employer of record, meaning they are entirely responsible for certain designated HR functions, effectively giving your PEO the power to act on your behalf within the agreed upon terms of your contract. Their main purpose is to share and manage employer related responsibilities such as payroll admin and employee benefits among others. Essentially acting as a legal partner/co-employer of the company means your business also benefits from being under the PEO’s lower state unemployment tax rate and their workers’ compensation policy, as well as gaining access to better quality health insurance for your employees.
  • Administrative Services Organization (ASO): They will handle daily operations of HR tasks decided by the employer and you still retain functional control over your employees. Essentially they act as a helping hand, allowing for more flexibility. This gives the employer the ability to create a comprehensive suite of options based on their needs.
  • Human Resource Outsourcing (HRO): This model allows you to choose which HR tasks you would like outsourced, meaning you’ll only pay for what you need. HROs primarily deal with HR related functions within the process of managing employee related tasks. This provides access to experts from many different areas of HR expertise.

Some of these providers offer comprehensive packages, while others allow you customize based on what you need, giving you the freedom to select a scalable and cost-effective option.

Find HR support aligned with your business needs

Running a business involves wearing many hats, which is why HR outsourcing may be a valuable investment, especially when it comes to keeping your employees happy and satisfied.

By having the right people on your team, your startup can reap the many benefits mentioned from a strategic partnership aligned with your company’s goals to success.

Depending on the extent of support you choose, your business can enjoy the rewards of innovative HR systems, stay current in state and federal regulations, and utilize services from an experienced HR team specialized in helping your small business scale and grow.

*This blog does not constitute solicitation or provision of legal advice and does not establish an attorney-client relationship. This blog should not be used as a substitute for obtaining legal advice from an attorney licensed or authorized to practice in your jurisdiction.*

Let's chat

Get on our calendar for a free introductory call.
Find out what it's like to work with Finvisor and how we can help you reach your business goals. Our financial advisors work hard for your business across our full suite of accounting and reporting services.

Request a Quote

We'll get back to you within a business day, usually sooner. Or you can schedule an introductory call and get on our calendar.

"*" indicates required fields

Details
This field is for validation purposes and should be left unchanged.