Human resources (HR) plays a vital role in the success of a company. From onboarding employees to managing payroll, HR specialists take on difficult and time-consuming administrative tasks so a business owner is free to focus on running their business. They also work to create a healthy company culture so employees feel like the company hears them and cares.
As a small business owner, you have a few options when it comes to human resources. You can try to take on the role yourself, employ an in-house HR specialist, or outsource your HR. A combination of these choices could also work for your situation. Our guide below provides an overview of what outsourced HR is, how it functions, and whether it’s the right option for your business.
What is outsourced HR?
Outsourced HR is when a business hires an outside company to carry out HR functions like recruiting and hiring new employees. An outsourced HR company takes on a wide array of administrative tasks as requested by the business owner. They can do everything from administering employee benefits to background checks to ensuring compliance with employment laws and regulations. Some outsourced HR tasks can be performed by automated HR software systems.
Should HR be outsourced?
As a new or small business owner, you’re probably wondering what you should do about human resources. You may feel that your company isn’t large enough yet that you need to use an outside HR service. Outsourcing your HR provides many benefits that you might not be aware of. Consider the following advantages you gain by passing this role off to an HR specialist:
- You can save time. As the owner, your time is best spent running and growing your business — not dealing with paperwork and employment issues. Leave the interviewing, hiring, and training to the HR staff so you can focus more on your current employees and customers.
- You can save money. Working with an HR outsourcing company can cost less than hiring a full-time HR department within your business. They can also leverage their expertise to help you get deals on benefits and services.
- Conflicts are more easily resolved. The HR company acts as a mediator between yourself and an employee. They could also resolve issues between employees. As a neutral party, their conflict resolutions can be fair and decisive.
- Compliance is ensured. There are many employment laws and regulations at the state and federal level. An HR specialist has the knowledge needed to ensure your business complies with them all. This benefit protects you from lawsuits and fines.
- Employees are accurately paid on-time. HR takes care of payroll processing and helps with budget management to ensure everyone is paid the right amount at the right time. Often, they use an automated system to do so. This allows them to have more time to focus on other tasks, such as coordinating a wellness program or maintaining employee morale.
What types of HR functions are generally outsourced?
There are a lot of details to handle when it comes to human resources. No matter the size of your business, outsourcing your HR can offer relief from stress and worry. Even if you’re just starting a new business, it’s often helpful to outsource HR functions. There are four main HR functions that are usually outsourced. Some tasks, such as compliance, will become more of a concern as your company grows from just a few employees to more than 10.
Payroll and Related Tax Services
In larger companies, the payroll is usually managed by an HR or accounting department; however, in small companies, this task often falls to the owners. An easy way to lift a lot of burden off your shoulders is to outsource payroll services and related tax services to an outside HR company. They would take care of the following tasks so you wouldn’t have to:
- Keep employee records, including pay rates
- Track hours worked and time off
- Calculate employee pay
- Factor in variables like overtime, sick pay, vacation pay, and bonuses
- Distribute payments via direct deposit or check
- Figure out employee tax withholding
- Produce reports for tax filing requirements
Payroll may not seem like a big deal when you only have a couple of employees, but as your business grows, the amount of work to keep up with it can become overwhelming. Outsourcing payroll relieves you from the stress of making sure every employee is paid correctly and on time. Consider taking advantage of online, automated systems to ensure accounting accuracy and tax compliance.
Another main function of human resources is to administer employee benefits. An HR specialist informs each employee about available benefits and makes sure they understand all of their options. They administer benefits like health care, retirement, and paid time off.
Excellent benefits are a huge draw for those seeking employment. It can be worth outsourcing your benefits administration because experienced HR companies can use their knowledge to leverage better coverage at more affordable prices for your employees. They also understand all of the details and can explain them to each potential new hire.
Employment Law Compliance
In the U.S., the Department of Labor enforces more than 180 federal employment laws and regulations. Workers are protected by these laws, and all businesses must abide by them. An HR specialist helps to ensure that your company stays in compliance with all employment laws, such as those that regulate:
- Employee benefit security
- Family and medical leave
- Wages and hours
- Workers’ compensation
- Workplace safety and health
HR specialists are able to train employers on federal and state regulations so everyone knows what’s expected of them by law. They can also train employees so they understand workplace protections and how to report violations. As a new business owner, you won’t have time to learn hundreds of laws and train your employees. Human resources outsourcing is a simple solution in this case.
Employee Assistance Program (EAP) and Counseling
A happy and healthy employee in a positive workplace is a productive employee who wants to stay on the job. Retaining employees can be an issue for your business if you don’t know how to offer assistance to an employee when they most need it.
An Employee Assistance Program (EAP) is a program that offers help to employees with personal and/or work-related problems. In addition to counseling, an HR representative can provide:
- Free and confidential assessments
- Follow-up services
An employee’s mental and emotional well-being should be well cared for, but it’s hard to find the time to do so as the business owner. You’re also probably not an expert in these matters, and there’s also the issue of privacy — an employee may not want to share their problems with their employer. An outside HR company can provide counselors to help your employees cope with a wide variety of issues, such as:
- Alcohol or substance abuse
- Family problems
- Psychological disorders
There may be issues in the workplace that need to be addressed, or problems outside the workplace that are affecting an employee’s performance. You can work together with the HR team to address these situations and resolve them together.
The Best HR Services for Small Businesses
With fewer employees and tighter budgets, small businesses have different HR needs than larger businesses. You may need outside help with one HR function while feeling like you could handle the others. An all-or-nothing approach to HR doesn’t work for every type of business, so it’s OK to change your HR setup as your business grows.
We’ve compiled reviews of the best HR services for small businesses below. Take a look at their different features and price options to help you decide which HR services may work best for your small business.
Paychex Flex is a large company, with more than 600 HR professionals and more than 200 compliance experts. The company uses award-winning integrated HR and payroll technology to provide solutions for your business. Expert HR support is always available, 24/7/365. Paychex Flex is one of the most popular outsourcing services for payroll, and they also:
- Hire, onboard, manage, and develop productive employees.
- Track employee time and maximize payroll accuracy.
- Help employees save for retirement and reduce taxable income.
- Offer health insurance, dental, vision, and more to recruit and retain employees.
Paychex offers HR solutions based on your number of employees:
- Sole proprietors or self-employed
- Small businesses (1-9 employees)
- Midsize businesses (10-49 employees)
- Large businesses (50+ employees)
They also have payroll package options to fit the needs of any business size. Paychex Go costs $59/mo. plus $4 per employee. Paychex Flex Select and Paychex Flex Enterprise are quoted at custom prices that are based on your company’s needs. Paychex can be accessed anytime through a computer or mobile app.
Oasis Outsourcing is a professional employer organization (PEO) that offers specialized HR services to companies of all sizes. They report that businesses who work with a PEO can save an average of 27% on their HR-related costs and up to $1,775 per employee per year in HR costs. Their two-point service model includes an HR generalist and a payroll account manager who work together with the business owner.
When you partner with Oasis, you and your employees will use one platform. Their industry-leading cloud-based technology simplifies complex HR administration functions. They also encourage the creation and use of an employee handbook.
Oasis Outsourcing provides the following services and more:
- Attracting talent
- Employee benefits
- Performance management
- Risk management
Oasis tailors HR solutions to address your industry’s specific challenges. They offer custom price quotes depending on your industry, company size, and other needs. Oasis is a good option if you’re looking for help but still want to devote some of your time to HR. It’s also helpful to use when you already have an HR person in your business who needs extra support as your business grows.
TriNet is another PEO that provides small and medium businesses with HR solutions. They also tailor their services by industry, as each has its own unique needs and challenges. TriNet’s specialists are experts in the following industries:
- Financial services
- Life sciences
If your business is within one of these industries, TriNet could be a great solution to your HR needs. Besides specialized knowledge and a full suite of HR services, TriNet offers contracts with flexible terms and believes in transparent pricing. They charge a flat fee per employee each month so costs are predictable.
Insperity is a company that offers full-service HR solutions. Their experts customize a package of HR services to fit your business. They also offer individual and HR technology solutions for when you only need HR support in specific areas. Whichever service you choose, Insperity guarantees access to better benefits, dedicated support, first-class service, and time-saving technology.
For small businesses with five to 149 employees, Insperity offers full-service HR that enables you to focus on growth and opportunity. HR services for larger businesses with 150+ employees focus on helping you maximize productivity while minimizing risks. To get a price quote for HR services, you’ll need to talk to a specialist at Insperity.
Outsource human resources and improve your business
Business owners choose to outsource human resources for a variety of reasons, one being that the benefits of HR outsourcing are many. You may be starting a new business and don’t know everything about human resource management, or maybe your business is growing and you need to streamline your administrative tasks. No matter your situation, it’s worth taking time to investigate HR solutions designed to help your business succeed.
If you need more help with starting, running, or growing your business, trust ZenBusiness to partner with you every step of the way. We offer fast and simple business formation services and so much more at affordable prices. Contact us to get access to tools, guidance, and expertise that can help you start or grow your dream business today.