How Do You Know When It’s Time to Outsource Your HR?

Posted by Neha De

3-minute read (615 words)

Many small business owners devote more hours than they should to non-revenue-generating activities. While a do-it-yourself approach to handling the HR function might seem like a good idea initially because it allows you to maintain costs and control, what happens when your business grows and you need to focus on core activities?

The answer may be to hire a professional employer organization (PEO). For a fee, a PEO will take care of payroll, benefits, regulatory compliance and other HR services.

While PEOs might not be suitable for all companies, those that do outsource to them can usually offer better benefits packages and thus, hire better talent. So if your HR function has become a drain on your company's time and resources and you cannot afford to hire an in-house HR professional, you should consider outsourcing to a PEO. According to The National Association of Professional Employer Organizations (NAPEO), small businesses that use PEOs grow seven to nine percent faster, have 10 to 14 percent lower employee turnover and are 50 percent less likely to go out of business.

Here are six signs that it might be time to outsource your company's HR.

Your Business is Booming, Your Bottom Line is Not

If your business is expanding and you’re not making money, that’s a cause for concern. A growing business can lead to more administrative tasks, including answering benefits-related queries, carrying out background checks and dealing with employee conflicts. By outsourcing your HR function to an experienced PEO, you can devote your time to revenue-generating activities that will help your business maintain its growth rate. `

You Cannot Keep up with Employment Laws

Businesses of all sizes struggle with compliance issues because employment laws change periodically and compliance violations can be costly. Apart from understanding the current local, state and federal laws and regulations that may affect your business, you also need to make sure that your infrastructure supports data collection and reporting, as per the law. PEOs are trained in these compliance regulations, and can protect you from expensive penalties and fees.

You’re Struggling to Contain Costs

Extra administrative tasks require additional resources to support the HR function. But when you outsource your company’s HR, you gain the knowledge and experience of someone you won't have to train.

Additional cost savings can be realized through the use of a comprehensive human resources information system, or HRIS, which can simplify business processes for both you and your employees.

You’re Unable to Attract Talent

Finding and retaining talent is expensive, time-consuming and difficult. One way to be competitive when it comes to recruiting and maintaining top talent is to offer attractive and comprehensive employee benefits. Partnering with a PEO allows you to do so.

You Need to Boost Employee Engagement 

It can be extremely difficult for small businesses to invest money in areas where they don’t see an immediate return on investment. This is where a PEO can help, by implementing cutting-edge HR technology, providing training, giving employees access to knowledgeable HR experts and so on. This creates a desirable work culture, and therefore reduces turnover.

You Need to Create Your Employee Handbook

If you think you don’t need an employee handbook or properly laid-out policies, you are probably wrong. A handbook helps your employees understand your vision for the company and how you’d want them to operate. It also comes in handy in case of an employee relations issue or a lawsuit.

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