Outside Insight: When Outsourcing HR Makes Sense

The ever-increasing burden of government regulation on small businesses doesn’t make compliance easy, especially when small-business owners spend so much of their time performing “nonproductive” obligations. Many small and midsize businesses today simply can’t afford to employ managers dedicated strictly to human resources.

The answer may be outsourcing. Fortunately, there’s a great range of options and expertise to fulfill your HR needs. Here are ways to come out with your hired guns blazing.

Avoiding Pitfalls

Before seeking outside HR assistance, determine exactly what you need, when you need it, how quickly you need it and for how long. Many companies forge ahead unprepared. Two common mistakes businesses make when hiring outside HR services are:

1. Not having goals or a strategy, and

2. Not adequately communicating new HR service information to staff members.

The effort you expend on preparation may save you time and aggravation later on.

Meeting Your Needs

After clarifying your requirements, you may want to test drive an outsourcing firm by hiring them for a short-term service, such as an HR assessment. Or, if you feel confident that a company can meet your HR needs (for example, you use the firm for other services such as payroll or tax preparation), you may seek a longer commitment. In that case, you can bundle more than one service or contract for all-inclusive packages that turn over all of your company’s HR services, including:

HR assessment. Perhaps you have no formal HR services. All decisions about hiring and firing, or policies regarding vacation, sick leave and the like, are made as they arise or not addressed at all. If this is the case, you may want to conduct an HR assessment. Your requirements may be more — or less — than you think they are.

Handbook development. After assessing your company’s needs, an HR consultant can develop a company handbook from a template reviewed by an attorney. (Counsel will make sure the wording covers your company if an employee later refutes something, using the handbook as ammunition.) If need be, you can also engage the handbook preparer to write employee job descriptions.

Don’t underestimate a handbook’s importance. It presents written company policies for health and welfare issues (such as family leave or flexible spending accounts) as well as for recruiting and separation. And you legally must have written policies that comply with anti-discrimination, safety, and other government-mandated work practices. So think through all of your policies carefully and have an HR professional help you with compliance issues.

Hire temps. Some companies offer specialized HR skills and provide contract HR professionals to work on-site. Many of these individuals are retired HR directors and flexible with their time. Before you hire project pros, write a clear agenda or checklist of what you want to be accomplished.

Payroll. This is the simplest service to outsource. The provider submits tax payments, handles the paperwork and cuts checks for cost-effective monthly fees, generally adding up to a few thousand dollars annually.

Although choosing these services can be a huge help, contracts shouldn’t be entered into lightly. Check references before signing on.

Looking Outside

Some small to midsize companies try to “wing” their HR processes. Sure, they’ll save some money now by not outsourcing. But they’re leaving their companies open to potential noncompliance lawsuits. It’s the HR equivalent of “extreme sports.” Practitioners may go years without breaking something, but when it happens, it may be career-ending.

Need help finding a resource, contact us at 513-858-6040.  We will connect you with experts in HR.