What should you look for when outsourcing HR? We have some ideas.

HR Outsourcing: Is it Right For Your Business?

Posted July 11, 2016 by Justworks in Keeping Compliant
Is HR outsourcing the right solution for your company? Learn some important things to consider when looking for small business HR services.

It’s a celebratory time when your business and team has grown... and also a hectic one. During periods of growth, maximizing efficient working time and scaling business practices are crucial.

For many, the decision to outsource HR is a way to save time and headaches. But is it financially worth it for your company? Here are three major aspects to consider before you decide if an outsourced HR service is right for your small business.

Update: We've written a guide to help you weigh your HR outsourcing options. You can download it for free here.

Review Organizational & Administrative Priorities

As your business grows from a young startup to a full-fledged business, your company’s goals and priorities will inevitably shift.

According to a study conducted by the Harvard Business Review, workers spend an average of 41% of their time “on discretionary activities that offer little personal satisfaction and could be handled competently by others.”

How much employee time is being taken up by HR functions weekly and monthly? And what tasks require the most time spent? Before you decide what kind of HR services you want outsourced, meet with other company leaders and force rank priorities.

This list of HR tasks may include:

  • Onboarding and offboarding
  • Payroll administration
  • Benefits administration
  • State and federal compliance
  • Professional development and training

Discover which HR solution is the best fit for your business.

Download the guide

And calculating the value of those services doesn’t stop at hours spent multiplied by hourly wages. Factor in which business development opportunities could be pursued in that time, as well as how much you’re willing to spend on HR administration.

Look to Automate

New software services now automate paperwork and administrative tasks that once took manual labor and a painstaking amount of time.

According to research conducted by Total Jobs, HR professionals spend about 15% of their time on administrative work and operations management alone.

Kissflow's customer research indicates these are tasks HR managers want to automate:

  • Leave requests - Sick leave, PTO, parental leave — the list goes on. Even if you have an unlimited vacation policy, it’s a good idea to still document it. There comes a point when keeping it all in a spreadsheet becomes too clunky.
  • Time sheet tracking - Sorting out time sheets and keeping track of hours can take more time than it’s worth. An automated service that easily tracks and documents hours employees worked will make your life easier.
  • Staff information systems - Keeping a directory of employee of addresses, numbers, job titles, bank accounts, and personal emergency information gets complicated quickly as a team scales. Seek out software that allows employees to edit their own information, without the middleman.

Finding a place to update and file hundreds of forms particular to each of your employees and your company is no easy feat. Going paperless makes it easier for departments to communicate much-needed information across all verticals.

Prioritize Compliance & Bundle HR Tasks During Expansion

If your company has grown to 50 employees, or is on target to reach that point, regulations and compliance standards continually evolve. New compliance means new paperwork as well.

  • Benefits - Medical, dental, vision, and 401(k)s all come with mounds of paperwork and are tailored specifically to each employee.
  • Affirmative Action - Companies that have $50,000 in government contracts and 50 or more employees are required to have an equal employment opportunity in place.
  • State Hiring Laws - If you’re expanding into different states, there are a host of state and local laws to consider, such as I-9 forms, commuter benefits, state income tax requirements, and disability insurance.
  • The Family Medical Leave Act (FMLA) - Companies with 50 employees or more are required to provide at least 12 workweeks of parental leave for parents of newborn and adopted children.
  • The Affordable Care Act (ACA) - The ACA regulates healthcare provider rules for employers depending on your number of employees. It also comes with tax penalties, credits, and paperwork — like the 1095-B, 1095-C, and 1094-C.

Related article: Startups Make These 5 Compliance Mistakes All Too Often

Ultimately, you’ll have to determine what your organization wants to outsource. Will it be payroll alone, or benefits and compliance as well? If you’re searching for an all-in-one solution, PEOs (or Private Employer Organizations) often bundle all three. Some even include automated services like staff information systems and leave requests as well. Often the size of the company determines whether outsourcing HR is the best option.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.