Have you ever considered outsourcing your HR department? Perhaps you have never heard of this possibility. If your business is new is upcoming then this possibility might not have been in your thoughts at the time.
When you first start your business, your priority is to hire people who are integral to building the product and growing the company. From engineers and marketers to sales people, consultants, and so on, every new company needs to fill the roles that move the bottom line and grow the business.
At some point during your business’ growth, the need for people to take care of your back office operations become relevant. You need someone responsible for coordinating interviews, sending offer letters, managing benefits administration, and much more.
The problem with that job is that it’s incredibly multifaceted and it can be hard to find all of those skills in one person. You might find yourself beefing up your back office with multiple people just to get everything done.
The question today is, do you really need an internal HR staff?
The reality is, a well-functioning HR department can ensure that you are compliant, have payroll figured out, can on-board everyone appropriately, and hire the correct people while also ensuring that the current employees are comfortable while continuing cultural growth.
In general, HR provides the most value on strategic initiatives that have to do with building strong organizational teams like recruiting, hiring, and developing company culture. While they are often responsible for other key tasks like payroll and managing benefits, these are functions that can be automated and easily left to an outsourced HR.
It’s not newfound information that there are a large number of costs involved in maintaining an effective in-house HR and payroll function. There are obvious costs such as the salaries of the HR staff as well as the less obvious costs such as purchasing, hosting and maintaining an HR and payroll system, training and recruitment costs, office space and time spent developing and improving internal processes and managing the in-house team.
An HR outsourcing company can split many of these costs across multiple client organizations, meaning that a high level of service can be provided to organizations at a lower cost. Additionally, by using automated workflow processes, HR and payroll administration can be carried out in a more efficient way, which can reduce costs and man hours even further.
Cost savings come from several areas, including:
- Spending less on salaries. The average Human Resources Manager earns more than $75,000 per year, plus benefits. Depending on the size of the HR department, a small to medium-size business can easily spend hundreds of thousands of dollars on an HR staff. Outsourcing those jobs to a HR company can significantly reduce that expense.
- Reduced costs for benefits, as the HR company can negotiate better rates for a large pool of clients. Smaller businesses can get rates usually reserved for large companies with bigger staffs.
- Reduced costs for hiring and training. Research from the Society of Human Resource Management found that it costs an average of $4,129 to hire an employee, and more than $1,200 to train him. An outsourced HR company not only helps ensure that businesses hire the right people to reduce turnover and associated expenses, but also has the resources in place to cut the costs of hiring.
- Avoiding penalties from noncompliance with employment laws and regulations.
- Spending less time on HR functions frees up time to spend on strategic sales and growth goals, increasing revenues. Research shows that despite working an average of 50 hours or more per week, business owners only spend about 30 percent of that time on actual business functions. The rest of their time is spent on administrative and other tasks that don’t contribute to revenue.
So in summary, our advice is if you are looking at your existing internal HR operations or are debating whether to hire your own internal HR team or outsource, begin by evaluating the total cost and man hours against your organization between both internal and outsourced HR. A good HR outsourcing provider will focus on how they can add value to your organization by saving you money, implementing procedures, correcting any compliance issues, and allows you and your staff to focus more on other operations from day one. At SW HR Consulting, we are one of those HR outsourcing providers who will work with your business and budget and provide a range of HR solutions to act as your in-house HR team or as a welcomed addition to improve on your HR teams skills. Read more about us here.
To learn more on how to calculate these amounts, please feel free to reach-out to us here at SW HR Consultingat 702-979-2119 as we would be glad to partner with you through these important steps.