Why Do Small Businesses Owners Outsource HR Needs?

There are many moving parts that go into running a successful business. No matter how talented, experienced, or motivated a business owner is, keeping up with every business need can be overwhelming and extremely time consuming.

The Alternative Board conducted a study that found the average small business owner worked around 50 hours each week. Of those 50 hours, only 32 percent of the time was spent working on the business itself. So, what took up the bulk of the time at work?  The answer: administrative tasks of running the business.

Thankfully, there are professionals who specialize in all areas of business. Allowing for easy access to an extra helping hand. Small business owners who are looking for extra help managing their business may find it more reasonable to outsource these tasks. Hiring a full-time employee is a big investment to make in any business, especially at a smaller business.

Small businesses tend to have tighter budgets compared to large corporations. Outsourcing human resource administration to a third party gives small business owners access to a team of professionals who are able to help the business succeed. It’s a budget friendly option to hiring an internal human resources team. Hiring can cost the company thousands more in salaries for the full-time employees that make up the team.

What functions of a business can be outsourced?

Many business functions can be outsourced. In terms of small business this could mean outsourcing anything from employee benefits to outsourcing human resources administration and everything in between.

  • Benefits Administration
    • Medical Insurance
    • Dental Insurance
    • Vision Insurance
    • Life Insurance
    • 401(k) Retirement Savings Plan
    • Short-Term Disability
    • Long-Term Disability
  • Payroll Administration
  • Employee Wellness Program
  • Employee Assistance Program (EAP)
  • Background Checks
  • Drug Tests
  • Employee Onboarding & Offboarding

What are the pros of small businesses outsourcing human resources?

  1. Compliance – Laws and regulations are constantly being changed and updated. With the ever-changing status of laws and regulations, it can be especially tricky to ensure business practices are staying in compliance. A benefit to outsourcing HR is knowing that business practices are in compliance. HR outsourcing firms specialize in understanding changes and what to keep an eye out for. This benefit allows the business owner to leave the stress in the past and get back to focusing on growing their business.
  2. Access to affordable health insurance benefits – Outsourcing HR to a Professional Employer Organization (PEO) gives small business owner access to quality health care at a fraction of the price. In addition to the health insurance benefits, small business owners gain the ability to offer a rich suite of voluntary employee benefits to their employees. This is an added perk for employers and employees, and it’s often out of reach for small business owners due to the high costs associated with these added benefits.
  3. Save money – Hiring an on-staff human resources professional may not be an option for some small business owners due to financial reasons. Outsourcing multiple business functions to a third party, such as a PEO, helps small business owners maximize their dollar. Through a PEO, small business owners can purchase a package of services with one monthly fee rather than paying multiple third parties for each individual business service. In the long run, the PEO package ends up being a better bang for your buck.

What are the cons of small businesses outsourcing human resources?

  1. Size – Depending on the size of the business, it may make more sense to bring HR in house. Businesses with 100 or more work site employees may see a financial benefit to hiring their own internal human resources team.
  2. Loss of control – Although the day to day responsibilities remain with the business owner, the backroom administrative tasks will be taken over by the third party. Some small business owners may feel uncomfortable knowing that some functions of the business are out of their hands. Although the PEO handles the administrative function of the business, the business owners continue to have a say in what happens with the business. This loss of control allows the business owner to dedicate more time to growing their business without worrying about the administrative tasks of the business.
  3. Low importance – When outsourcing, it is very important to find a trustworthy third party that has the businesses best interests in mind. Many HR outsourcing firms handle human resources administration for many clients. Because of the high volume, some small business owners may experience their needs being pushed to the bottom of the priority list. Conducting thorough research before outsourcing any business functions to a third party can reduce the risk of this happening.

Some small business owners enjoy and depend upon the knowledge and personal investment that full-time employees add to their business. This is a benefit that can be missed when using HR contractors. A Professional Employer Organization is the best option for small business owners who are looking for assistance with the administrative tasks of running their business. A Professional Employer Organization (PEO) takes a bundled approach to business services, taking care of everything from payroll, human resources, benefits administration, and more.

The co-employer relationship between the small business owner, their employees, and the PEO is tight knit. This allows the PEO to really understand the individual business and the business needs. Think of the PEO as an extension of the back office of the business. The business owner continues to take care of the day to day operations of the business, and the PEO focuses on the administrative tasks behind the scenes. This relationship allows the business owner to focus on growing their business knowing everything else is being taken care of.

Focus OneSource is Iowa’s only domiciled PEO. As an Iowa based business ourselves, we understand wanting to do business with other local businesses. We are close to home and can fit the needs of various businesses. Our unique approach to the PEO model allows us to break our services into a la carte options. This added flexibility gives our customers the option to pick and choose the services that best fit their needs.

Everything from the full PEO package to HR outsourcing, payroll outsourcing, and more – We’ve got you covered!

Contact us today to learn how Focus OneSource can customize your businesses outsourcing needs.

Alaina Riley
Marketing & Wellness Coordinator