Human Resources: In-House, Outsourced, or No Comment?
As a business owner, you want to ensure you're doing all that you can to contribute to the growth, health, and happiness of both your business and your employees. "Human Resources" covers a vast area of functions and responsibilities, many that take some serious expertise to execute. So what do you do when your business starts growing and you can't keep up with all the time consuming tasks that fall under HR? You might consider hiring in-house HR personnel or outsourcing your HR services altogether.
For starters, consider the following questions:
1. How do I benefit from having HR in-house?
2. Could my employees be more productive and happy if I outsource HR?
3. What is the real cost of outsourcing vs keeping HR in-house?
4. Do I even need HR?
One of the key reasons for hiring in-house HR personnel or outsourcing HR is simply to have more time to focus on the key strategic initiatives of your business. (And by that we mean revenue-generating activities). But maybe you have found that HR is not as necessary or pertinent to the success of your business as it may be for others?
Let's break it up into two categories: What is the cost of having an HR department/program, and what is the cost of not having an HR department/program?
A.) What is the cost of having an HR department/program?
- For small businesses with few employees, the amount of money spent per employee on HR services could potentially be significant. Typically small companies don't have the bank accounts of larger companies and so any additional expenses can really make an impact on their bottom line.
- Having an HR department may also cost you time spent managing and accounting for more employees and services, which may spread you too thin after managing all of your other services and employees.
- Having an in-house HR "generalist" could cost you a big chunk of money, as they are typically paid in the range of $75-80,000 annual salary. (And that's just for ONE person!) If you were to outsource HR services, you'd be paying significantly less per year for more services and a range of subject matter experts with the knowledge you need.
B.) What is the cost of not having an HR department/program?
- Not having an HR department may cost you several things: mainly time, money, and employees.
- The administrative tasks that fall under HR can be incredibly time consuming. Consider running payroll for all of your employees, double checking the deductions and contributions specific to each employee, managing their benefits, making changes to their tax forms, hiring and onboarding, managing paid time off, ensuring their 401(k) is receiving the contributions it should be...the list goes on and on.
- Some of these HR tasks also cost money: does your management team have knowledge of the relevant laws and how to stay compliant with them? If not, not only could your business be audited and potentially in trouble with the law, but we also know that any infraction costs you big time cash.
- The new hire process can be costly as well. It takes time and money to search for the right candidate, interview, perform background checks, on-boarding, training, etc., especially when you have a business to run! The HR department can take over those duties so that you can focus on your strategic business initiatives.
- Another potential cost: employees. If there is a dedicated person at your company to confide in, to resolve conflict, to ensure employees are the best fit for their position, and to ensure they are engaged and motivated, they may be more likely to stay with the company.
Here's an engaging thought: If your core product or service offering doesn't involve HR, why spend large amounts of time or money managing it? What you want, what all business owners want, is to generate and increase revenue, and the best way to do that is to shed the administrative tasks associated with HR and put all of your (and your employees') focus into your core business objectives.
The interesting thing about outsourcing HR is that you can pick and choose which areas you'd like to be handled for you. For example, if you've found that payroll and tax administration are taking up too much time and pulling away from the core focus of your business, perhaps you might outsource those tasks and have someone handle strategic HR for your employees in-house.
Whether you choose to keep your HR in-house or to outsource it, it's imperative to keep your sights set on the activities that are critical to the success and growth of your business. If you can continue to grow your business and generate revenue with a great HR team in-house, kudos to you! But if you find HR tasks to be time-consuming and overworking your staff, it might be time to outsource.
Lucky for you, we do just that!
If you have any questions regarding the services we provide, do not hesitate to contact us by phone at 410.451.4202.