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6 Reasons to Outsource HR and Payroll

outsource_compassAs your business grows, your human resources and payroll needs are bound to increase with it. From processing new hire paperwork, managing benefits and handling payroll, the HR and payroll department manages a broad range of crucial tasks. However, managing your rising HR related needs in-house can quickly become a complicated, costly process. Here are some reasons you should consider outsourcing.

1. If Administrative Processes Are Slowing Down Productivity
Professional employer organizations can help startups in their early stages, but consider when the right time to partner, and NOT partner, with one may be. When startups begin to get employees, founders can quickly be overwhelmed by health care and payroll processes, and this detracts from operations. Many PEOs won’t work with firms that have fewer than 10 employees, according to Entrepreneur magazine. When small businesses exceed a certain threshold, it may be more practical to manage HR internally to get quicker resolution on issues. This frees up time to gain customers and launch product lines. But what happens when you do begin to grow? You’ve hit the point where you need to bring HR and payroll in-house. You are over 50, 80 or even 100 employees. A PEO is not the most cost effective option for outsourcing at this stage, and thus you will have to seek an alternative – and there are many. From an administrative and strategic  perspective, you will do best to find a solution that mimics the PEO without the constraints of co-employment.

2. If You Don’t Have a Firm Understanding of Employee Compliance
Entrepreneurs often have a specific area of expertise, and it isn’t surprising if their business knowledge doesn’t cover HR, especially for a first-time business owner. Even when the first few employees come on board, you need to be prepared for any issues that may occur. Depending on your industry, employees will need to sign a noncompete or confidentiality agreement, Finance and Commerce stated. Unless you have a background in employment law, you will most likely need help drawing up these documents, as well as creating an employee handbook. An outsourced HR provider can help a founder create offer letters and outline expectations.

“Payroll is one of the most essential services a firm provides for its employees, and it’s also one of the most complicated.”

3. If You Need to Reduce Time and Effort Put into Payroll
Payroll is one of the most essential services a firm provides for its employees, and it’s also one of the most complicated. If your team doesn’t get paid on time, there are bound to be big problems. Payroll is governed by many regulations, and these vary by state. Business owners have too many other tasks to manage on a daily basis to handle payroll themselves. This is one of the biggest targets for HR outsourcing because small variations during a pay period, such as employees starting or taking time off, can make the whole process far more complicated. Ensuring that you have the right solution for payroll is a must, but you will want to be careful about how that payroll is managed outside of your organization. Your payroll solution should be able to work together with all of your other solutions that administer benefits and talent management. Even better if they are on one single data set, one single solution.

4. It Saves Money
Outsourcing HR is more cost-effective for a new firm than building up an internal HR team. All the components of talent management, payroll and benefits administration can quickly become too much for one person as a company grows. Outsourcing helps you save money and time so you can focus on other areas of the business, according to Forbes. You can access a specialist with a great deal of experience in the HR and payroll industry for less money than it would take to recruit and hire one. Not only can you get expert advice, but outsourcing gives you access to the latest tools, such as data analytics to help ensure compliance. Implementing these systems in-house isn’t cost effective for many growing companies.  And let’s say you do have someone to manage HR and payroll on staff. Outsourcing can still save you money as they will have more time to focus on the strategic aspects of their company that ultimately effect the revenue.

5. It Improves Recruitment
Don’t have time to court the high-value talent you need to make your company more successful? No problem. A skilled outsourced HR partner knows how to bring in top talent. Because having the right people on your staff is such an important concern, many companies would rather hand this responsibility over to a partner that knows what they’re doing. Recruitment can be extremely time-consuming. While you likely have some idea what type of employees they want to hire, there are key skills you may overlook.

6. If You Need to Focus on Your Core Competencies
Although you may have a strong understanding of your particular industry, growing your business is an entirely different issue. You are trying establish yourself in a competitive marketplace. You are benefiting by having an internal HR department, but it requires a great deal of effort to align your strategic goals with ensuring compliance, containing cost and ensuring control of the many moving parts of your organization. Many HR and payroll teams don’t have time to manage the business and help guide the company in a strategic direction at the same time. Companies can focus on their key strengths and work to improve potential vulnerabilities when they aren’t being spread in too many directions at once. Outsourcing HR is often the right choice in this position. It can help your company build a competitive position in the market, maintain compliance, save time and reduce costs.

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