Owners of small to medium-sized businesses have plenty on their plate on a daily basis. It’s not always clear how to balance the tasks required of a leader — like planning, strategy, and execution — with the myriad of details involved in important HR functions.
Tasks like payroll processing, onboarding, policy implementation, and data management are critical and cannot afford to be overlooked. However, the larger your company grows, the more difficult it is to find the time to do these jobs well.
When it comes to HR, small mistakes can quickly become majorly expensive.
With this in mind, you may be considering outsourcing human resources. To help you understand whether this is right for your business, we’ve put together a list of pros and cons.
Human resource outsourcing involves working with a Professional Employer Organization (PEO) that offers comprehensive support to small and medium-sized businesses in various HR aspects such as employee training, corrective action planning, hiring, termination, administering employee benefits, fostering the implementation of HR best practices, and more.
Here’s a breakdown of the most common services that a human resource outsourcing company can provide:
To help you decide if HR outsourcing is right for you, let’s start with the benefits.
Human resource outsourcing companies offer unparalleled expertise in the HR industry by specializing in a specific set of skills.
What can this expertise get you?
As your business grows, your HR needs may change. When you only have a few employees, you may be able to handle HR functions independently with little guidance. But as you scale, outsourcing your human resource tasks allows for flexibility in HR operations.
As a leader, it’s your job to stay on top of big-picture tasks like which market to expand into, who to hire, what responsibilities to delegate, and holding your senior leadership accountable.
Put simply, there will come a time in your business’s growth when you may not have time to handle time-consuming HR tasks anymore. When this day comes, an HR consulting firm can take on tasks like:
Better employee development means you can unlock the potential of lower-level employees who can become leaders down the line.
Employee development also means more satisfied employees who stay with the company longer, exhibit greater loyalty and perform better.
There are clearly tremendous potential benefits involved with outsourcing your human resources. However, it isn’t the right decision for every business.
Here are some potential drawbacks that might come with outsourcing HR.
Outsourcing HR functions generally results in a lack of direct control over many aspects of your HR operations. This can be stressful and distracting for some business owners.
The transition to outsourced human resources can be challenging, particularly if that company exists in a different time zone.
There is a risk that the HR consultant you choose employs one-size-fits-all solutions to their HR services. Lack of personalized solutions could mean your company is getting second-rate HR, leading to problems that will need to be patched up in the future.
HR is a sensitive topic for employees, who are often weary of changes to HR management and policies. Concerns about job security, communication gaps, and how to adjust to new processes can negatively impact morale and productivity.
When considering outsourcing your HR operations, it’s important to first understand why you’re researching the topic to begin with.
Have you had HR challenges you weren’t sure how to overcome?
Do you think you’re spending too much time on daily HR tasks?
Are you planning to scale aggressively and looking for a solution that will bridge the gap between your small business and the large one you plan to build?
Finding answers to questions like these will help you understand if outsourcing is right for you. Here are a few more tips for choosing the right human resource consultants:
At BBSI, we feel that all the cons related to outsourcing HR can be resolved by choosing the right partner.
We’re a PEO who specializes in HR consulting. We satisfy our clients by understanding the usual drawbacks an HR firm can pose for a business and making them our strengths.
Ready to get more out of your HR functions by outsourcing to a skilled and experienced partner? Find a BBSI Human Resources Consultant near you.