Should You Outsource Your HR Department?

By Aries Payne

There are a lot of tasks you may juggle as a small business owner: Beyond budgeting and bookkeeping, developing products and services, marketing and sales, you also need to tend to new and current employees and their needs. That said, not every startup will immediately have a dedicated human resources person to oversee this. But, because a happy workforce is critical to a successful business, it’s worth considering how to make this process more efficient with the resources you have as your organization grows. 

One possible solution to address this is outsourcing your HR tasks, that is, contracting a company to manage specific HR functions on your behalf. However, there are a few pros and cons to keep in mind, especially as a new business. 

Advantages of Outsourcing HR

According to Workplace, some of the biggest benefits of outsourcing HR for small businesses are saving time and money. Startups may not have the resources to hire a professional to manage staff and onboard new workers. By contracting HR services, they can leverage the expertise of an HR specialist without the cost of offering a full-time salary and benefits. Additionally, business owners can free up time to focus on operating and scaling up the organization, as contracted HR professionals can also assist with recruiting and screening candidates for open positions and streamlining payroll and benefit offerings for current employees. 

An added advantage of outsourcing HR tasks is that it ensures your business is compliant with relevant labor laws and regulations. Contracting firms stay up-to-date on these changes and can help you avoid costly mistakes and fines associated with discrimination or wrongful termination claims, for example. 

Disadvantages of Outsourcing HR

Although outsourcing HR tasks can save small businesses money, you may encounter hidden fees. Some vendors require you to sign a contract that locks you in with their services, meaning there could be costs down the line if you decide you want to change providers or hire a full-time HR professional instead. 

Additionally, as someone who may interact with your staff regularly, you have a solid understanding of the company culture and your goals for what you would like to achieve. However, an external HR firm may not be as familiar with them. As a result, as Paychex notes, it may be difficult to find candidates or develop policies that will fit your business or team. 

Finally, there are cybersecurity concerns when you outsource HR, especially since the organization will have access to sensitive employee data such as social security numbers, personal addresses, and banking information. 

Options for Outsourcing HR for Small Businesses

If you are still unsure whether your small business should outsource HR, schedule an appointment with our HR business specialist, Erica McGruder. She can provide advice and resources at no cost to you and walk you through your options for streamlining your HR processes.