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For most small businesses, the idea of outsourcing human resources seems like something that only huge corporations with massive HR departments can do. The truth is that you can outsource all or part of your human resources department like accounting and web development work, to experts who will make sure all your needs are being met. 

Before you decide on outsourcing, however, there are some questions you need to ask yourself and factors you need to consider so that you know when outsourcing your HR would be the best option for your business. The following are nine ways to know when outsourcing your HR department would be the right move for your small business.

What does it mean to Outsource HR?

HR (Human Resources) is sometimes referred to as an organization’s people department. HR professionals are responsible for helping companies keep track of, attract, and retain employees. In order to do so successfully, HR specialists must be experts in everything from compensation and benefits programs, employment law compliance, labor relations, recruitment strategy and development and management training. Fortunately for small businesses on tight budgets, there are plenty of ways to outsource your HR department—and save time and money while doing it. Like using EOR services as many companies do nowadays.

1) The company is growing fast

As business grows, you’ll find it hard to juggle all of your responsibilities as an owner, manager and employee. This can lead to mistakes that hurt your business and its employees. By outsourcing human resources work like payroll processing and recruitment, you free up time for more important tasks. This not only improves internal operations but also increases productivity.  If your company is paying employees by check or direct deposit, chances are they have access to their real pay stubs online. 

A real pay stub is different from a W-2 in that it shows how much money was actually paid out after taxes and other deductions were taken out. The government requires employers to provide their workers with these documents each year. When they need custom software built, many small businesses turn to outsourcing web development companies. Outsourcing allows you to focus on what makes your business unique while letting someone else worry about making sure everything works correctly behind the scenes. Because outsourcing has become so common, there are many reputable firms offering services at reasonable prices—and often with fixed pricing options that allow you to know exactly what you’re going to pay before any work begins.

2) The Job Function Must Be Strategic And Critical To The Success Of The Company

Is your human-resources function critical to your company’s success and growth strategy, or is it an ancillary business unit that only occasionally gets involved in day-to-day activities but must still produce performance metrics for upper management? If you answered yes to question No. 1, then it may be time for you to start thinking about outsourcing. Outsourcing certain functions within your company can save money while allowing you to focus on other areas of importance, such as strategic planning and product development. For example, if you outsource or outstaff web development work to an outsourcing company, then you can hire someone who specializes in coding websites to create your site instead of having one of your employees learn how to do it from scratch. This will allow him or her to spend more time working on other tasks that are more directly related to growing your business.

3) The Industry Demands Highly Specialized Skills

Before you look at outsourcing, make sure your business really needs an external partner to develop these skills. If so, it’s time to investigate what’s out there—and whether outsourcing would be more cost-effective than hiring someone new with those skills on staff. Do some research and speak with other small businesses that have outsourced in order to understand how they approached it and why they chose outsourcing over hiring internally. You may find that outsourcing isn’t right for your company, but learning about options can help you decide if it is or not.

4) The Required Skills Are Hard To Find In One Place

One of the top reasons that small businesses should outsource is because you’ll often have trouble finding individuals with all of your necessary skills in one place. For example, if you’re trying to do an excellent job with payroll but can’t find anyone who is good at accounting, then it might be time to start outsourcing. Similarly, if you need help with customer service and web development, but don’t know where to turn, an outsourcing web development company may be your best bet.

5) Your HR Staff Doesn’t Have Time For Other Duties

If your small business is growing, you might need to take over tasks like payroll and benefits administration. When does it make sense to outsource these administrative duties? Consider delegating these duties when you can’t devote more time or money toward them without compromising other parts of your business. If it’s becoming increasingly difficult for an in-house HR staff member or manager to handle these tasks, outsourcing might be a good idea. Here are some signs that should point you in that direction. 

Your employees have become disillusioned with their paychecks: Payroll is one of those areas where mistakes can happen often and cause frustration among employees—and employers. A real pay stub shows exactly how much each employee has earned in terms of gross wages, taxes withheld, deductions taken out (like 401(k) contributions), etc., but not all businesses use these tools.

6) You Want More Flexibility In Your Benefits Packages

You may have grown so big that it’s time to outsource HR. As your company grows, you might have trouble keeping up with everything else and you might find yourself getting fewer real pay stubs from your team members because they’re now working for an outsourced web-development company. If you want more flexibility in your benefits packages or other parts of employee life, consider outsourcing some of those tasks to companies like ZenPayroll or ADP. They can take care of payroll, benefits management and other tasks while freeing up your employees (and yourself) to focus on more important things.

7) Human Resources Software Is Too Costly For Your Company’s Budget Or Needs

If you have less than 10 employees, it may not be financially feasible for you to purchase human resources software. For example, ADP TotalSource only charges $20 per month per employee, while Workday costs $15 per user per month. While these prices might seem small in comparison to paying for traditional office space, if your workforce is small enough that freelancers would be more cost-effective than an on-site employee or two, then you’ll want to consider outsourcing human resources altogether.

8) You Want Access To Expertise Outside Your Industry Or Region

Outsourcing human resources is a logical choice for small businesses that want access to expertise outside their industry or region. An outsourcing firm can help you design an employment handbook, write an employee manual, and craft an interview process for new employees. You have in-house HR staff who need mentoring: As your business grows, you may find that one or more of your internal human resources staff could use some extra training. You do not only provide professional development opportunities for them but also free up time so they can focus on other areas of your business, when you outsource web development company. The economy has made it difficult to hire and retain qualified workers: Outsourcing human resources helps protect against rising unemployment rates by giving employers more control over how they recruit, hire, and retain workers.

9) The Budget Doesn’t Allow For Hiring Full-Time Employees

A lot of small businesses struggle with budgeting for full-time employees; when business is slow or there are other constraints on money, it may make sense to save money by outsourcing instead. Many people will say that outsourcing human resources isn’t worth it because you lose control over your company culture and brand. While that might be true in some cases, if you’re struggling to keep your company afloat, it might be worth looking into how much you could save by outsourcing certain tasks and letting go of things like employee handbooks and payroll management software.

What Are The Downsides Of Outsourcing HR

A business usually outsources its Human Resources (HR) department when it has grown too large and needs somebody with more experience than it can provide internally. But there are downsides to outsourcing your HR functions. For example, you lose in-house expertise, and you’re also handing over some degree of control over your company culture. If you have an entrepreneurial or start-up mentality, outsourcing might not be for you. You may find that keeping your HR functions in house is a better fit for your style.


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