Human resources play a critical but often overlooked role in an organization’s success. From recruiting and hiring to payroll and employee benefits, human resources impact every one of your employees. HR management is also one of the most time-consuming tasks for a business—especially small businesses like yours. That’s why making sure your HR is done right is so important.
As a small business owner, you understand what it feels like to take on the world; to build a successful business from the ground up. Naturally, you want to retain control of every aspect of what you’ve built and maintain that do-it-yourself approach. You might even be handling HR tasks yourself, or at the very least, you’ve handed them off to someone you trust like a controller, a bookkeeper, or an office manager.
This approach has some advantages. You understand your company culture better than anyone and can immediately respond to employees’ needs. But there are some significant costs to this in-house HR model. For example, in addition to the huge administrative burden, you might lack the specialized expertise necessary for your industry, and keeping up with changing compliance and legal requirements can feel like a full-time job in and of itself.
Outsourcing your HR functions can be immensely beneficial for your business. By partnering with an external service provider like a Professional Employer Organization (PEO), you’ll reduce overhead costs and save time and energy so that you can focus on your core business functions and leave HR to the experts. However, what you gain in increased efficiency and scalability can be negated if you choose the wrong HR partner.
Unsure which option is best for your business? We’re breaking down the pros and cons of each to uncover the real cost of a DIY approach compared with outsourcing your HR to a PEO.
The Pros and Cons of In-House HR
Here are some of the advantages and challenges of handling HR yourself:
A Connection to Company Culture and People
An internal HR team that is fully integrated in the day-to-day of your business will have a deeper understanding of your organizational culture and company values. This connection can help them align HR strategies and processes to meet the organization’s unique needs. An in-house HR team will also be able to build relationships with people throughout the company, enhancing employee engagement and morale. When issues do arise, having dedicated HR professionals on site ensures an immediate response. An in-house HR team can work quickly to address issues, answer questions, and reassure your workforce. Serving as a single point of contact for both employees and leadership, a DIY HR team allows you to streamline communication and keep critical business running smoothly.
Higher Costs Without the HR Expertise
While keeping HR in-house has some advantages, it’s not without challenges. One of the biggest is higher costs. Running HR can be an expensive endeavor, especially for smaller businesses with limited resources. And the cost isn’t just monetary. A DIY approach to HR requires a huge amount of time, often at the expense of small business owners who spend valuable time dealing with HR decisions and administration instead of growing their business.
Another challenge with the do-it-yourself approach is that most people are generalists. They may be skilled at dealing with a broad range of HR functions, but they lack specialized knowledge and expertise. For a small organization, keeping track of payroll, benefits, regulations, compliance, and record-keeping is a very tall order. Things inevitably fall through the cracks, which puts your entire business at risk.
The Perks of a PEO: How Outsourced HR Benefits Business
Doing HR yourself is the right move for some, but other organizations are choosing to outsource their human resources functions to external service providers. A PEO is one such provider that works with small businesses to help them manage payroll, secure better benefits, improve HR administration and compliance, and put safety and risk management strategies in place.
For some business owners, outsourcing HR functions may feel like giving up the keys to your favorite car and letting someone else drive. But partnering with a PEO doesn’t mean relinquishing all control over your business. Instead, it enables you to invest time and energy into other projects, freeing you up to pursue new business opportunities. In other words, instead of being completely focused on the road, you get to let someone else worry about driving while you enjoy the scenery.
Not quite sure if you’re ready to hand over the keys? Let’s explore the pros and cons of outsourcing your HR to a PEO.
Reduce Overhead and Scale Up Your Business
Let’s start with the basics. A PEO provides comprehensive HR solutions for small and medium-sized businesses. Using a co-employment model, a PEO co-employs your staff and manages both routine and complex HR tasks, allowing you to focus on growing your business. By outsourcing your HR functions, you save time and money, avoiding the costs associated with managing HR. This means that, instead of spending money on salaries, HR training, and office equipment, you can invest that money back into your business and use it to scale up operations. Additionally, partnering with a PEO allows you to scale your HR services up or down based on changing business requirements.
Beyond the bottom-line costs, one of the biggest benefits a PEO provides is better buying power. Using the collective bargaining power of their clients, PEOs can provide employee benefits at lower rates, ensuring businesses can offer a robust benefits package that helps them hire and retain talent. Outsourced HR also increases efficiency and productivity by streamlining HR processes and leveraging cloud technology to keep all your HR-related data in one integrated system.
Choosing the Right PEO Partner
While outsourcing your HR functions to a PEO offers many perks, the system isn’t without its pitfalls. You need to choose the right HR partner for you. Sure, there are lots of big payroll companies and national PEOs to choose from, but more often your best option is to pick someone local. A regional PEO like Ethan Allen can provide customized HR solutions that fit your business. In fact, if you currently have a dedicated employee on staff who acts as your HR point of contact, we can work behind the scenes to support their efforts, freeing them up to focus on more impactful tasks like recruiting, training, and strategic initiatives.
We stay up-to-date on national and local employment laws to help your company maintain compliance with changing regulations. And, just as importantly, we work to ensure your cultural alignment and integration remain intact. By partnering with a local, experienced PEO, your business will avoid the communication mishaps and coordination issues that tend to minimize the potential benefits of outsourcing your HR functions.