June 14, 2022
Who Should Outsource HR Functions

Does outsourcing human resources make the most sense for your business or organization? What exactly can a third-party HR firm do for you?

Many startups or small organizations choose to outsource HR functions in their early years or even forever. It can be significantly more cost-effective than staffing an internal HR department. Plus, you’ll receive focused attention from a team of experts who will — most importantly — help you remain compliant with employment laws.

Outsourced HR works particularly well for small businesses and nonprofit organizations. Whether you have a one-time or ongoing need, there are many options. A reputable HR consulting firm will help you find one that suits your needs and your budget.

Outsourced HR for Small Businesses

HR functions fall into one of three general categories, so you’ll need to determine what type of HR outsourcing your small business needs. The three categories are:

  • Administration: Includes payroll, taxes, insurance, hiring and termination, benefits. There are many HR software solutions that can help in these areas, as well as companies that offer specific administrative HR support.
  • Employment law compliance: Includes legal and regulatory issues, such as ensuring your employment policies and job descriptions are legal, ADA compliance, and FMLA management. Some companies need ongoing help in these areas, while others may only have one-off projects.
  • Employee performance: Includes performance reviews, recognition, training, performance improvement plans (PIPs). Again, these could be ongoing or one-time needs.

When you have employees who are not HR experts spending time managing (or trying to manage) HR tasks, that’s valuable time in which they could better be using their skills. It affects their productivity and your business’s overall performance. 

Outsourcing HR functions can significantly help reduce stress and distractions for employees from their core job responsibilities. In some cases, the right HR software and external HR firm are sufficient for small businesses until they reach 200 employees, according to Software Advice.

By outsourcing HR for your small business, you can: 

  • Save time and improve productivity.
  • Lower costs.
  • Reduce risks and ensure employment law compliance.
  • Maintain proper payroll processes.
  • Enhance employee development.
  • Provide better employee benefits.
  • Gain an outside perspective.

Discover all the benefits of outsourcing HR for your small business.

Outsourced HR for Nonprofits

The primary reason nonprofit organizations decide to hire an HR company is employment law compliance. Compliance issues can lead to big-time fines — which many nonprofits can’t afford! And if your nonprofit operates in multiple states, it complicates things even more because you have individual state laws to keep up with.

It may also make sense for your nonprofit to outsource HR if: 

  • You only hire staff to manage the nonprofit programs, but outsource all administrative functions, like HR, accounting, and IT.
  • Your existing HR staff can no longer accommodate your nonprofit’s growing needs.
  • Your HR department consistently sees high turnover, and you can’t afford to keep pouring time and resources into building it.
  • Your controller/director of finance/CFO previously managed HR tasks but no longer has bandwidth due to growing accounting and finance needs.
  • You don’t have the budget to hire a full-time HR manager or department.

When nonprofits partner with an external HR firm on an ongoing basis, they most commonly outsource: 

  • Compliance
  • Employee relations
  • Compensation management
  • Performance management
  • Benefits administration
  • Payroll

Working with a third-party HR company can help your organization save on administrative costs, ensure compliance, complete tasks and projects more efficiently, and provide you with overall peace of mind. And when you work with an HR firm, they offer a team of experts in a range of skills and with varying years of experience.

Learn more about how outsourcing HR can benefit nonprofit organizations.

Businesses with Internal HR Departments

Perhaps your small business has an internal HR employee, manager, or small department. They are capable of managing the day-to-day HR functions and issues, but are more of generalists. 

But what about when you need support on a specific HR project or task?

For example, maybe you have a short-term project, like an employee handbook or benefit package review. In these cases, you don’t need a new team member. Your outsourced HR firm can simply partner with your internal team to guide them and get the job done. This is also beneficial if you’re on a tight deadline; your HR consultant can work much more efficiently, thanks to their expertise.

Or maybe you need an expert in a specific area, something your internal HR professional is not as experienced in. You don’t have the budget to support a full team, but need additional support. Your HR partner can bring in experts for things like diversity and equity training or employee investigations/conflict resolution. Often, having a neutral third party guide these processes works best!

On another note, perhaps your HR manager or employee recently left and you need interim support while you find a new HR employee. Some HR firms offer this temporary assistance and will also work with your new hire to get them up to speed on all HR policies and processes. Check out our HR Gap Coverage service to learn more!

Before you outsource HR for your small business or nonprofit organization — whether for an ongoing or one-time project — you’ll need to assess your needs to ensure you choose the right HR consultant. If you’d like to discuss your options or simply need some guidance as you search for the perfect partner, contact BlueLion today at 603-818-4131 or info@bluelionllc.com. Our HR experts will be happy to answer your questions. 

The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.