Outsourced HR Services for Small Business

HR Services for Small Business

When an owner is growing their small business, it’s usually their instinct to do everything on their own—especially human resources functions. On the surface, keeping tasks like payroll, hiring, employee onboarding, and benefits management close to the chest seems like the right move. If the business owner is in charge of these functions, they believe it’s less likely something will go wrong.

In reality, the opposite is true. HR consulting services for small business can actually help prevent small companies from making costly mistakes.

Key functions like payroll, benefits, and compliance become extra tasks that increase stress and lengthen the to-do list, while more strategic HR functions like performance management and succession planning become little more than an afterthought until a moment of crisis strikes. And, in that moment of crisis, the business owner may not have the experience necessary to achieve the best possible outcome. Working with an HR professional doesn’t just save business owners time but helps them feel confident the job is being done right.

Addressing the myths and misconceptions that lead small business owners to believe they don’t need outsourced human resources or internal human resources support is the first step to making life better for them and their employees.

Do Small Businesses Need HR?

Do small businesses need HR? Every small business needs to manage essential human resources functions like payroll, benefits, hiring, onboarding, and more. Even these HR basics for small business can quickly fall through the cracks when the founder or owner is responsible for human resources management on top of all their other duties. According to score.org, human resources functions consume 25-35% of a small business owner’s time. As much as 25% of that time is simply handling employee paperwork!

This leads to the question, what size company needs an HR department? Most experts agree that around 40-50 employees is when it is essential to work with at least one dedicated HR person, because that is the size of company that is subject to more complicated laws like the Family and Medical Leave Act (FMLA). These complicated laws also come with a significant increase in required documentation, which is why this is a threshold where HR administration for small businesses becomes necessary.

But other regulations like the Fair Labor Standards Act (FLSA) apply to any size business with hourly employees. In certain industries like healthcare, manufacturing, and construction, businesses of every size are subject to regulations like the Health Insurance Portability and Accountability Act (HIPAA) or the oversight of the Occupational Safety and Health Administration (OSHA).

In short, the need for a dedicated HR manager isn’t just dependent on a company’s size. The industry in question, as well as the company culture, goals, and even current challenges like training, recruitment, or retention, may mean HR services for a small business are a necessity.

Is HR needed in small businesses? Absolutely yes. Small businesses need HR so they can survive long-term, outpace the competition, and attract and retain the best possible talent.

What are the Important HR Requirements for Small Business?

The basic HR requirements that are important to a small business’ day-to-day operations include employee documentation, regulatory compliance, and payroll administration. But talent acquisition, onboarding, and performance management are other human resources functions that, when handled by an expert, can help a business grow exponentially in the direction of its goals. Finding the best HR outsourcing service for your company requires narrowing down which areas your business needs the most help with. Small business HR services can bridge these gaps efficiently.

List of HR Consulting Services for Small Business

These six categories will answer the question, “What does HR do in a small business?”

Documentation and Compliance

Documentation and compliance go hand-in-hand. The need for documentation starts when an employee is hired, including their I-9 form, W2 form, benefits elections and enrollment, health and financial information, and even keeping their resume and credentials on file.

This need continues throughout the employee lifecycle, both for compliance and to preserve company culture. Examples include keeping track of used and available paid leave and time off hours; alignment with rules like anti-discrimination laws and benefits laws; internal employee training records and achieved certifications; and documenting and preserving the outcomes of employee performance reviews.

These records and the initiatives they keep track of are important both for talent retention and in the case of an audit or other legal requirement, like an unemployment claim.

Payroll Administration

Payroll administration is a process unto itself, especially at companies with complex pay structures that support both salaried and hourly employees. Accuracy on the employer side is essential and translates to the seamless experience employees expect and deserve. It only takes one payroll error to lose an employee’s trust and confidence. With over 40% of businesses adhering to a biweekly payroll schedule, there is a continuous need for HR professionals to ensure timely and accurate payroll processing.

Plus, payroll administration can be one of the most time-consuming HR functions for a business owner to carry out on their own. Working with a small business payroll administration expert or a professional employer organization (PEO) connects small businesses to the industry-leading tools and processes that ensure success.

Talent Acquisition

The success of a small business is directly connected to hiring the right talent at the right time. 30% of small business failures are blamed on poor hiring decisions.

But for a busy small business owner also trying to handle a talent search, the approach to recruitment may be too passive to attract the right talent. In an environment where 91% of businesses are expecting to hire for newly-created roles in 2021, small businesses can stand out from the competition when a human resources consultant that specializes in recruiting takes the job search to the top candidates.

Acquiring the right talent in terms of skill set, personality, career goals, salary and benefits expectations, location, and beyond can simply no longer be left up to chance. In fact, 72% of candidates are passive candidates, meaning they are open to new opportunities but not actively applying for jobs. Outsourcing talent acquisition and recruitment is one of the best pieces of HR advice for small businesses that can be acted on to improve the bottom line and ensure a high level of incoming talent.

Onboarding New Hires

Smooth and strategic onboarding of employees is another essential function of HR for small businesses. G2 reports that 69% of employees are likely to stay with their employer for at least three years if they had a great onboarding experience, but only 12% of employees strongly agree their organization provides one. 26% of American workers have actually quit a new job during onboarding because they were so dissatisfied with the process.

These risks are challenging enough for large corporations, but for a small business the cost of a new employee search, as well as the pending vacancy, can be crippling. Even if a business owner wants to conduct certain elements of onboarding on their own, an outsourced HR provider can create a repeatable, professional, consistent, and effective process that will help retain employees and ramp them up to greater productivity faster.

Performance Management

Performance management is an HR function that is essential to success at a small business, but it’s also one of the most likely to be under-prioritized in a way that helps the business grow.

Many leaders only manage performance when it becomes an issue or barrier. At the same time, employees are looking for more recognition, investment, and development of their diverse skills and strengths. 70% of current US employees say they would leave their current employer to work for a business with more learning and development opportunities.

Human resources manages both the positive and challenging aspects of performance management, helping to strategize improvements with some employees while ensuring interest in and excitement about the job is sustained in the key talent the company can’t afford to lose.

Each small business needs all of these HR functions, but no two businesses are alike in the approach that is necessary. Some require more compliance support, while others are hiring rapidly and need to onboard effectively. Maybe it’s both!

Understanding how better human resources management aligns with the strategic goals for growth will help each company design the strategy that works best for them.

How Can HR Consulting Services Help Small Businesses?

HR is essential for small businesses for its administrative, benefits, and talent functions. If done well, these can lead to higher engagement for employees. Engaged employees are reported to be 21% more profitable according to a study done by Gallup.

Yes, that’s right, effective HR can lead your small business to be more profitable. HR increases overall employee satisfaction. When employees have proper avenues for growth via performance management, they are more satisfied with their job. This performance management should be matched with competitive compensation. So overall, good HR solutions can lead to happier and more productive employees. HR outsourcing companies for small businesses help companies create effective HR strategies that increase employee satisfaction over the long term.

Why Do Small Businesses Outsource HR to Human Resources Consulting Firms?

The best HR outsourcing for small businesses gives access to leadership, expertise, and experience. At a small business, areas for outsourcing HR functions include compliance management, employee experience management, benefits management, and cost management.

Outsourced HR Compliance Management

Most small business owners did not start their business to become labor law and employee relations experts, let alone keep up with changing standards of compliance that might apply to their unique industry. Not only may the subjects be boring or dense to a business owner, but even a minor mistake can lead to costly penalties and even legal risks. Outsourcing compliance management means a vendor is contracted to pay attention to these details and has the expertise to do so with confidence.

Outsourced HR Employee Experience Management

Outsourcing employee experience functions like recruiting, onboarding, and the creation of a company handbook or internal training program allows business owners to feel supported in leading company culture. An experienced, high-quality human resources consultant can listen to the goals and vision for the company culture and leverage their experience in programs and processes to help the owner make those goals a reality. All the best intentions in the world can’t replace the value of experience that an outsourced employee experience manager brings to the table.

Outsourced HR Benefits Management

Outsourcing benefits management means practical and strategic gains for a small business. On the practical side, events like open enrollment for health insurance, questions about the retirement plan, and keeping track of who has used how much paid leave time become the responsibility of a seasoned expert with time to focus on the details. On the strategic side, that same expert can help the business owner benchmark their benefits offerings against competitors. While a small business may not be able to compete with a large corporation in some ways, offering the same or better benefits can make all the difference in winning an employee. Consulting with an expert who has a broad industry perspective makes this possible with less effort, stress, and research required by the owner.

Outsourced HR Cost Management

Outsourced HR cost management also manifests in several distinct ways. First, the services of HR outsourcing companies can be tailored to meet the company’s exact needs, and the expenses determined accordingly. HR outsourcing reduce costs at a great rate than hiring a dedicated internal human resources manager, without compromising on any of the benefits. Additionally, an outsourced HR consultant saves the business money by saving time and effort. Whether it’s streamlining the hiring and onboarding process to help the best candidates do a great job, or simply freeing up the owner’s time that is currently spent on HR functions, outsourcing HR can pay for itself in the long run.

Should a small business outsource HR? Absolutely. While the outsourcing partnership may help the company grow to a point where a dedicated internal human resources manager is needed, that individual may still want to outsource some elements like compliance or payroll. Establishing a long-term relationship with a human resources consultant allows them to get to know the business and make increasingly-beneficial recommendations for growth.

Evaluating HR Consulting Services for Small Business

Once a small business has decided to outsource some or all HR functions, there is the task of evaluating HR outsourcing companies. Here are some strategic questions to ask when evaluating a human resources consultant to determine if they will fit a company’s needs.

• How much experience do you have working with clients in my industry?
• Are you a certified human resources professional?
• What do you consider your strength among the many human resources functions?
• Will you be the only point-of-contact?
• Will you be the only one servicing my account? Do you hire third-parties to do work on your behalf?
• If I choose to hire internal HR staff down the line, will you be willing to help them become self-sufficient?
• How many clients do you work with at one time?
• Will you be willing to sign a letter of confidentiality?
• What software do you use? Will I have access to that software?
• What type of reporting will I receive, and how often?
• How are fees determined, and on what schedule will I pay you for services?
• Am I required to sign a contract?
• Can you provide any references?

These are just some of the questions that will help a small business owner determine if an HR outsourcing company is the right fit for them. While the ideal answers will differ for each company, knowing all this information will make both the practical and strategic elements of the relationship more transparent from the beginning.

Human Resource Outsourcing Examples for Small Business

Here are some human resource outsourcing examples that may make it easier to imagine how these services can transform life and accelerate growth at a small business.

• A sole proprietor wants to hire their first employees, but needs support creating an employee handbook that legally enforces the policies and company culture they want to see realized. They also need to ensure the salary and benefits packages they are offering are competitive enough to secure top talent. Working with an HR consultant, they are able to achieve these projects, as well as retain the consultant for a monthly fee to manage payroll.
• A small business owner is experiencing high employee turnover because two of the managers are hiring with different sets of expectations, and onboarding employees in different ways. Working with an outsourced recruiting and onboarding partner, they are able to unify the processes in a way that satisfies everyone’s needs. This arrangement simultaneously attracts better-quality candidates to the company’s open positions by more clearly communicating the organization’s values and expectations.
• Employee morale is low at a small business since employees went to a fully-remote work model. The business owner wants to better-engage employees but isn’t sure what approach will achieve an impact. HR outsourcing services lend perspective on what has worked for other companies in similar situations. HR professionals implementing a rewards and recognition program, as well as training offerings and increased internal communication, leads to improved productivity and better attitudes in the workplace.
• A business owner was excited by rising demands for their services and made many new hires in a short timeframe. Now, they find the employee files are a mess and payroll is taking twice as long as it used to. Plus, it seems like some new hires are thriving while others may be on the verge of quitting. Calling in an outsourced HR consultant relieves the business owner of the time-sink that is created by the increased operational work. The same consultant checks in with employees about their onboarding and is able to create a program to address knowledge gaps and make it easier to onboard employees in the future.

These are just some examples of how working with an outsourced HR provider makes the work of owning a small business less stressful. Feeling supported in the back office with business administration means business owners are free to get back in touch with the passion that inspired them to start the business to begin with.

Milestone Business Solutions: HR Services Tailor-Made for Small Businesses

Milestone Business Solutions is a small business serving other small businesses. We provide quality HR support services from payroll administration to a fractional CHRO. Like the business owners we work with, we are committed to forward-thinking problem solving that allows us to hang up our hats each day knowing we have made life for our clients a little easier than it was the day before. Honesty, integrity, and a firm code of ethics empower us to help each business owner meet their goals, on their terms. Each client we serve works with a single point-of-contact on our team for as long as they find value in the relationship. With no binding long-term contracts governing our business, it is our priority each day to win the trust of our clients all over again.

As a business owner, it is essential to surround yourself with smart people who are passionate about helping you grow your business. Contact Milestone today to meet the human resources consultants who can help you reimagine the back office from a blind spot into an asset with the best HR outsourcing services. Our HR outsourcing services cover all of your HR needs, from employee benefits administration, to payroll processesing, to finding the right employees, to onboarding them efficiently.