Outsourced HR for Startups

Outsourced HR for Startups

Outsourced HR for startups can provide a valuable competitive edge. By working with experts to carry out essential back office functions, your team can focus on providing best-in-industry results for your customers.

In this guide, we’ll explore answers to many pressing questions, such as:

• What does it mean to outsource HR functions?
• What are the advantages and disadvantages of outsourcing HR functions?
• How do I find the best HR outsourcing companies near me?

Let’s get started.

What Is an HR Outsourcing Company?

An HR outsourcing company (or a fractional HR company) provides high-quality human resources services for businesses that would benefit from less overhead and expert HR professionals. Rather than hire an in-house team to handle crucial tasks like recruitment and benefits management, startups and small businesses can work with an external service provider.

In the case of HR outsourcing, “outsourcing” simply refers to hiring a team from a third-party provider instead of building and maintaining an in-house HR department. Sometimes, “outsourcing” comes with a tarnished reputation, as the term can be associated with moving jobs overseas and receiving lower-quality services. With outsourced HR services, this isn’t the case. Think of it like hiring a roofer to fix your house. You wouldn’t hire them to stay in your home all year waiting around for leaks, right? The same can be true for HR services.

In other words, HR outsourcing companies make it possible for startups and small businesses to pay for only what they need—no more, no less. And in the case of Milestone, your expert HR partners are based right here in the USA.

What Do HR Outsourcing Companies Do?

HR outsourcing companies take the burden of managing essential human resources of your team—without sacrificing quality! In fact, working with an HR outsourcing company like Milestone can actually increase performance. Why? Because third-party HR service providers are focused strictly on human resources. Their experts bring experience from a wide variety of businesses and industries, which makes these services perfect for startups who want to catch up in a competitive market. 

Sounds great, right? We think so, too. Take a look at some key HR outsourcing services that HR outsourcing companies can provide:

Managing Day-To-Day Administrative Complexities. 

Startups need to ensure that they’re in compliance with local and state labor laws. Staying on top of these laws—all while running essential business functions—is far more work than a single full-time job. Outsourced HR services can help your business do it all.

Milestone’s monthly HR support services can include handling:

• Employee onboarding and offboarding
• Employee/owner relations
• Exit interviews
• Handbook development and delivery
• HR compliance monitoring
• Benefits, continuation of health benefits (COBRA), 401k, and leave administration
• Unemployment claim administration
• Annual personnel file audits and maintenance
• Labor law postings
• Performance review coordination
• Employee engagement surveys
• Stay interviews
• New manager playbook
• Quarterly business reviews

Overhauling Functional Areas and Pushing Specific Initiatives Across Exciting Finish Lines.

Startups are growth-oriented, but did you know that HR services are essential to any business’s expansion goals? Finding the right people for your team and creating a culture in which they thrive is non-optional. Trust an outsourced HR company to ensure you hit the ground running.

Milestone’s strategic HR initiatives can include handling:

• Total rewards and compensation management
• Top talent acquisition and retention
• Team member assessments
• Learning and development initiatives
• PEO unbundling
• Company culture and employee engagement

Processing Payroll—Error Free.

Money makes the world go ‘round, and for startups, money is a key component to attracting and retaining top talent. In fact, Startup Search reports that salaries for startup employees and Big Tech employees are closer than many think. Outsourced HR services can ensure your employees are paid on time with no hiccups—as they should be.

Milestone’s payroll services can include:

• Payroll administration
• State and local registrations
• System selection and implementation

The list of what outsourced HR companies can do is lengthy because HR departments need to do a lot to keep businesses running smoothly. If your startup or small business could use some help checking off any or all of the HR essentials, reach out to our team of experts.

What Is an Example of HR Outsourcing?

One example of how a startup can use HR outsourcing is by trusting a third-party provider to handle all of their HR needs. However, this isn’t the only option. Companies that outsource HR for startups can also supplement their current team. Do you need some assistance with onboarding employees? Outsourced HR companies (like Milestone) can help. Need an overhaul to your payroll system? We can help with that, too—and so much more!

For a better idea of just how impactful fractional HR services can be, check out these inspiring HR outsourcing examples:

Milestone Brings Back Office Synergy to Jackrabbit Learning Experience

Jackrabbit LX delivers extraordinary educational experiences for a wide variety of industries to benefit both employees and students. To manage back-office operations, like payroll and managing employee onboarding and benefits, Jackrabbit relied on freelancers to supplement their highly focused team.

However, this business found that their back-office setup had too many silos. Rather than focusing on fulfilling billable hours and delivering the best service possible, Jackrabbit’s leaders had to spend extra time sorting out communication and ensuring that essential tasks were completed.

Then Jackrabbit LX partnered with Milestone with the goal of breaking down silos between important functions. Milestone provided HR, payroll, accounting, and fractional CFO services to improve communication and efficiency.

The result? Jackrabbit’s team has more time and energy to do what they do best—providing exciting educational experiences for their clients. 

Read the full case study and watch the client testimonial here.

Milestone’s HR Function Brings Continuity to Base, Allowing the Company To Grow Quickly and Globally

Base provides a platform for leaders to hire executive assistants without the hassle of the traditional hiring process. While they found success with their service, Base’s growth goals were limited by a “cobbled together” HR system and the complications of a recent acquisition.

Base partnered with Milestone to deliver HR services that are both cohesive and scalable. This partnership has resulted in the recruitment of top talent combined with internal systems changes that have equipped Base for its exciting global growth.

Discover even more benefits of working with an outsourced HR company by reading the full case study or watching the client testimonial here.

Curious to see how your company could benefit from partial or fully outsourced HR services? Contact us to learn more about which services would be best for you!

Why Do Companies Do HR Outsourcing?

Companies need outsourced HR for startups for two key reasons:

• HR services, like employee onboarding and retention, are essential to the successful operations of any business.
• In-house HR teams require overhead that can strain your internal resources.

The importance of HR outsourcing is that you can lower your overhead without sacrificing the quality of your HR system. In fact, you could even improve your HR functionality by partnering with a third-party provider like Milestone.

Here are some of the key benefits of outsourced HR services for startups:

• Remain compliant with local, state, and federal labor laws.
• Attract and retain top talent.
• Onboard new employees and bring them to max bandwidth more quickly.
• Increase efficiency and results by focusing on key value offerings rather than back-office tasks.
• Improve employee engagement and satisfaction.
• Create scalable back office systems that can grow quickly with your company.
• Manage various compensation packages and payroll needs.

One of the key benefits of working with an outsourced HR provider is that they come ready to navigate the difficult landscape of startup salaries and compensation. Founders Network reports that equity or stock options are an expected piece of compensation packages. Top talent will not only expect competitive salaries, but they’ll also want a stake in the company to maximize their earning potential. Outsourced HR teams know how to balance salaries, stock options, and other packages to attract top-notch team members without breaking your startup’s budget. 

Is It Cheaper To Outsource HR?

In many cases, it can be cheaper to outsource part or all of your HR needs rather than having an in-house team handle all of your back-office tasks. This is because when you outsource HR tasks, you only pay for what you actually use. Instead of budgeting for employees who will be on your payroll 40 hours a week and 52 weeks a year, your company can budget on a project-by-project basis.

For example, if your startup is ramping up for a growth phase, you’ll likely need more employees. To ensure you connect with the best and brightest in your industry, you’ll want HR professionals who are dedicated to your recruitment needs. To quickly bolster your hiring and onboarding efforts, you can partner with an outsourced HR provider whose team will be able to hit the ground running. Then, once you’ve grown and trained your team, you can scale back your recruitment efforts and reallocate your resources to other pressing initiatives.

Remember our roofing example from earlier? It’s not cost-effective to hire someone full-time when their workload will have to go through slow periods. It’s the same idea when it comes to ordering food versus hiring a personal live-in chef. With outsourced HR, you can have your cake and eat it, too!

Is Outsourcing HR a Good Idea?

Whether outsourcing HR is a good idea or not depends on your current business situation and forecasts for the future. One good place to start your evaluation is to see whether or not your startup could use any of the following benefits of HR outsourcing:

• More time for your organization’s core functions. Let’s face it; you didn’t start a business to obsess over back-office functions. Even if you created a groundbreaking software platform that revolutionizes HR departments, you’d rather spend your time helping other businesses manage human resources instead of stressing over your own HR tasks. Outsourced HR services alleviate this burden so you can put more energy into providing excellent service for your customers while planning the best path forward.
• Better compliance with local, state, and federal regulations. Laws change, and it can take a lot of resources to keep up. However, the consequences of falling behind are severe. Take Hampton Creek’s backorder violation, for example. As reported by Fortune, this vegan-food company instructed employees to buy significant quantities of their products to artificially bump sales numbers. Doing so was not covered by buyback regulations for quality control, and the reporting of the scheme led to a slew of bad press and negative public reception. Outsourced HR companies stay up-to-date on regulations across a variety of industries so they can act as a firewall against illegal or unethical business decisions.
• Experience innovating across industries and business models. Outsourced HR services are the Swiss army knives of your back office. They have a tool for nearly every situation because they’ve seen it—or something close to it—before. In a market as saturated and volatile as the one startups compete in, every ounce of extra knowledge adds up to a competitive advantage. If a back office team that sees the bigger picture is something your business could benefit from, it’s time to strongly consider partnering with an outsourced HR services provider.

Reach out to learn more about how your startup can benefit from a ready-to-go back-office team. 

What HR Processes Can Be Outsourced?

The types of HR outsourcing that can be outsourced are:

• Employee Recruitment: Appeal to, connect with, and sign top talent in your industry.
• New Hire Onboarding: Minimize ramp-up time for new employees to reach their full potential.
• Compensation and Benefits Packages Management: Reward your team members for their contributions without straining your resources.
• Performance Management: Ensure that leadership and team members are on the same page when it comes to what’s working, what’s not, and what needs to change for each party to be successful in the future.
• Learning and Development: Keep your team up-to-date with new technology, industry trends, compliance requirements, and security measures. 
• Information Management and Documentation: Prepare for audits and stakeholder interactions with detailed records.
• Succession Planning: Ensure that your team won’t miss a beat, even as experienced members leave and new ones join.
• Data and Analytics: Monitor organizational trends to identify areas of improvement in key metrics such as employee engagement and retention.

One of the best qualities of outsourced HR services is that you can pick and choose which services you need. In other words, these services are entirely customizable to your business.

What HR Functions Should Not Be Outsourced?

While there aren’t any HR functions that should never be outsourced, there are a few that should be outsourced with more guidance than others. For example, internal stakeholders may want to play an involved role in a function like succession management. The reason for this is that internal stakeholders will have more information on what your business needs during this process. However, as you partner with an outsourced HR services provider, you’ll be able to delegate more and more tasks to these partners. It’s important to note that some tasks, like making final hiring and firing decisions, should still be completed with input from relevant stakeholders. 

Why Is Outsourcing Good for Small Businesses?

The primary reason why outsourcing HR is good for small businesses is that it allows them to utilize experts without taking on excessive overhead costs. This allows small businesses to focus more on providing value to their customers while retaining more resources to reinvest in their products or services. 

What Are the Disadvantages of HR Outsourcing?

There are several risks associated with outsourcing any essential roles, including HR, such as:

• Limited Control
• Culture Changes
• Process Shifts

Fortunately, these disadvantages can also work in your business’s favor—if you partner with an effective HR services provider. For example, when you first partner with an external provider, you may feel as though you’re losing control over a department of your business. However, by delegating certain HR tasks, you can actually gain more control over your business because you’ll have more time and resources to focus on the future instead of back-office tasks.

When it comes to cultural changes and process shifts, these adjustments are necessary. While they can be uncomfortable, reputable HR service providers will work to ease your team into these transitions. 

How Do You Choose HR Outsourcing Services?

To get the most out of outsourced HR services, find a provider that offers:

• No long-term contracts
• Transparency on scope and pricing
• Tailored approach to your business’s needs

Not sure where to start? Milestone has you covered. Give us a call to learn more.

Turn HR into a Competitive Edge with Milestone

When you think of HR functions, do you think of leaving your competitors in the dust? Probably not. While HR departments don’t get flashy results like sales teams or product engineers, they’re just as essential to a startup’s success. With an outsourced HR partner, your startup will be able to operate more efficiently, recruit and retain star employees, and navigate complex legal barriers. It all adds up to a leaner and more effective operation.

Searching for “the best outsource HR for startups near me”? Start with Milestone. Contact us today to learn more.