payroll-banner-img

PROSERVICE BLOG

Should Your Business Outsource HR or Keep it In-house?

by Jody Aadland | March 5, 2019

Before we dig in to the debate, let’s quickly define what goes into HR, or Human Resources. Essentially, HR is anything and everything that relates to the management of your people. It involves recruiting and hiring new employees, assessing, managing and motivating existing ones, paying people on time, thinking through workplace safety, and adhering to labor laws too—to simply name a few things.

Did we mention admin and paperwork too? There’s plenty of that to go around also.

When it comes to HR management and the responsibilities of having employees,you generally have two options: you can grow your HR team internally, or you can share the workload with an HR partner through a strategy we call outsourcing.

Let's take a look at these two options. 


Option 1: DIY in-house

Handling all of your HR in-house is certainly an option—whether you take it on yourself, add HR duties to an existing employee’s role, or hire a HR specialist to tackle it full-time.

Choosing the do-it-yourself path gives you total responsibility over how you stay compliant, compensate your employees, offer benefits, and take care of your team.

DIY in-house also means a few other things worth noting:

  • A single source of talent. If you decide to handle things in-house, your business’s HR capacity and expertise is then limited to the specific professional or professionals you hire.That is, once you’re able to find excellent talent to join your team (remember Hawaii’s unemployment is at a record low).
  • You own all the risk. HR compliance? Payroll liability? Employment-related claims liability? When you take things in-house, you become 100% responsible for all these liabilities. According to the Small Business Association, the average cost of an employee-related lawsuit in the United States is $150,000. When the stakes are this high, you want to be sure you (or someone on your team) knows the ins-and-outs of employer laws and HR rules.
  • It’s a good idea, until it’s not. Handling everything in-house may seem like a good idea until you run into a problem. Think of it like this: We’ve all seen a home remodel show or two. A DIY kitchen remodel can seem like a fantastic idea, and it might even kickoff smoothly—until you run into a problem with your drywall seams, and the impact is costly. The same thing applies to HR.
  • It’s an added cost. If you choose to hire a dedicated HR pro, there’s the added cost of their wages. According  to PayScale, HR managers in Honolulu earn ~$64,000 per year. But don’t get us wrong here: We 100%believe in the value of having a dedicated HR pro on your team if you have the means. The key is to make sure they have time to add value to your business and your people—rather than juggling all your back-office HR admin work instead.

Option 2: Share the workload with an HR partner
Another option is to outsource a portion of your work to a local HR partner. While you still need someone internally to do the face-to-face, people-work of HR, an outside partner can help you with certain back-office HR functions like payroll, benefits, workers’ compensation claims, compliance, and a variety of other HR tasks.

If you’re new to the concept, outsourcing is simply when you contract certain functions and tasks that you previously performed internally, to an outside, independent organization. It’s a strategy that can give you access to a greater pool of specialized talent at lower costs.

But who is it for? And what kinds of things should you outsource?

Here are two things you should consider:

  • It’s for your non-core work. You may already be familiar with outsourcing when you think about certain non-core areas of your business that you already send out-of-house, e.g. IT, legal, or accounting. HR belongs in that category of outsourcing potential too. If your product or service isn't HR services itself, why spend large amounts of your time managing HR tasks when you could focus on growing your business instead?
  • Your size doesn’t matter. Outsourcing is not just for big businesses—it’s also for the little guys too (whether you’re a small or mid-sized business, or even a startup with one employee). In fact, outsourcing can be an especially powerful strategy for smaller operations. After all, the only way to grow or manage certain day-to-day challenges is through delegation.

Still weighing your options? Download our free ebook to learn more about the three big benefits of HR outsourcing & partnerships in Hawaii. 

 

Jody Aadland

ABOUT THE AUTHOR

Jody has over 5 years of HR experience in the PEO industry in Hawaii. His areas of expertise include HR strategy, employee healthcare, HR compliance, and employee retention.

LEAVE A COMMENT

Your email address will not be published. Required fields are marked *