Managing Your HR: In-House vs Outsourcing HR

You have options when it comes to managing HR. You can take a do-it-yourself approach or hire someone internally to manage it. Or you can outsource HR to a partner to share the workload. Both options have their advantages and disadvantages.

As a business owner, you know that having employees comes with a host of responsibilities. There’s hiring, benefits, payroll, onboarding, and training, establishing a culture, and hiring and attracting top talent — you have your hands full.

These and other tasks fall under human resources. And when HR is managed smoothly, you and your staff can focus on your primary responsibilities to help the business grow.

Ideally, you would have a dedicated HR professional on staff — and possibly even a whole team to manage HR. But this isn’t always the case, especially in a smaller operation with limited resources. And even if you have an HR team, there could still be work that is particularly challenging and requires more time or expertise than the team has available, which means other high-value tasks could end up on the back burner.

Option One: Manage HR In-House

Many business owners either add HR duties to an existing employee’s role or hire someone to do it full time. But there’s also a third scenario, which is that business owners end up taking on HR themselves.

If you’re the person in charge of HR, you have to spend significant time on HR tasks instead of other high-value strategies and initiatives. Similarly, if another employee is handling HR, they have to split their time as well. But no matter who is managing HR in-house, all employee-related matters are solely the responsibility of your business.

Here’s what else to consider with HR if you’re the one managing it:

• Your can-do attitude can’t necessarily solve everything. Handling HR yourself may seem like a good idea…until it isn’t. If you run into a problem, suddenly you have to devote more time than you can realistically spare to take care of it. And that’s assuming that you have the right knowledge (or access to it) to solve the problem appropriately.
• You have less time to be strategic. As the business owner, you know what it’s like to wear many hats, especially when first starting the business. But if you’re continuing to manage HR alone, this leaves you with far less capacity to focus on the strategies, initiatives, and goals that will help your business succeed and be more competitive.
• The risk is entirely yours. All the employee-related liability and compliance concerns you can imagine are one hundred percent yours and yours alone. And the impact can be significant. The cost of litigation for small businesses can range anywhere from $3,000 to $150,000. The stakes are simply too high if you’re not well-versed in employer laws and HR rules.
• The work is never-ending. As you grow and hire additional employees, employer laws and regulations change. And with each employee that leaves or joins your team, you’ll have to adjust HR policies to handle a termination, onboarding, and benefits.

If you’re still at a manageable size, handling your HR internally is certainly an option. However, if you’re growing beyond five to ten employees, you might consider outsourcing your HR to a local partner. Some HR tasks waste time better spent on other business activities.

Option Two: Outsource HR to a Local HR Partner

There are several signs your business is ready to outsource HR. If you’re new to the idea of outsourcing, think of it like this: Instead of managing all your HR in-house, you can contract with a third-party organization to handle certain functions and tasks for you. Outsourcing gives you access to specialized talent and experts to round out your HR needs — at a lower cost than if you were to hire for multiple HR roles internally.

A dedicated, local HR partner has the experience and expertise on hand to make sure your employees are cared for and compensated, your staffing needs are addressed, and your workplace challenges are resolved. They can also help ensure your business stays updated and compliant with changing regulations. And even if you have a well-equipped, internal HR team, you can still offload and consolidate many HR tasks to your partner so that everyone in your business can become more strategic in their focus.

Here’s what else to consider with outsourcing HR:

• The size of your business doesn’t matter. Whether you’re a two-person startup or a small to mid-sized business, outsourcing HR can be beneficial. To grow your business, you need to be able to delegate certain day-to-day tasks and challenges to the people who are best suited for them. This is an especially powerful approach if you’re a smaller operation with limited staff and resources.
• Your critical, but non-core work gets done. Services like IT, legal, and accounting are critical to your business, but they may not be your core work. The same is true for HR. When you outsource HR and other critical but tactical functions to the experts, you’re freeing up your time and your staff’s time. This time can be used to perform the core work of your business and strategically help your business grow.
• The cost of employee benefits is lower. Outsourcing to an HR partner eliminates the time you’d spend putting together and managing an employee benefits package. But it also rewards you with a lower cost of benefits — and often better benefits. An HR partner can do the research and heavy lifting for you while providing a group discount that you wouldn’t necessarily have access to on your own.
• Your administrative burden is reduced. Many of your back-office functions like payroll, benefits, and workers’ compensation claims require a lot of time, patience, and skill to manage — not to mention the right technology to help automate them and reduce paperwork. Outsourcing a portion or all of these HR-related functions to a partner helps relieve the administrative burden.
• You can still be a people person. When you outsource many of your HR tasks and functions, it doesn’t mean that there’s never any person-to-person interaction at your business. You can still enlist someone internally — whether it’s you or another employee — to handle the fun people-focused work of HR without the administrative load.

There is a big difference between outsourcing HR workload to the experts and having to be an expert yourself. But when you work with an HR partner with specialized knowledge in multiple areas, you can avoid headaches, mitigate risks, and save costs. You and your staff can also focus your time and energy on the high-value tasks that drive revenue and business growth. If you’re ready to outsource HR activities, reach out to us. If you want to learn more, download our guide on the three key benefits of outsourcing HR.