"Time is more valuable than money," Jim Rohn said. "You can get more money, but you cannot get more time." One of the smartest things you can do as a small-business owner is to analyze the time you waste on non-revenue generating activities.
The easiest and most urgent one to deal with is likely the time you spend on HR-related functions. Do you spend precious time handling payroll and compensation issues; processing benefits; administering vacation, sick and other leave time; keeping up on knowledge of regulatory compliance; data-crunching; record-keeping; auditing and other such time-consuming tasks? Then it might be time for you to consider outsourcing HR functions.
This can free up your time to focus on money-generating activities, such as paying more attention to client needs and requests, improving the quality of your products and services, and engaging more in marketing activities that pay off. Think about what you can do with the time you save to devote more care to other parts of your business, like sending out newsletters, posting on social media and updating your blog more regularly. How about networking activities to generate sales and bring in more new business? By eliminating time-consuming activities that adversely affect your bottom line, you can focus on those activities that can bring in new business and increase your profits.
Research by The National Association of Professional Employer Organizations shows small businesses that use Professional Employer Organizations (PEOs) grow faster than those that don't. Since 2010, employment growth among clients of these companies has been 9 percent higher than other small businesses and 4 percent higher than employment growth in the U.S. economy overall.
HR Outsourcing Tips
If you decide to outsource your HR function, here are some tips to keep in mind:
- Hire a reliable provider who is an accredited PEO. Confirming that a PEO is accredited could save you time in your due diligence process, as there are at least 1,800 to choose from in the U.S.
- If you don't hire an accredited PEO, make sure you vet them. For example, ask about the credentials of the firm's staff and get referrals from long-term clients.
- Have a solid service-level agreement in place. The Outsourcing Center provides a sample of key items that should be considered in an effective service-level agreement.
- Spend more time than you think necessary to choose the right provider at the outset, as changing vendors later can be cumbersome and time-consuming.
- Create a list of important questions you need to ask. For example, does the outsourcing firm have a help desk that employees can access? Is the help desk available after hours? What security provisions does the company have to protect employee confidential information? Can the reports they provide be modified to your specific requirements?
- Make sure there is a cancellation clause that works for you. Even if you're dealing with a known entity, what happens if that company is acquired by a vendor you had previously rejected because of management style, customer service attitude, geographic location or other factors?
- While most companies may outsource their HR needs to a single outsourcing provider, consider using several outside providers for a range of functions. You can also choose to outsource your HR functions either partially or completely.
- When evaluating a prospective vendor, check out the extra level of support they provide such as online resources. Busy employees appreciate having access to online videos, webinars, articles and answers to their FAQ that they can access at any time.
- Find out if the company has a globalization strategy should you expand globally in the future. If you end up having offices outside the U.S., it may be more efficient to keep all your HR processes in one place.
- Choose a payment option that works best for you in the long run. A good PEO provides an option to either charge a per employee flat fee, or a fee based on a percentage of the total payroll for each pay period. Choosing the first option may help you make your costs more predictable.
- You are not too small to consider a PEO. These firms provide a virtual HR department for early-stage companies with as little as one to 10 employees and growing companies with 10 to 200 or more employees.
- The cost of outsourcing to a PEO is generally less than the cost of doing everything yourself in-house. At the very least, it would be equivalent to the cost of doing it yourself. Only in a small percentage of cases do outsourcing costs exceed the costs of keeping all HR functions in-house. But bear in mind the savings that come from redeploying your time and that of other talent in your company, and the savings of potential employee lawsuits, fines and penalties.
As Peter Drucker sagely put it, "to spend up to one quarter of one's time on employment-related paperwork is indeed a waste of precious, expensive, scarce resources." Free yourself and your managers from these routine chores of employee relations and focus on your customers and markets. It's a smart move.
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