By Randy Stollar
At some point in the lifecycle of a business, especially when it grows large enough, it needs people to take care of its people. But how do you know when the time is right? And just as important, how do you decide whether to hire an internal HR professional (or staff) or consider HR outsourcing?
Although there are theories and common guidelines that offer answers to both of these questions, every business is unique and should, therefore, consider factors such as company culture (or your culture strategy), the costs and benefits of internal or outsourced HR, and the growth stage of the organization.
An effective HR function is multi-faceted and takes responsibility for recruitment and onboarding, compensation and benefits administration (and oftentimes payroll), training and development, employee retention, compliance with employment laws, employee health and safety, and communications across the organization. And they need to do all of these things while successfully balancing the needs of employees with the market-driven needs of the business.
New and/or smaller companies—with generally fewer than 50 employees—need to focus on key activities like product development, customer and investor relations, and overall business development. Understandably, these organizations don’t have the time nor expertise to effectively manage all of the HR-related needs and responsibilities. Companies in this growth state can significantly benefit from outsourcing most if not all of their HR functions.
Mid-size organizations of 50 to 200 employees, especially those that are multi-state, should consider having an in-house HR function, even if only one individual who is responsible for managing the fundamental HR activities along with other operational duties. Companies in this growth stage typically augment their internal HR function with an outsourced HR consultant or Professional Employer Organization (PEO) that offers services and solutions for payroll, benefits, wage and hour issues and compensation, worker’s comp, and legal compliance.
Larger companies tend to keep their HR functions in-house as a competitive advantage, but even organizations with over 500 employees often use outsourcing as a key element in staffing a strategic HR function. The benefits to outsourcing can include enabling the in-house HR team to focus on more strategic HR activities, reducing overall HR costs, and jump-starting best practices that would take significantly longer if started internally.
To ensure the right HR service delivery model, organizations need to first identify their people-related business challenges and take into account the employee experience. Three signs that HR outsourcing is right for your business are: 1) your organization is growing, (2) you’re having difficulty staying on top of new state and federal employment laws, and (3) you’re struggling to attract and retain talent. HR outsourcing can deliver tangible business benefits such as increased productivity, lower labor costs, access to best practices and resources, and reduced risk and liability.
Our HR Consultants are well positioned to help all size companies evaluate and recommend an HR support model aligned to their business strategy and culture.