September 11th, 2023

3 HR Services Small Businesses Should Outsource

When it comes to outsourcing for small businesses, HR functions aren’t usually the first that come to mind. Business owners think they can handle HR support themselves—or they have one of their team members essentially become the “HR department” on top of other job duties. But this approach only works for so long.

To provide the appropriate level of HR expertise and cultivate a healthy company culture, small business owners need to hire an internal HR team or invest in HR outsourcing services. And oftentimes with the limited budgets and bandwidth of small businesses, outsourcing HR is the smart decision.

Benefits of Outsourcing

To stay on top of all of the duties that come with running a growing business, employers have to outsource business functions at some point or another. The most common functions a company outsources are IT, accounting and finance, legal support, and marketing.

Outsourcing business functions provides many advantages from controlling and reducing costs, to increasing efficiency, to reducing risk. Harvard Business Review reports businesses can reduce costs by 20-30% by outsourcing non-core business functions.

As a result, outsourcing is growing as a means of competitive advantage—PRNewswire reports that 80% of small businesses plan to outsource some form of business in 2021. Most importantly, outsourcing helps company leaders focus on growing their business and not just running it.

So here are three HR services for small businesses that—when outsourced—provide the greatest benefit to your bottom line.

Benefits of Small Business HR Outsourcing

What can you expect from an HR outsourcing service? Virtually every organization needs an HR department, yet HR is often overlooked as an outsourcing candidate. found that businesses save an average of 27.2% of costs by using an HR outsourcing company.

Here are some benefits that you can expect from HR outsourcing services for small businesses.

Reduce Administrative Costs

The up-front costs of hiring a professional employer organization (PEO) company that can scale with your company is negligible compared to growing an HR department internally. That’s right–PEO services bring to the table HR professionals whose expertise can match the growth stages of your company and adjust with your company as it grows.

Speed Up and Streamline Employee Onboarding

A strong onboarding process significantly increases employee retention, satisfaction, and ultimately improved productivity. PEO services manage everything from new hire paperwork, applicant tracking, HR policies, compliance and procedures, benefits administration and more.

Improve Business Efficiency

The most important benefit of HR outsourcing is that it gives time back to company leaders so they can focus on growing their business and not just running it. Rather than spending time on daily tasks such as payroll processing, human resources functions, or anything in-between, time can be spent on company strategy and forecasting.

3 HR Services for Small Businesses that Should be Outsourced

1. Payroll Services

Payroll is actually one of the first business functions a small company decides to outsource for several reasons: it’s time-consuming, it gets complicated, and you risk running into compliance issues if it’s not set up properly. Many HR compliance issues small businesses face start with payroll errors.

The benefits of payroll services for small businesses beyond saving time and reducing risk is that they’re scalable. As your business grows, your payroll costs usually decline. So not only are payroll services the first thing you should outsource, they’re usually the last thing you should worry about running in-house.

2. Benefits Administration

Benefits administration is another business area that takes up valuable time and resources. Further, benefits pose a challenge to businesses because of the cost to provide them.

Not every small business will be able to provide employee benefits like healthcare insurance to their workers until they reach the required size of 50 employees. In fact, due to the rising cost of healthcare premiums, only 30% of organizations with fewer than 50 people offer group health insurance.

But healthcare is by far the most desirable and expected benefit for employers to offer. When you choose to outsource HR services, access to better more affordable healthcare and benefits comes with it. An HR partner can use their buying power to provide large group plans to smaller businesses—providing you with quality benefits at a manageable cost.

3. HR Compliance 

Business owners are all too familiar with the stress of maintaining compliance with new employment laws and regulations—especially here in Colorado. What companies may not know is that the best HR outsourcing services from the right HR partner can come with HR compliance support.

You can share legal responsibilities when you outsource HR services, which means instead of having to rely solely on your judgment or your staff’s, you can get help and guidance from your partner’s legal and compliance experts. With this strategy, outsourcing helps your business stay fully compliant with federal, state, and local labor laws and reduces your liability.

Ready for HR Services for Your Small Businesses?

Obsidian HR can provide a variety of outsourcing HR services for small businesses—including payroll, benefits administrative tasks, and HR compliance support. We also help with workplace safety and workers’ compensation and other valuable HR services. We’re here to alleviate the burden of HR so small to medium-sized businesses can focus on growing their business.

Reach out to one of our team members to learn more or download our guide and see how we can help improve the efficiency and effectiveness of your HR. We’re ready to be your dedicated HR outsourcing provider.

Download Our Guide: Improve the Efficiency and Effectiveness of Your HR

Learn how using an HR partner as an extension of your business or HR professional team can make your HR strategy and company more successful.

Download Our Guide: Improve the Efficiency and Effectiveness of Your HR

Learn how using an HR partner as an extension of your business or HR team can make your HR strategy and company more successful. 

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