The Pros and Cons of Outsourcing HR for Small Businesses in 2020

by
Operations
January 24 |

Often small businesses have limited time and resources. The time spent on administration could be used to do other tasks that could be more beneficial for you and your business. Outsourcing human resources functions will help you run and manage your business smoothly and save you a lot of time.

An HR outsourcing service can manage the whole human resources department for you, from managing payroll and processing benefits, hiring and recruiting, training and more. You’ll have extra time to focus on the company’s marketing and objectives. Some companies even outsource various areas of HR that demand risk management because they need constant updates and knowledge of the risks that a company could potentially face.

Before you decide on HR resourcing, we will list the pros and cons of outsourcing HR for your small business in 2020. However, when you opt to outsource HR, make sure the outsourcing company will work with you and is prepared to deliver services that are easy to use and approachable for all your employees.

The Advantages of Outsourcing

Understanding the benefits of outsourcing human resources will help you decide if this is something that could help your small business.

1. You Only Hire the Employees You Need

When you decide to outsource, you can pay an employee as a contractor. This will prevent you from bringing unnecessary employees into the company, which helps save money on training and benefits. The HR outsourcing company will assist with the recruitment process so you won’t have to spend extra time evaluating and interviewing candidates. And you don’t have to manage your employees on a day to day basis because they will manage them for you.

2. Lower Labor Cost

Every organization has its reasons for outsourcing, and one of the top reasons is because they’re trying to lower labor costs. No businesses would want to trade quality for a cheap price, but when you choose to outsource, you get to find the right employee you need for your business at the right price. Outsourcing is much cheaper than having in-house HR departments. The in-house HR employee must be paid a salary, benefits and incentives that you have to add to the company’s expenses. Most HR outsource companies will have customized fees based on your business’s needs and you don’t have to pay unnecessary fees for something that you are not going to need.

3. Access to a Larger Talent Pool

When looking for the ideal candidate to work for your company, you often have to compromise because you only have access to a small, local talent pool. Many small businesses have found that outsourcing allows them to reach more potential candidates even from other parts of the world and at lower hourly rates.

4.Skills and Knowledge

An HR specialist company will ensure they have fully trained experts with in-depth knowledge of handling HR. The specialist will understand employment laws and regulations. In-house personnel may not have as good an understanding as a specialist.

Some employment regulation changes are made each year regarding matters such as taxes, safety violations and healthcare. The HR specialist will stay up to date on the changes, understand more about legal compliance, and ensure the company complies.

Cons of Outsourcing

Despite the many benefits of outsourcing HR, you might want to consider these potential disadvantages:

1. You Have Less Control

When you outsource, you give up some control and many business owners who are used to managing their company find it difficult to do so. Of course you can provide direction but it’s hard to keep track all the time as you’re not communicating with these contractors on a daily basis. An HR specialist may have other clients and it’s impossible for them to talk to you everyday.

2.Distance

Choosing offsite HR professionals to manage everything HR related in your company will make it hard for employees to communicate with them. They might be late in replying to emails and if there are sensitive matters to talk about, they might prefer not to do it on the phone. An in-house Human Resources Department will always be there for them in person.

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