Navigating the realm of human resources can be difficult, particularly for small businesses. Lacking many of the resources larger companies have and with plenty of operational pressures to attend to, small business owners sometimes push HR to a back burner.
Unfortunately, making HR a secondary consideration will, in the long run, weigh down a company with unaddressed issues and demands – everything from HR compliance questions to skyrocketing health benefit costs to challenges handling unexpected employee requests for extended leave or special accommodations.
The other common response to HR issues in a small company is entrepreneurs who try to take the demands on themselves. These business owners may not trust their team members to handle certain jobs, may feel they are the only ones capable of accomplishing HR tasks or may believe HR, like virtually everything else about running the company, is their responsibility. But they rarely have the time or training to handle all aspects of the discipline well, and loading HR responsibilities onto an already-full schedule leads to burnout.
While you may not be running a struggling business per se, delegating HR can be key to greater success – and can positively affect other aspects of the business, too, by returning to you the time and energy that HR tasks have been consuming.
When should you outsource HR to a PEO? Three areas of struggle are evidence that it’s time to do exactly that.
1. Time and Expertise Struggles
Business Growth Is Stagnant or Moving Backward
Depending on the size of your company and how many employees it has, you or someone you designate to handle human resources can spend hours every week just on administrative tasks. Other periodic demands – meeting compliance deadlines, interviewing and hiring for an open position and annual benefits enrollment, for instance – escalate the time demands even more.
For your company to grow and thrive, you need adequate time available to devote to financial management, sales, operations and product or service development. When you offload employee relations and engagement, payroll, benefits, HR strategy development and other responsibilities to a PEO, you add hours to your weekly schedule.
HR Paperwork Is Piling Up
Pretty much anything that has to do with your employees, from leave-taking to insurance issues to onboarding, will have some form of paperwork attached. Since your job is running the company, do you really have the time or desire to be mired in mountains of papers? The odds are the answer is no.
A wonderful result of enlisting the services of a PEO is that its professionals are on top of that paperwork on your behalf. Not only will a PEO partnership clear stacks of paper off your desk, but the PEO’s professionals also understand employment regulations and HR best practices. Whatever HR issues your company encounters, the PEO’s team can manage the paperwork – and every other detail, too.
It Seems Impossible to Stay on Top of Payroll Issues
Payroll is an ongoing demand, and the tax reporting associated with payroll can be confusing and complex. Payroll errors can occur when the people handling this task aren’t fully knowledgeable about how to carry out their duties. It’s easy to make mistakes without meaning to, and payroll errors can be costly.
Although many small businesses handle payroll internally, it’s actually a risky practice that leaves the company open to fines and penalties, financial misconduct, security concerns and litigation. A PEO relationship eliminates those risks – and provides benefits in the form of streamlined processes, tight data security and accurate, on-time payroll tax reporting.
2. Employee Relations and Hiring Struggles
You Are Losing Top Talent to Your Competitors
Especially now, with a labor crunch gripping the nation, people searching for new jobs have more options and can afford to be choosier than they were a few years ago. This means they are demanding more from prospective employers. The decision to accept a job offer is not just about the salary or the position's responsibilities. Job candidates also are comparing benefits and company cultures.
How do your benefits compare to those of other companies in your industry? Does your company offer an attractive package that will appeal to well-qualified applicants? A PEO partner can help you understand what top talent wants, how your benefits match up, and if needed, how to enhance your benefits package. The PEO can even research and deliver benefits options that fit your company’s needs, negotiate with providers on your behalf and help you implement a benefits package that will attract your industry’s best and brightest.
Organizations that don’t facilitate company culture run the risk of losing their company culture altogether, especially as they grow. HR professionals at a PEO can help you evaluate your business culture and develop strategies to improve employee morale.
You Aren’t Sure Whether Employees Are Hitting Key Performance Metrics
Productivity is central for any business, but smaller companies particularly depend on high individual output from each team member. Yet, in the busyness of running a company, it can be easy to miss where an employee is underperforming or how that employee might be hurting the company rather than helping it.
Formal employee reviews, coupled with managers providing employees with regular, constructive feedback, help small businesses identify and correct low performance – but only if they’re executed correctly.
If you haven’t established a review and feedback process or the one you have in place isn’t providing the information you need to evaluate and improve employee performance, a PEO partner can help you put more effective employee review systems in place. This enables you to identify where an employee may have skills, knowledge or other gaps so you can take corrective action.
Employee engagement refers to the practical and emotional commitment employees have to their positions and employers. A simpler explanation is that employee engagement equals how aligned workers feel with their companies.
Just how important is employee engagement? Consider these statistics:
Employees can disengage at work for multiple reasons: losing trust in senior management, not being involved in compelling projects that fit their skills and interests, not understanding how their work contributes to the company’s success or disharmony with colleagues, to name a few. Whatever the reason, that lack of engagement affects productivity, morale, and ultimately, retention rates.
Small and mid-sized businesses must offer attractive benefits to compete for talent. The challenge is that health insurance and other benefit costs have increased so much that SMBs may have a hard time affording benefits that appeal to employees and top job candidates.
Insurers routinely offer volume discounts to large employers that smaller companies can’t access simply because their employee groups aren’t big enough to qualify.
A significant advantage of working with a PEO is that, as a co-employer, a PEO brings its clients together to form a single large group, then negotiates the lowest prices for employers and the most robust benefits for employees.
Problems with Recruiting and Retention
Recruiting good employees takes a great deal of time, not to mention money. Often, small businesses use a patched-together recruiting and hiring protocol, simply because they don’t have the time or expertise to establish a system based on best practices.
From creating clear and detailed job descriptions to developing an on-point screening and interviewing process, a PEO can have a major impact on how effectively your company recruits. A PEO’s guidance helps you make the most of the time and dollars you’re investing to find your next team member.
Of course, finding great employees is only half the battle. SMBs also must be able to keep them. PEOs work with their clients to develop retention strategies that include creating a strong onboarding process, clarifying performance expectations and ensuring fair and equitable treatment for every worker.
The ongoing process of complying with employment regulations and deadlines – besides being time-consuming – is rife with opportunities for error. Small business owners or their internal HR personnel need to wade through thousands of federal regulations, as well as state, county and city codes. Laws change constantly, rendering existing company policies obsolete and creating new obligations. Deadlines can sneak up, too, even when the small business has done its best to monitor its compliance responsibilities.
Under a PEO agreement, the PEO’s HR professionals can handle compliance on your company’s behalf. The PEO typically is already monitoring regulations and managing compliance for its existing clients. It can seamlessly do the same for you.
A (Potentially) Unsafe Work Environment
Workplace safety is of paramount importance. Accidents can both cost the company money and undermine morale in general. A PEO’s experts, who are intimately acquainted with safety-related rules and regulations, can guide you toward a healthier and safer work environment.