Boss Lady

The 5 ‘W’ steps of outsourcing human resources


As you likely already know, startups usually don’t have a lot of money. As a result, they need to cut corners and save wherever possible, which usually means leaning heavily on third-party business tools and services to accomplish daily tasks. This allows a startup’s few employees to focus on more pressing business tasks while less-important issues are handled outside of house.

One of the most popular services for startups — especially young, small startups — is outsourced human resources. If you are considering adding human resource outsource services to your budding business, read on for answers to the most common questions.


What is outsourcing human resources?

Just as you can outsource IT, marketing and virtually any other task in your business, you can hire a third party to assume the responsibilities usually assigned to human resources. This means you will pay someone outside the employees of your company — more on “who,” exactly, later — to perform the HR services your employees need to thrive in their positions.

What HR services should be outsourced?

Different startups choose to outsource different tasks. It’s important that you evaluate which HR initiatives are most crucial to your startup’s function, which tasks are cost-effective to keep in house and which functions are best performed by a third party. Some of the most commonly outsourced responsibilities include:

  • Payroll and benefits administration
  • High-volume recruiting and temporary staffing
  • Coaching and training
  • Development of employee handbooks and policy manuals

Meanwhile, more personal responsibilities like employee relations and talent development can stay in house.


Why should startups outsource HR?

Startups should strongly consider outsourcing HR for one simple reason: money. Your brand-new, teeny-tiny business simply doesn’t have the resources to hire a full HR team, and your other employees (including you) don’t have the time or expertise to accomplish HR tasks effectively, either. Thus, your choices are to ignore HR, which isn’t viable considering the field’s significance to business success, or to outsource much of HR’s responsibilities to a dedicated third party.

Why should any company outsource HR?

Even as your business grows, you should consider continuing to outsource HR. Businesses often find that outsourcing remains cost-effective when a workforce is large, especially when it comes to simple but time-consuming tasks like payroll and benefits. Additionally, third-party HR providers are better-versed with laws and regulations governing HR practices, so they can safely assume the tough responsibility of keeping a business compliant — no small task for larger employers.


When should a business outsource HR?

As soon as you recognize that your current HR strategy isn’t viable, you should begin outsourcing labor-intensive HR tasks. However, it is also a good idea to anticipate the need for HR outsourcing when you build your business strategy. In the latter case, you can avoid the slow and costly transition, and you can ensure that your employees are accustomed to the new HR setup from the get-go. Generally, if you believe that outsourcing is the right path, the sooner you pivot into an outsourcing model, the better.


Who should consider outsourcing HR?

Obviously, startups struggling to juggle HR responsibilities should be considering outsourcing. It’s a waste of time and energy to strain your business to accomplish tasks that could more efficiently be completed by a third party. However, even if your current HR efforts seem to be going smoothly, it might be a good idea to investigate your outsourcing options. As your business grows and adds more employees, HR will only become more difficult.

Who are the best HR outsourcing options?

There are several tiers of third-party HR providers. Many startups are drawn to free or freemium software that automates HR processes, but it’s important to remember that you or your employees will still need to control and monitor this software, which takes hours away from their other responsibilities. More realistic options for startups and SMBs include human resources service provides and professional employment organizations (PEOs). Both of these groups have the expertise to complete HR tasks effectively and offer custom options to ensure your business gets the HR it needs.


Where should you look for HR outsourcing?

HR service provides and PEOs come in all shapes and sizes, from small, mom and pop outfits to vast international ventures. Your goal shouldn’t necessarily be to find the objective “best” third-party HR provider; rather, it should be to find the provider that works best with your business and brand. That might mean prioritizing a local HR service provider if your startup isn’t likely to enter new markets, or it might mean opting for large PEO if you expect your startup to explode. You might consult your existing business network or use an online service to search for options.

Outsourcing might be the catch-all solution for startup HR woes. Although you can’t eliminate HR entirely, you can relegate it to a third party, who will do a better job of managing crucial HR tasks than an expensive in-house team.

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