Human resources, "HR," is an important department for businesses of every size; it has a dramatic impact on the day-to-day productivity, the happiness of the team, and, thus, the overall success of the organization. This is why it is imperative to have well-established HR processes and dedicated support with the skillset to help you succeed. The two main methods of HR adoption include in-house support and outsourced HR. Here we examine the differences between the two, and how effective HR can help your company thrive.
So what really is “in-house HR” anyway? If you are on a small or growing team, you probably already know! While in-house HR can consist of an individual hired for this specific task, more often than not we find that it is a member of the accounting department or the leadership team. Often in these situations, the person tasked with this responsibility has enough knowledge to be helpful, but not enough time or expertise to be as resourceful as necessary.
As your company grows, however, “in-house HR” typically shifts from a single person to a team of two or more people who handle all the HR responsibilities. This can be a more ideal setup as these employees typically bring a large amount of knowledge with them, however, as you can imagine, it also comes with its own costs like salary, benefits, etc.
Now what exactly is “outsourced HR?” Outsourced HR, as the name implies, is a team of dedicated and skilled experts outside of the company that are brought on to handle HR tasks. With a large set of resources to draw on, years of experience, and the ability and bandwidth to handle a wide range of HR issues, outsourced HR helps business owners focus on what they got into business to doin the first place. It can also help support internal HR employees by taking on redundant back-office tasks so that they can focus on larger initiatives.
HR affects every person within an organization, and is simply something you can’t afford to do without. Effective HR can not only save but also help make organizations money. Discover how budgeting for HR upfront can generate big returns for your business.
“But how can effective HR programs save me money?” you ask. Well, let's dig in:
- It helps you AVOID costly mistakes. HR Advisors can help you save thousands of dollars in common HR costs and penalties.
- $50,000 is the potential cost of a single bad hire due to lost productivity, rehiring, onboarding, and training expenses.
- $10,000 is the potential penalty for wage and hour violations under the Fair Labor Standards Act (FLSA).
- $7,000 is the potential fine for each Occupational Safety and Health Act (OSHA) violation.
And these amounts can add up fast! Having effective HR programs are a great way to avoid these potential losses.
“And how can effective HR programs make me money?” you ask. According to researchers at Cornell University who studied several hundred companies that invested in key HR practices, the results showed a significant financial impact:
- 22% higher sales growth
- 23% faster profit growth
- 67% lower turnover rate
Research also shows that investing in HR can result in a host of other benefits including:
- Greater customer retention
- Higher productivity
- More operating income
- Increase in referrals
- Less employee absenteeism
- Fewer safety incidents
*Sources* Cornell University, Watson Wyatt, Entrepreneurs.com, St. Cloud University, Gallup
These numbers are dramatic, and are not realistic for each and every company that sets up robust HR programs, but you can still expect great results from creating these processes.
When are you ready for a fully-comprehensive HR solution? Below we list out the criteria that we have found that make you a great fit for implementing a robust HR platform:
- Once a company gets to 15-25 employees, is when processes and administration can become a real issue- the things they did when they had only 10 employees no longer work anymore from an operations standpoint.
- Once a company gets to 25-50 employees, compliance becomes a real issue because there are a lot more legal components to deal with.
- Even if a company has an HR employee(s) they still benefit from outsourced HR services because they gain:
- Expertise in regard to HR laws
- Organization and processes-- expert advice on what needs to be done and in what order
- Peace of mind that they aren't forgetting anything that could get them sued or negative press
- Human resources information system (HRIS) which is the same type of software that big companies have. HRIS can automate repetitive tasks and can communicate to employees.
As a business owner, we know that you have a million balls to juggle, and HR can sometimes fall to the wayside. At ScalePEO we love to help businesses hit their goals, continue to grow, and grow in a way where the “growing pains” are not overly painful. When it comes to HR, we know that you can benefit from having the right people to help you so your team can stay focused on what really matters, serving your clients and community.
Reach out today to set up time to chat with a ScalePEO specialist, and discover how we can help. Keep the “human” in HR, and we have the “resources” to help!