Entrepreneurs and business leaders encounter numerous challenges on the path to growth—from managing cash flow and payroll to growing sales and hiring the right employees. When you’re out there hustling to win the next client or launch your next product, new responsibilities and requirements emerge. For example, there are new demands of a growing workforce that must be met to keep the supply chain running, customers happy, and revenue growing.
During periods of rapid growth, it’s important to be prepared to keep existing employees engaged as well as quickly recruit and onboard new staff that can take your business to the next level. Though it increases productivity and adds skills to your workforce, hiring more employees also creates new challenges for the person who handles human resources for your business. A larger, more diverse workforce translates into more complex benefits and payroll administration, greater need for formal policies and procedures, and much more. Many high-growth businesses will begin noticing signs that company growth has outpaced their HR approaches.
What is HR as a Service?
HR as a Service (HRaaS) is a holistic approach toward providing end-to-end service solutions to meet all HR and payroll needs through cloud-based self-service systems. To meet business requirements, it’s important to recognize that HR as a Service is an integration of your business with an outside provider and you must work together as one to develop effective strategy and HR delivery.
SHRM defines HR outsourcing as a “contractual agreement between an employer and an external third-party provider whereby the employer transfers the management of, and responsibility for, certain HR functions to the external provider.” There are many options available to meet both general and specific needs including the outsourcing of the entire HR function to particular processes like applicant tracking, compliance reporting, or benefits administration.
Identify when it’s time to outsource HR functions
Many high-growth businesses recognize it’s time to outsource some or all of the HR activities after a review of business processes. Did your business just hire its fiftieth employee? Are you ready to comply with the compliance responsibilities that go along with it such as FMLA and EEO-1 reporting? If not, the business is at risk for noncompliance penalties. Since HR is not a profit-making center of your business, it is an obvious area that can be outsourced.
A business that has experienced, in-house staff can get basic compliance assistance from an outside provider through an online HR library kept up-to-date by experts in federal and state laws and best practices.
A business with inexperienced, in-house staff can choose a higher level of service by adding live HR support from a team of fully-certified HR professionals.
A business that hasn’t yet hired HR staff and/or chooses to focus its resources on growth, can fully outsource HR.
To fill HR delivery gaps, a business can choose to outsource specific functions such as payroll, recruitment, or benefits administration.
Outsourcing HR processes to an external provider allows your business to save time and money that can instead be put toward business growth.
Six reasons why growth-oriented businesses use HR as a Service
HR as a Service enables your business to adapt to evolving needs by supporting a culture of continuous learning, increasing retention, reducing hiring costs, and emboldening your company’s ability to grow your workforce.
Leaders of growth-oriented businesses have numerous cost-effective options available to help meet their current HR needs as well as those at the next stage of growth. Here are six things you need to know about HR as a Service:
1. Reduces costs. By outsourcing HR functions, your business spends less on staffing employees in an area of your business that’s important, but doesn’t generate profit. HR as a Service also reduces the fixed cost of managing employees. Your HR as a Service solution provider offers integrated user interfaces and automates processes like payroll calculations, time and attendance records, and more. This allows your in-house staff to focus on strategic business activities.
2. Provides access to expert knowledge. As your workforce grows, it becomes more complex and it’s increasingly difficult to manage compliance and minimize risk. Many small business owners simply don’t have the specialized knowledge, or time, to avoid errors and noncompliance. Using HR as a Service, businesses have access to attorneys, experts, and certified HR professionals whose job is to keep your workplace compliant with employment laws and regulations and your workforce healthy and happy.
3. Ensures compliance. One survey found that 81 percent of small business owners handle HR on their own and more than 30 percent said they weren’t sure they were doing everything correctly. Is your business on top of paid sick leave regulations, FMLA responsibilities, new overtime threshold laws, and 2020 W-4 changes? There are hundreds of federal, state, and local regulations related to employment and they are constantly changing. Your HR as a Service solution ensures you’re always up-to-date whether it’s due to changes in workforce size, passing of new legislation, or updates to existing codes.
4. Improves hiring. A growing company needs employees that are armed with the right skills, aligned with goals and objectives, and fit in with company culture. Outsourcing HR processes helps you deliver a better employee experience. HR as a Service allows you to set up an efficient process that finds the right people for your company.
5. Saves time. For entrepreneurs and small business owners, time is a precious commodity. One survey found that the average small business owner worked about 50 hours per week, but that only 32 percent of that time was spen
t on the business itself. Instead, too much time is spent on mundane tasks like payroll tax administration. By outsourcing key HR and payroll functions, you get more time to spend on core business needs.
6. Minimizes upfront IT investment. HR as a Service does not require large investments to get up and running. Choose only the services you need. Since the solutions are cloud-based, your business doesn’t have to buy IT infrastructure or hire more staff to deploy or maintain the system.