Should You Outsource Your HR?

Reading Time: 3 minutes

Author : Gary R. Jones

Advantages of HR outsourcing for start-up businesses are numerous, although small businesses and entrepreneurs may be reluctant to consider outsourcing, thinking that it is too expensive. The reality is that outsourcing human resources may actually be a much more cost effective option in both the short run and the long run.

An entrepreneur or start-up business owner is effective at beginning the business. As the organization grows, there are many challenges, not the least of which are the difficulties of evolving into a company with employees. The growing pains of moving from an informal, family business to one with employees can drive companies out of business because the cost of not understanding and complying with Federal and State employment law could be devastating.

As the company grows the challenges of maintaining a workforce multiply. At first, there is a loyal group of employees who are incented to be creative and innovative. In a larger organization, there is a need for some level of standardization of services, and this becomes a management objective. Employers need to provide an employee manual that defines the expectations for their associates, and which helps to offset risks of employees taking undue advantage, like serial absences or sickdays.

A human resources company can help to establish the benchmark expectations and define what should be included in a corporate policy manual. For example, the entrepreneur may not realize that there should be a

No one wants to think of these things when focused on building the business, especially because most small business owners are expert at what they do, but not expert at human resource compliance requirements.

As a company grows and hires more staff, roles start to become specialized. This may be difficult for the original group of employees who had to creatively adapt to projects as they became priorities. Understanding how to adjust and relinquish control of duties can be difficult and this can result in miscommunication, duplication of work and a vexatious work environment.

With outsourced HR services, the learning curve is shortened and expensive human resource mistakes avoided. Training and preparation for job transitions, implementing employee retention and incentive programs, and anticipating costly workplace conflict before it arises are just a few of the benefits of working with a human resources company that has experience in start up company growing pains.

Preparing employees for workplace changes is only part of the HR challenges for a growing company. There also needs to be ongoing evaluation of each employee to assure the best associates are in positions that are suited to their talents. In the start-up phase, employee reviews may not have been necessary, however having a way to assess employee performance becomes much more important as the company grows.

A rapidly evolving company may need to reorganize workforce requirement and redefine job descriptions to streamline organizational structure and meet business needs.

Outsourced HR services can help the growing company by developing a plan to periodically evaluate the roles and structure of positions within the company and develop an employee expansion plan. These plans may include:

  • Evaluating internal and external sources to determine best sources for services for example, should the internal bookkeeper maintain the payroll, or would it be better to outsource?
  • Developing a training schedule, establishing a budget and creating incentive programs for employees to continue to improve their knowledge and skillset.
  • Reviewing employees on an ongoing basis to determine what the employees talents and skills are to assure that there is a match with the requirements of the position.
  • Re-defining job roles or re-engineering departments to assure organizational efficiency and workload.
  • Hiring new employees to fill gaps in expertise or add to the skills the organization requires. An outsourcing organization can also recommend testing services to validate knowledge.

Organizational growth can result in greater revenues, but also may require some tough decisions. Having an experienced outsourced HR company that understands the pitfalls and can help to navigate through the rough spots can be one of the best investments a start-up can make


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