The Benefits of Outsourcing HR Functions for Small Businesses

The Benefits of Outsourcing HR Functions for Small Businesses

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Small business owners are pulled in a thousand different directions, always with the goal of sustainability and growth. However, something has to give, and unfortunately, it is often human resources functions. The DIY approach to HR has too many pitfalls and can lead to lost time and money and non-compliance with the law, which puts your business at serious risk. When you outsource HR services, you free yourself of this burden while focusing on building your business.  

It Saves You Time and Money

Many small businesses want to be lean and mean in order to maximize margins and be profitable. That’s understandable, but when business owners and their staff wear many hats, they wind up with makeshift HR operations that divert from business development. A survey from the Society of Human Resource Management found that it costs an average of $4,129 to hire an employee, and more than $1,200 to train her or him. As Forbes notes, “HR does not produce a product, yet it can eat up a lot of an organization’s time and energy. A great HR department demands resources and continual oversight and innovation. Many organizations would rather focus on their core strengths and/or moneymakers by outsourcing HR.”

Ensures Compliance

Falling asleep at the wheel when it comes to regulatory and compliance standards could land you in serious legal and financial trouble. Federal rules, state, county, and local regulations are fluid, and keeping up with them is paramount. HR professionals can guide you through the complexities of the Affordable Care Act, for example, along with FMLA, ERISA, PPACA, COBRA, and HIPAA. In addition, there are frequent updates and changes to employment and wage laws that are directly related to employee issues, including harassment claims, discipline and termination. Amendments to the Illinois Human Rights Act is a recent example that we recently covered. Meeting compliance standards is complex and must be addressed by dedicated HR experts.  

Outsourced HR Strengthens Work Culture 

Having a fresh set of eyes from an HR expert can work wonders for your company’s work culture. If there’s a disconnect between owner and employee perception, an HR professional can bridge that gap. As we’ve previously written, collecting employee feedback on work culture is critical for employee relations and engagement. A third party can streamline the process. 


Managing employees is mult-faceted, and most small business owners don’t have the bandwidth or knowledge to ensure HR best practices. The risks are great and can be costly. Mistakes with payroll, inconsistent employee policies, and non-compliance can destroy your business and potentially send you to court. When you outsource your HR function, you relieve yourself of this burden while focusing on what you do best: running your company. 

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