February 2, 2023

Small business owners wear a lot of hats. They make executive decisions, play the role of accountants, and even function as HR administrators at times. As a result, the need to delegate or outsource HR tasks, which are often sensitive, is an ongoing struggle that all entrepreneurs face.

One of the best ways to open up the doors for delegation is by helping a small business owner see the value that comes from offloading a job onto someone else. This is particularly true when that task has to do with keeping up with the complicated and overwhelming world of human resources.

What Is Outsourced HR?

As the work world becomes more interconnected through technology, HR professionals are seeing their responsibilities increase in complexity. One of the most obvious examples of this is remote work.

As businesses great and small hire across international borders, it opens up a Pandora’s box of regulations and compliance concerns. A common solution to this challenge is to outsource the HR responsibilities associated with those new hires. Also called human resource outsourcing or HRO, outsourced HR involves passing HR functions off to an independent third-party provider.

Depending on the situation, you can farm out either all or a portion of your administrative HR duties to outside entities. The global HR solution specialists at Remote point out that outsourcing HR can have other nuances, too.

For instance, a company may need to choose between an EOR (employer of record) or PEO (professional employer organization) to efficiently navigate HR requirements in another country.

While it does take some work to set up, outsourcing HR can offer small businesses several key benefits, especially when it comes to efficiency.

6 Efficient Benefits of Outsourced HR for Small Businesses

Here are a handful of the most important ways outsourced HR can benefit small businesses, despite their limited size, time, and resources.

1. Keeping Up With Regulations

HR is a regulation-heavy field.

However, it doesn’t just take time to grasp all of the rules and compliance concerns that come with hiring and retaining employees. You also need to invest significant effort into keeping up with those standards and requirements. Outsourcing HR takes that ongoing burden off of the shoulders of a small business’s employees.

2. Cutting Costs

One of the most obvious advantages of HRO is that it saves money.

The cost of hiring a full-time HR professional is significant. ZipRecruiter estimates the average annual U.S. HR salary at over $66,000. Working with a third-party provider gives small businesses access to the same skills and services at a fraction of that price.

3. Freeing Up Precious Time

A small business owner may decide that they can get by without a full-time HR professional on staff. In fact, that’s often the case.

But the truth is, whether you have a human resource rep on your team or not, someone is going to need to spend time tending to that part of running a small business. Outsourcing HR frees up significant quantities of time that can be reallocated to more productive activities.

4. Better Retention

Chairman and CEO of Lyons HR, Bill Lyons, emphasizes the impact that HRO can have not just on upfront efficiencies like payroll and administrative costs. He also points to retention as a quiet-yet-critical way outsourced HR can revolutionize a small business’s efficiency.

When a small business works with a third-party provider, it can provide higher-quality HR services to its employees. This helps them feel valued and well-compensated for services, leading to improved loyalty and retention, both of which have a direct impact on efficiency over time.

5. Access to Better Talent

One subtle way outsourced HR can improve small business efficiency is through access to better talent.

When you use an HRO partner, it gives you the confidence to recruit the best individuals for your team. This is true no matter where they’re located or what complexities come with hiring them. This sets up a much larger talent pool, helping you build a better, more efficient team.

6. Help With Scaling

As small businesses scale, their HR needs grow, as well.

Typically success comes with more hires, a larger staff, greater compliance and regulation concerns, and so on. When you have an experienced and knowledgeable HRO partner, you can address these needs without spending unnecessary quantities of your internal staff’s precious time, effort, or resources.

HR is a necessary part of any small business. It’s also a complicated and evolving field that requires professional attention.

Small business owners can cut through their organizations’ HR inefficiencies (and at the same time keep costs down) by passing off ongoing HR needs to an outsourced HR provider. The result is a leaner, meaner operation that can maintain quality and onboard better talent. Consequently, they can effortlessly scale internal operations when the time comes.

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