Should Your Start-Up Outsource HR?
With many start-up businesses, the question of HR is often shunted down the list while financial, sales and marketing, and product development concerns take prime position.
While this is understandable, as HR is a cost rather than a revenue-generating part of the business, at some point it usually strikes hard that you’re dealing with people and that the process must be managed. What’s needed cannot be coded into software.
But how can you address the problem? You can’t afford to hire an HR manager, let alone a whole HR department.
So should your start-up hire an outsourced HR company?
The high costs of in-house HR
Practically every aspect of HR involves an outlay. With an in-house HR department, there are the costs of recruiting, salaries and benefits, training costs, administration costs, potential non-compliance costs, and more.
It gets very expensive to run an HR team; the average HR manager in Australia makes over $88,000 per year, according to Payscale –
but this is only the tip of the iceberg.
What happens if there is an error in following local employment or tax regulations? The company can be liable for heavy fines.
Are these costs and risks necessary? Do you need a full-time, in-house HR manager or would it be better to hire external professionals?
The benefits of your start-up outsourcing
With outsourced HR, many of the costs are allayed, but that’s not the only benefit.
Finding specialist talent in HR can be tough and getting the best people to work for you rather than another business can be tricky. With the best outsourced HR companies, you get access to an entire pool of talent with the required expertise for what you need.
The time saved is also a major factor in outsourcing. With a start-up, there is a tendency for everybody to ‘muck in’ to get the job done. Unfortunately, most managers, directors and leaders are not necessarily skilled in HR functions. They can potentially waste huge amounts of time unproductively; they should really be focusing on the core business and revenue-generating activities, but often get caught up in tasks that they are not well suited for.
Next, there are compliance benefits of outsourcing HR. Being such a specialist area, mistakes in following employment regulations are common; these can become expensive. The risk is greatly reduced if you hire a high-quality outsourcing company, because skilled professionals are across all the latest developments in employment law, as well as local, state, and national regulations, hiring rules, and tax regulations (if they are also managing payroll).
What are your outsourced HR options?
Depending on the nature of your start-up, you will want to consider a number of different outsourcing options for your HR needs:
• Long-term outsourcing – where you outsource all or part of your HR functions for the foreseeable future, on a long-term contract.
• Temporary outsourcing – a short-term contract where you are able to outsource all or part of your HR functions until you bring it in-house or decide it suits you long-term.
• Total outsourcing solution – where all HR functions are outsourced: recruitment, orientation, working conditions., managing employee relations, training and development…and maybe even payroll.
• Part outsourcing solution – where one or more of the major HR functions are outsourced temporarily or permanently to assist the in-house team; this may be the essential back-office functions like payroll in a start-up.
• Project-based outsourcing – where you need to bring in HR specialists for a particular project that you are working on.
• Sole consultant or an outsourced team – the scale of your needs might determine whether you opt for a single, professional HR consultant or a firm that specialises in all areas of HR.
Outsourced HR professionals can work on site at your offices, or remotely; in most cases, there will need to be at least some time spent at your site, in order to fully understand the needs of the business.
HR cannot be simply replaced with software. It requires a solid understanding of your business and a human touch. This has always been the case – and is perhaps even more evident now with an increasing presence of millennials in the workforce.
While ‘lean’ start-up culture may be slightly different to that of established organisations, with employees who are, by nature, goal-oriented and all pulling in the same direction, HR doesn’t necessarily have to be a burden on growing the business. In fact, it can help it grow.
Outsourcing HR to qualified and skilled professionals provides your start-up with many advantages as you look to establish your company. Beyond saving you valuable time and money, outsourcing can provide flexibility, specialist expertise in many areas of HR, access to best practice knowledge, and less risk of non-compliance with regulations.
Are you a start-up looking for help with HR issues? Why not email me at: firstname.lastname@example.org.