3 Reasons Why Your Startup Should Outsource HR

Starting a business is no small feat. Navigating the logistics and legalities of acquiring, maintaining, and selling a product or service can often be more complicated than you might have imagined. If you’ve considered adding employees to your business, you may have already looked into the complexities that being a boss entails.

However, being a boss doesn’t have to be hard. Many startups and small businesses have opted to outsource their human resources tasks. Not only does this ensure that everything is done legally and efficiently, but it frees you up to focus on what matters—your business and your customers.

Outsourcing HR Gives You Access to a Professional Without the Price Tag

Most startup businesses do not have the need or the budget to hire a full-time human resources director. The chances of a startup lucking into an individual who is not only qualified to manage human resources but also willing to work part-time for subpar pay is slim to none. Outsourcing HR allows you to work with an individual who is qualified and experienced, both invaluable qualities for a startup.

There are a few different ways that human resources can be outsourced. Typically, business owners will go through a Professional Employment Organization or PEO. According to Layne Davlin, founder of NetPEO, “A Professional Employer Organization provides administrative services as they relate to an employer’s responsibilities regarding its employees.”

Professional employment organizations will charge businesses one of two ways: a flat per-employee charge or a yearly fee. The actual cost of the service depends on the services offered by the PEO. For most small businesses, including startups, paying a PEO is typically cheaper than hiring a full-time HR manager.

Outsourcing HR Ensures That Your Business Is Legally Compliant

Federal and state employment laws are complex and can change frequently. Failure to follow these laws can result in lawsuits and fines. The best way to ensure that your business is operating within the law is to trust a professional with HR operations. 

Workplace Discrimination

Equal Employment Opportunity (EEO) laws were created to protect individuals against discrimination based on age, disability, genetic information, national origin, race/color, sex, pregnancy, or religion. It is vital that the HR manager of any company be familiar with these laws and make sure the business is compliant.

Individual laws that have been put into place to help prevent workplace discrimination include the Americans with Disabilities Act (ADA), the Age Discrimination in Employment Act (ADEA), the Equal Pay Act (EPA), and the Pregnancy Discrimination Act (PDA). These laws protect both potential, present, and past employees, and HR managers should be familiar with all of them.

Employee Benefits 

Laws regarding employee benefits should also be familiar with HR managers. From affordable healthcare to standards for pension plans, all of the following laws were created to protect employees in some way: the Affordable Care Act, the Employee Retirement Income Security Act, the Consolidated Omnibus Budget Reconciliation Act, and the Health Insurance Portability and Accountability Act.

Immigration Laws

Immigration laws help to ensure that businesses only employ individuals eligible to work in the United States. It is essential to be aware of these laws, such as the Immigration and Nationality Act (INA), so that all employees are legally employed.

New Hire Paperwork

When hiring a new employee, there are several things an HR manager should acquire. It is crucial to be sure all paperwork is completed and submitted to the appropriate agencies. An HR manager can also help with pre-employment screenings, background checks, and periodic drug testing.

Workplace Safety

The Occupational Safety and Health Act or OSHA is a familiar name in most businesses. It was created to ensure that companies provide safe working environments for their employees. Additionally, worker’s compensation laws were created to outline the administration of disability programs, and are decided upon by each state.

Outsourcing HR Helps with Payroll and Taxes

Payroll and taxes are critical to employees. The main reason why people work is to make money. Ensuring that their pay is accurate goes a long way towards helping employees feel confident in the business for which they work. This is especially important for startup businesses when employees are taking more of a risk by choosing to work for you.

Payroll can be more complicated than one might initially think, especially if employees require a number of items to be deducted from their check such as health insurance costs, child support, additional federal withholdings, and more. It is essential that the correct amount of taxes be withheld from the employee’s check to prevent them from owing additional taxes at the end of the year.

In addition to paying employees, small businesses have many agencies with which they owe taxes. Quarterly federal, state, and sales tax payments and reports are common for most companies. Outsourcing this duty to an HR professional can save you a lot of time and effort, not to mention ensuring that you won’t get any surprises when it’s time to file your business’ yearly taxes.

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