8 Reasons to Outsource HR as A Small to Mid-Sized Business

Is it time for your business to outsource HR? Here are 8 reasons why you should consider making the shift now.



Small to mid-sized businesses face a unique set of challenges when it comes to offering their staff necessary support for human resources responsibilities. For example, small businesses need the basic elements of HR such as payroll processing for their employees, but their team might not be large enough to take on a complete HR department.

As a mid-sized business, you may be able to support basic HR functions like onboarding, payroll, and benefits. However, your team may lack the expertise needed to tackle compliance, labor laws, talent management, or any form of strategic HR. As a result, your HR department can get stuck between a staffing rock and a budgetary hard place. 

By outsourcing your HR responsibilities to a Professional Employer Organization (PEO), you can alleviate the stress of administrative tasks with a team of certified experts that are ready to help you navigate challenging HR struggles. Now, you focus on the core activities of your business without compromising the well-being of your employment processes.  

When Should a Company Outsource HR? 

As a small to mid-sized business, there may come a time when your employees have to take on HR work or additional tasks they may not be trained to do. 

While assigning a few temporary tasks might not be a problem, creating additional time-consuming responsibilities could cause some backlash in your company culture. Your employee morale, engagement, and workplace events may have to take a back seat, reducing job satisfaction and decreasing the team’s collective focus on growing the business at large. As the company grows, back-office responsibilities such as recruiting, employee relations, and managing benefits can become overwhelming.

When you start to notice the added pressure, it is time to find an outsourced HR partner to help organize your work, assist in HR admin tasks, and supply HR best practices. 

Reasons to Outsource HR

The reasons to outsource HR are not so different from the reasons you outsource other specialized tasks. An exceptional HR professional must have a deep understanding of countless processes and regulations, many of which have steep consequences if performed poorly. 

Below are a few reasons why you should consider outsourcing HR:

1. Increase ROI

According to a study conducted in 2019 by the National Association of Professional Employer Organizations (NAPEO), outsourcing HR to a PEO increases your annual return on investment by an average of 27.2% in cost savings alone. This means that an average of $270 is saved for every $1000 invested in HR expenditures by outsourcing HR-related services to a PEO. These savings are typically manifest through lower employee turnover rates, higher employee satisfaction, and increased business revenue growth.

2. Save Time and Focus on What’s Most Important

Time is a limited resource that every professional stands to gain. When you outsource HR, your in-house contact person simply does a quick review of the work done by the PEO and then moves onto the next project. Your staff spends less time doing transactional HR and gets more business-related projects done (with fewer employees) because of the shift in duties. In the end, this gives you more time to focus on your business growth.

3. Cost Savings for Your Business

When broken down by an hourly rate and compared to what you would be paying for a full-time, benefited employee, outsourcing HR is significantly cheaper. For growing businesses, employing a full-time, in-house HR team gets expensive. This is especially true for businesses hiring new employees at a rapid pace or for those experiencing high employee turnover. When you partner with a PEO, your HR processes get streamlined and you gain efficiencies from the advanced HR technology they provide. You can also have confidence in any guidance you receive, knowing it’s from certified HR experts who have experience with the entire employee lifecycle. 

4. No More Payroll Penalties

Did you know that 33% of American small businesses get fined for payroll errors each year? When you outsource to a PEO, the fiduciary liability for providing accurate payroll and remitting timely tax payments rests on the PEO. 

5. Gain Access to Better Benefits

Because PEOs work with many different companies, they have secured advantageous agreements with insurers and offer great buying power to you, the client. This helps your business offer competitive benefits to your employees at a reasonable price with a wider variety of options than what you could offer on your own.

6. Secure your Business’ Compliance

Being compliant with state and federal regulations can be a particularly frustrating experience for new or growing businesses. With a PEO, you don't have to spend countless hours staying up-to-date with all the current regulations. Instead, let the PEO advise on which laws apply to your company and what the expectation is for you to maintain compliance.

7. Improve Efficiency with Technology

It is expensive to invest in the latest high-efficiency HR technology, and most small and mid-sized businesses typically lack the budget and resources needed for the investment. However, partnering with the right PEO will provide you access to an advanced, fully-integrated Human Resource Information System (HRIS). Solutions may include capabilities for payroll, applicant tracking, paperless onboarding, benefits enrollment, HR analytics, and much more. With the right technology, you can also review meaningful metrics to make your job as an employer easier than ever. 

8. Prevent Workplace Issues

Among other solutions, most PEOs offer risk management services. This helps you establish policies and procedures to minimize potential workers’ comp claims and employment lawsuits that may arise from careless employment practices. Plus, in the event of an accident, the PEO will help you with claims management to keep your experience modifier (and ultimately, your workers’ comp premiums) low.

Outsourcing HR With Stratus 

Outsourcing to Stratus HR helps you organize your work, relieves you from mundane admin tasks, and supplies you with the latest HR best practices. Staffed with certified HR experts, you gain valuable expertise, industry knowledge, and additional support to help your in-house team flourish.

Stratus has been in the HR outsourcing business for over 20 years. We’ve used our rich knowledge and industry experience to refine both our software and services. Our seasoned experts work in the shadows to support your existing staff and help you manage your employer liabilities. We ensure that small and medium-sized businesses spend less time tackling transactional HR duties and more time focusing on their business growth. 

Are you ready to focus less on paperwork and more on the work that matters the most? Book your free consultation with our team today and learn how Stratus HR can help you reap the benefits of a PEO partnership.

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