Tips For Small Businesses Outsourcing Payroll & HR

Tips for small businesses outsourcing HR and payroll.

Millions of businesses outsource their back office functions these days, including those burdensome administrative tasks like payroll and HR. Non-core business functions like these are ripe for outsourcing. You get the tasks off your plate while freeing up your time to focus on more important company goals.

It’s a simple process that companies of all sizes are embracing, but before you begin researching providers, there are a few things you should know.

Why Outsource HR and Payroll?

When the topic of outsourcing comes up, we’ve spoken with many prospective clients who ask: Why outsource payroll? Why outsource HR? My company isn’t that big; shouldn’t we just do it in-house?

It’s tempting to just grit your teeth and muscle through these tasks on your own, but HR and payroll are complex, detail-oriented tasks that soak up precious time. These time-sinks affect all companies, regardless of size—the ongoing burden of administrative management adds up:

  • Collecting/reviewing wage details
  • Calculating and subtracting income withholdings
  • Managing checks and direct deposits
  • Preparing annual tax filings

These workflows compound as your company grows. And while some businesses grow to the point where it becomes more feasible to keep an in-house HR team on staff, many enjoy the advantages of outsourcing and prefer to keep functions off-site. Of course, to reap the benefits of an optimum outsourcing arrangement, you’ll need to find a provider who can meet your company’s goals.

Outsourcing Considerations to Note

There are a few specific considerations to keep in mind as you look for outsourced payroll and HR help.

What outsourcing services do they offer?

Make sure the provider is capable of meeting your needs in the services they offer. There’s a lot of variance in services across outsourced providers, so do a thorough audit of your needs before committing:

  • Will they generate reports, checks, or forms, signing and approving everything without needing input on your end?
  • Are they accurate with ongoing calculations for tax withholdings, PTO, insurance, or retirement funds?
  • Do they work with you to set up custom reporting schedules that align with your desired level of input?

You get the idea. Create a wish list of must-have services and work with your outsourced providers to make sure all the bases are covered.

How do they handle customer service?

Paramount to any outsourcing arrangement, make sure the provider in question makes customer service a priority. How long does it take them to respond to calls? What kind of messaging protocols do they prefer? If problems arise, what kind of workflows do they have to get you in touch as soon as possible? This is particularly important for companies with unique time constraints, such as short payroll cycles.

Does their system allow for simple knowledge transfer?

What type of platform will the provider use? For both outsourcing payroll and outsourcing HR, you’ll need to begin the onboarding process with a transfer of data from your own system to their platform. This transfer helps them better understand your business and how to approach their own workflows with your company goals in mind.

Are they flexible with pricing?

Keep costs in mind, both right now and with your future plans in mind. You might have a small business today with only seven or eight employees to manage, but what about a year from now? Or two years?

Ask about pricing as it pertains to growth. Will there be processing fees when adding new employees? Will pricing structures change based on any other inputs? Don’t be afraid to get into the details, here. Every outsourced provider should be transparent about their pricing.

Building an Outsourcing Partnership

Above all, do your research and get specifics from your provider well in advance of your decision. There are plenty of vendors in the market these days, so you won’t be hurting for choice.

But given how many options are out there these days, it’s more important than ever for you to come up with a plan for finding and vetting each provider. This is the only way to find a vendor that meets your needs—and ideally, will act as a trusted business partner for years to come.

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