Small businesses are often reluctant to outsource functions that they believe can be taken care of in-house. Case in point? Human resources, or more specifically benefits administration. Why pay someone else to do something that you can handle just as easily in house, and save the money?
The thing is, handling these tasks in-house isn’t always efficient, nor does it save your business money. In fact, by giving these functions to individuals who may not have the experience to do them correctly, or taking them on yourself even though you don’t have time, you’re most likely costing your company even more money. It may seem counterintuitive, but outsourcing benefits administration and other HR tasks to a professional services firm can actually save your company money.
1. Aggregated Benefits
Offering competitive benefits packages can mean major expenses for both employers and employees. In fact, many small businesses can’t offer the benefits that they’d like to because of the costs. When you outsource benefits administration, though, you can join a pool of other small businesses in the same situation, and gain access to benefits plans at costs competitive with those of larger employers. In addition, by joining an aggregated benefits pool, you may be able to access additional benefits that you wouldn’t otherwise be able to offer. For instance, a benefits administration company may have access to a discount program that provides discounts on travel and other services to your employees that you wouldn’t be able to offer on your own.
2. Reduced Liability
Benefits administration is complex, with the rules and guidelines changing all the time. In fact, according to the Society for Human Resource Management, compliance with the laws regarding benefits laws and regulation is the top HR concern among small businesses. With so many potential pitfalls that could lead to fines, sanctions, lawsuits, and other problems, outsourcing the administration of benefits to professionals offers a layer of protection that you might not otherwise have should you handle the task yourself. Given that a single lawsuit could effectively put you out of business, the cost of the outsourcing could pay for itself simply in the peace of mind that won’t happen.
3. Reduced Technology Expenditures
Outsourcing employee benefits administration also eliminates the need to invest in expensive technology solutions to manage enrollment and other benefits-related tasks. For example, in many smaller companies, benefits enrollment requires filling out multiple forms, along with tedious data entry. Benefits administration services remove most of that work by offering additional technology services, such as a consolidated website where employees can enroll and select options with just a few clicks. Depending on the level of service you request for the human resources provider, you may also be able to avoid investing in technology and software to manage employee time and attendance, payroll, and other tasks.
4. Reduced Salary Expenditures
As your company grows, the administration of employee benefits will undoubtedly become more complex — and more than likely, a bigger job than a single person can handle. By outsourcing key functions like benefits administration, you free up your HR manager’s time to focus on other important tasks, and potentially eliminate the need to hire additional staff to handle all the company’s HR tasks, including payroll. This can eliminate a substantial annual expenditure when you account for salary and benefits, as well as the time and expense required to hire and train a new employee. Even if you don’t hire new staff, there are expenses associated with training and education employees on the most up-to-date policies and regulations, expenses that you can reduce or eliminate entirely by outsourcing certain functions.
5. Improved Efficiency
Finally, human resources is generally a time-sensitive task, reliant on deadlines and timely submission of paperwork. If you’re running a small business and only have a small HR team — or if you are trying to handle most of the HR tasks on your own — there will inevitably be bottlenecks and slowdowns, some of which could prove costly or even detrimental to your business and employees. By working with an independent HR administrator, you can move some of those tasks off your plate, ensuring that they will be handled in a timely manner, while also freeing up your time to take care of other key, revenue-producing, tasks.
While there are expenses associated with HR benefits administration, of course, they are usually far outweighed by the benefits of the service — and the money savings you see by using such a service will quickly pay for it. So, before you dismiss a PEO or other HR company as being too expensive, consider the savings in time and money, and see how you can come out ahead.