- Quality - How good does it have to be?
- Payroll: Standard payroll processing is fairly straightforward, allowing some to do it themselves with the right software. When you have more complex needs though, like multiple worker classifications in different locations, then you'll want to consider more than just the mechanics of payroll and make sure it's paired with high caliber compliance experts as well. There are variations in the laws between states and sometimes even counties or cities, which can be overwhelming.
- Benefits: Traditionally, benefits are meant to help employers attract and retain top talent. These days, cost seems to have undermined this objective as companies strip down their plans to make them more affordable, which is beginning to frustrate their employees. One commonly overlooked area can help mitigate this effect though. 67% of employees that understood their benefits are more likely to be well received, particularly if the plan features have been diminished. The educational campaign needed to achieve this result comes from using benefits professionals that can do more than just explain what the copays and deductibles are.
- Compliance: The amount and complexity of the regulations you are governed by as an employer depends on your size, but you're on the hook even with your first employee. Working with templates may be oversimplifying things as they rarely cover the sheer mass of filings and forms that need to be maintained. Due to the constantly changing legal landscape, the language in your policies needs to be regularly monitored to make sure it's up to date. The more complex your employee structure is (independent contractors, exempt employees, multiple locations, etc.), the more experience you'll want someone to have in the area of compliance.
Whether your a new startup company or considering human resources for the first time, there are three main options for you: do it yourself, hire someone internally or hire a firm externally.
DIY - Using templates and help lines to manage your HR administration.
- Speed - Since you'll be doing payroll and billing reconciliation for the benefits, it's going to take you more time to attend to the compliance duties you've taken on, so do as much prep work as you can in advance when you do have time.
- Cost - All this option will cost you is maybe the access fee to the toolkit and a call center for HR help, so this will probably be the least expensive way to manage your human resources administration.
- Quality - Unless if you happen to have some formal training in the field, you're putting your fate in the hands of the toolkit you're using, which may not be refreshed very often. At the very least, it will be up to you to constantly check to see if the updates are available, and that can get complicated if you're not sure which parts apply to you and your business.
Hire Staff - Obtaining one or more professionals that will serve as your HR department internally.
- Speed - The average ratio of HR to staff is about 3 for the first 100 people, then about 1 per additional hundred. The high initial number is needed to make sure you have sufficient people to act as backups and provide areas of specialty. 3 people will work quickly enough to keep turnaround times low on most items because they can handle multiple tasks at once.
- Cost - 3 entry level HR specialists will probably run you at least $100k/year in total compensation, so this will be the most expensive option on the table.
- Quality - There's only so much expertise you can acquire working internally because you may not have experienced all of the things that could go wrong to know what to do. HR staff that come from a consulting background are more likely to have a well rounded experience, but be ready to pay top dollar to snag them for your own.
Outsource - Contract with an HR firm to provide you with human resources administration.
- Speed - With their larger size and specialized staff, the firm is more likely to have efficiencies in place that get most tasks done quickly, especially when they require interaction with red tape factories like insurance companies and government agencies.
- Cost - Because the outsourcing firm will serve as a cauldron of expertise and be able to take on many of the time consuming duties like payroll and benefits administration, you'll probably only need just one internal HR contact for them to work with. This would save you at least $60k/year and a good chunk of that will remain even after paying the firm for its services. You would also gain access to insurance programs commonly at lower rates because of their aggregated policies across their clients. However, if your company only has one location and your staff gets to more than 400 employees, you may find that the economies of scale no longer have the same value they did when you were smaller. In those cases, you can probably begin shifting to an internal HR structure.
- Quality - Unless you hired HR commandos under option 2, you're probably not going to find a more seasoned team to keep you out of trouble than the outsourcing firm. You usually get specialists focused on the each of the separate HR disciplines who will be at the top of their game and have a constant pulse check on the latest developments.
As you can see, it all depends on what you need and what your means are. Sometimes rolling up your sleeves is all you can afford to do, other times you may be so big that an internal HR department is justified, but when you're looking to focus only on your business and grow, the outsourcing option is a good bet!