Evaluating HR Options - Speed, Cost & Quality (Part 2)

Now that we have evaluated our need for speed, we can begin considering the costs of human resource administration. Determining a budget for these aspects of business operations largely depends on what your expectations and needs are. However, as we'll see below, you don't necessarily get what you paid for in HR. Sometimes (sadly not always) a less expensive option can also be more efficient!

• Cost - How much should I spend on it?
• Payroll: Depending on your needs, you might either do this in-house or outsource it. Contrary to what you might think, it's usually more expensive to have someone process your payroll internally. Even a single entry level payroll administrator could cost you around  $35k/year! However, most companies will roll these duties into another position to save money. The real question is whether you can afford to have this responsibility fall on someone who will probably look at payroll as something they need to "get out of the way" from time to time. The penalties for mistakes can add up quickly because they will probably be repeated on several payrolls before they are identified and resolved. Outsourcing most likely gets you a specialist in payroll for a small fee in the neighborhood of $7-10k/year for a company of about 10 employees.
• Benefits: The main area of benefits costs employers are aware of are the premiums they're billed from the insurance carrier. However, there's also a substantial cost in conducting staff meetings and administering the billing and enrollment relationship with the carriers, especially when offering many choices to your employees. If you employ staff that are in high demand positions, like executives or engineers, the least expensive insurance plan may not be attractive enough for you to bring in top talent for your business.
• Compliance: Just being an employer places you at risk for labor issues, particularly in more complex states like California. Typically, the more experienced, diverse and specialized your compliance team is, the more it will cost you. The amount you allocate to this area will largely depend on your comfort level with risk. Most startup companies face a domino effect of consequences due to litigation because of the effect it has on their funding sources and in the press, so making sure you have as much expertise as you can afford goes a long way towards having peace of mind enough to focus all your attention on your product.