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Small Business HR Outsourcing 101

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Many small business owners are less interested in the logistics of running their company and more in the concept or product they are putting on the market.

One way that small business owners are finding more time to be involved with the core of their business is by outsourcing human resources administration to outside service providers.

By doing this, you can allow another company to take care of the logistics of running your company, giving you more time to spend developing your product and building your business. But before turning to HR outsourcing, consider these basics.

HRO and PEOs

Taking advantage of Human resource outsourcers (HRO) or professional employer organizations (PEOs) can help you address any number of your business’s HR tasks. Most companies provide a list of independent services and your small business can select which ones they need, or assign all tasks to the PEO. Services that PEOs offer include:

  • Payroll and benefits administration
  • Federal and state taxes and workers compensation
  • Recruitment, employee training, and all employee management.
  • Employee risk management and development of safety programs


Many small businesses are switching to HR outsourcing for a number of reasons. In fact, 92% reported success in achieving longer-term goals thanks to PEOS.  But that’s not all; your business can enjoy a plethora of other benefits, such as:

  • Lower labor expenses,
  • Reduce company liability with hiring and firing
  • Let you focus on business instead of paperwork
  • Increase productivity
  • Improve alignment with state laws and federal regulations


If your company has a relatively small number of employees or you find HR duties not to be very difficult, hiring a PEO might not be the best investment for your small business.  To make this determination, there are a few important things to consider.

  • Candidate quality may not be up to your company’s standards, especially if your company has a very specific employee profile.
  • You have less control if your PEO company doesn’t understand your office dynamics.
  • Training time can be more extensive if HR is outsourced.

Making Your Decision

Before deciding on whether or not to hire a PEO, you should make a list of all of the HR duties your business performs and include the working-hour price equivalent. If your business can’t afford to cover all of its HR services, choose one or two services that are the most complicated for you.

If you do decide to hire a PEO to handle your HR responsibilities, there are a few steps you should take to make sure the company is the right fit for your small business.

  • There are more than 700 PEOS worldwide, and many of them offer a variety of HR options.
  • Execute a background check of your PEO by examining previous clients as well as their bank and credit references.
  • Make sure that they have experience dealing the HR for your type of business.

According to the SBA, small-business owners spend up to 25 percent of their time handling payroll, taxes, benefits, workers’ compensation and other HR matters, that according to HR World. Many small business owners have found that outsourcing their HR tasks to an outside PEO has made doing business much more enjoyable by giving them time to focus on the passion within their business.

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By Kate Webster|Website|Other Articles

Kate Webster writes for lead generation resource, ResourceNation.com. She focuses on a variety of topics including human resources administration.

Discussion 3 Comments

  1. Grace

    Definitely Outsourcing hr services will offer more time for businesses to focus on their core stream.Because their outsourced hr service provider will be dealing with all employee related issues like recruiting,staffing,training,employees compensation etc.But their are some drawbacks too as Kate has mentioned in this post but I think “a business will never trap in these situations if they have chosen a right and trustworthy hr outsourcing partner”…By the way great post by Kate.How can I forget to say “thanks a lot”‘.

    • Outsource How

      Very true, Grace. It’s all about doing some research at the beginning to ensure there are no nasty surprises down the track. Glad you liked the article.

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