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Human Resources

What are the Benefits of Outsourcing Your HR Department?

Christine Batten, PHR
by Christine Batten, PHR on June 25, 2015

Outsource_HRAs a small business owner, you are expected to be an all-encompassing resource for your staff. You started with a vision and a dream about building a great business becoming an industry leader, yet now you’re knee-deep wading in HR issues like payroll, benefits, safety and Workers’ Compensation insurance. 

This figurative molasses makes it hard to climb up your “tree” and breathe in the fresh air of entrepreneurial success.

By now you may be asking, “what’s the way up?” While there are a couple measures you could take to lighten the load, you should consider outsourcing your HR department services. Doing so provides a multitude of benefits and HR shortcuts that allow you to stay OSHA and tax compliant, as well as save time and resources. As a small business owner, you know both how important time is and how little of it you have.

By outsourcing your HR, you can maximize the time at your disposal and also benefit from the following amenities:

Human Resources Solutions

As obvious as it may seem, a Human Resources department is responsible for a wide variety of tasks, and you may not even have an HR department. Even if you do have an HR department, chances are that it’s understaffed. Most HR functions can be efficiently handled by an outsourcing company, giving you or your small HR staff a chance to focus on HR priorities that you want to maintain control over, such as hiring. Not only is outsourcing a fraction of the cost, but it also helps you avoid HR mistakes within your business, which can carry costly and detrimental consequences. By outsourcing some of your HR functions, you can see many of your conventional HR tasks streamlined, including:

  • Workers’ Compensation Claims
  • Payroll & Payroll Taxes
  • Risk & Compliance Assistance
  • Employee Onboarding
  • Employee Benefits Administration
  • Wage & Hour Compliance
  • Unemployment Claims Processing

As a small business owner, these tasks can be quite daunting—the list is not only lengthy, but the components involved with each item require specific expertise. Employment laws and regulations are ever-changing, like the recently implemented Affordable Care Act. State and federal tax audits are always looming over your business; be prepared, and equip yourself with HR professionals who can ensure you’re tax compliant and up to date on all the changing employment laws and tax rule changes.

Employee Practices Liability Insurance (EPLI)

EPLI functions as coverage and protection against employee lawsuits that may arise when, in the words of the Insurance Information Institute, “legal rights as employees of the company have been violated.”

First and foremost, never assume your company is invulnerable to a lawsuit from an employee—in fact, employee lawsuits are on the rise, and don’t show any signs of abating. Both large corporations and small businesses need coverage as a buffer to avoid dissolution and facing judgment that forces them to declare bankruptcy.

EPLI policies typically protect against the following employee lawsuits:

  • Wrongful Termination
  • Discrimination
  • Sexual Harassment
  • Emotional Distress
  • Wrongful Deprivation of Career Opportunity
  • Failure to Hire or Promote
  • Improper Disclosure of Confidential Employee Information
  • Invasion of Privacy, Libel or Slander
  • Wrongful Discipline

With an outsourced HR company, you can purchase EPLI packages that keep the scalability of your business in mind. A survey by Chubb’s 2013 Private Company Risk Survey shows “the average cost of an employee liability lawsuit rose 26% over the past 3 years,” yet “7 out of 10 businesses don’t buy EPLI.” These figures are further reinforced by an Advisen white paper showing that lawsuit defense costs (which would be your costs as the small business owner) average $300,000.00, with a timeline between 18-24 months.


There are a slew of duties that constitute proper payroll and tax services, which affect how your employees get their wages distributed, as well as the creation of W-2s and adherence with other payroll regulations. There are state and federal taxes that must be deducted and matched by you, the employer. The advent of automation is upon us, and leveraging technology tools to keep up with everything is key to retaining employees and ensuring their information is kept up-to-date. With an outsourced HR company, you gain the following factors of automation and accuracy:

  • Weekly, Bi-Weekly or Monthly Automated Checks
  • Direct Deposit
  • Tax Filing
  • State Unemployment Insurance (SUI)
  • Electronic Billing Reports
  • New Hire Reporting
  • Secure Online Portal
  • Electronic W-2 Generation & Delivery
  • Wage Garnishments
  • Special Pay Arrangements
  • Multi-State Payrolls
  • Holiday Pay
  • Overtime
  • On-site Check Printing
  • Visa Cash Card
  • Department Allocations

When it comes to payroll, we know how sensitive and costly it can be. According to one study of over 279 organizations, in-house administration “spends on average 9% more” than other outsourced solutions. Avoid costly payroll errors, and let the HR experts handle payroll on your behalf and ensure your tax and OSHA compliance.

Workers’ Compensation

Your Workers’ Compensation Insurance is what covers your employees when they get injured on-the-job. This protection is an essential protection from claims costs and lawsuits, and having it is mandated by most states. Yet the administrative tasks associated with a Workers’ Comp claim can be time-consuming and can catch you unprepared. Don’t be blindsided when this occurs. Keep in mind all of the benefits Workers’ Compensation provides for your small business. This reserve protection can make all the difference in an employee’s life, as well as yours.

  • 24-hour Claims Management Services
  • Disability Benefits
  • Medical Coverage
  • Return-to-Work Programs
  • Safety Programs
  • OSHA Compliance Support
  • Death Benefits
  • Rehabilitation Assistance
  • Professional Accident Investigation

Outsourcing HR gives you access to safety programs and resources to implement preventive measures and stop accidents before they occur.

Employee Handbook

Your employee handbook is the bible of your business. It establishes rules, guidelines and policies for your company, as well as the state and federal laws surrounding your industry. This should be the first thing your new employees read, with firm and clear wording. An outsourced HR partner will help you ensure that your handbook is written, implemented and readily accessible to your employees. This handbook information can include:

  • Company Mission Statement
  • PTO, Pay Periods & Employee Leave Regulations
  • Holiday Pay and Schedules
  • Drug & Alcohol Policies
  • Code of Conduct
  • General Policies
  • Employee Positions & Work Week
  • Sexual Harassment and Discrimination Policies
  • Open Door Policy/How to Contact Management
  • Benefits Packages
  • Appropriate Paperwork to Avoid Employee-Related Lawsuits
  • Disciplinary Procedures
  • Disclaimer for Legal Protection

Outsourcing your HR allows for an effective and reliable handbook, customized to your business for added security and peace of mind.

Key Takeaway

Having an outsourcing company long-term is shown to produce incredible results on all things involving HR: a study from Sourcing Analytics exemplifies that companies with outsourced HR services for over 60 months have 62% in savings versus the benchmark. Saving time, money and resources is integral to the success and growth of your business (i.e. your tree). Don’t let HR responsibilities hold you back from achieving your business goals, and in turn hinder your development and success.

These tasks can be extremely overwhelming for a small business owner—this list doesn’t even begin to encompass all of the HR services that an outsourcing company can provide. There are many benefits of outsourcing your HR; do your due diligence, and find out what will optimize your business platform and industry today.


Christine Batten, PHR
Christine Batten, PHR

Christine has over 20 years of HR related experience with a background in labor and employment law.