As many large and small business owners can attest, the human resources department is a core component of a company's structure, handling a wide variety of issues that deal with employees, not to mention hiring, distributing paychecks and keeping track of operational expenses. The sheer amount of these tasks can be so overwhelming as to require that some or all of the work be outsourced to a firm that specializes in HR management.
However, based on a new poll, this tactic appears to be the exception to the rule rather than the norm.
Roughly 80 percent of small business owners handle HR functions internally, according to a recent survey conducted by compliance management firm TriNet. In fact, only 2 percent of company managers outsource their HR-related tasks.
While handling human resources tasks in house may save business owners on operational costs, poor management can wind up hurting entrepreneurs financially. For example, the survey found that as many as 15 percent of small-business owner respondents in the poll wound up losing money after failing to properly keep track of business expenses, a task that's traditionally carried out by the HR department. The same percentage also lost money due to staff members improperly listing certain costs as business expenses.
Burton Goldfield, president and CEO of TriNet, indicated that business owners may find outsourcing human resources-related tasks to be something that's worth considering in light of today's robust compliance and regulatory environment.
"HR regulations are changing much more rapidly than they did in the past," said Goldfield. "This means it's harder to stay on top of the latest rules and easier to make mistakes that can cost a company financially and legally."
He added that outsourcing HR can help free up entrepreneurs' time so that they and their workers can devote more resources to core job functions, which should help improve overall production.
Payroll errors common problem for HR departments
The poll also found that roughly 1 in 3 small business owners reported payroll errors that their human resources department have mistakenly performed from time to time, such as late distribution of checks, flawed recordkeeping, withholding the wrong percentage of income from employees' earnings for taxes and overpayment.
Roughly 33 percent of CEOs point to HR documentation as their greatest compliance anxiety, based on a separate poll performed by eMedia, also on behalf of TriNet. Second to documentation was concern about the potential of being sued and making a bad hiring decision.
"Expert advice and bundled technology solutions help manage compliance, candidate search, employee performance, benefits, payroll and expenses," said Goldfield. "They transform the function of HR from a burdensome time-suck on an SMB into a strategic business asset and driver."
The survey also found that roughly 30 percent of CEOs don't measure the return on investment that their HR division brings to their company. In the typical eight-hour workday over a given year, CEOs spend more than 960 work hours on HR annually.
