Top 5 Reasons to Outsource (or Insource) HR

If you are the owner or manager of a small to medium sized business, you may wonder from time to time if you really need an HR department. That's a fair question, and one we get asked frequently. There are really two parts to that question. The first is, do you need an HR department. That question has many answers. The second is, do you have HR needs. That answer is a definitive "yes".

Many times the responsibility for human resources falls on someone's job description as an afterthought. Sometimes it's the finance person, sometimes it's the office manager. Regardless of who gets the job, they probably don't have a tremendous amount of desire to put too much focus on it.

Below is a list of reasons you may consider seeking help with all or part of your HR needs:

1. Increased time to focus on strategic issues - 60-80% of an employers time is spent on non-productive administration (Forrester Research, Inc., as reported in ProEmp Journal). As a business leader, your focus should be on the strategic needs of the business. Any time you spend on tasks that are not value added, is time that takes away from the bottom line of your business.

2. Cost - The U.S. Small business Administration estimates that the average cost to administer HR internally for companies that are less than 250 employees is $1469 per employee, per year. Outsourcing can reduce this cost by as much as two-thirds.

3. Expertise - Here are some numbers to consider. Couple the fact that employment litigation has increased by 2000% since 1995 with the fact that the average litigation costs a company $75,000. There are currently over 40,000 pages of federal employment code. The peace of mind in having a knowledgeable resource is priceless.

4. Improved productivity - Having an outside company handle your HR function can help to eliminate the time wasted by having inefficient processes. If you need to hire someone, for example, a specialist can fill that position in a fraction of the time it takes for someone doing it whenever they have a few extra minutes to focus on it.

5. It works - UPS now outsources its hiring process, employment verifications, relocation services, and new hire compliance data. AT&T is nearing the end of a 7 year deal that provided end to end human resources administration that has resulted in significant savings.


In summary, some business CEOs are reluctant to consider letting someone else handle their HR because they're worried the cost might eat into their profit margins. Surprisingly, the opposite is more often the case. Each year, many small businesses lose money due to mismanagement of HR issues.

For more information about how Skywalk Group could help your business, send us an email here