According to the US Small Business Administration’s Office of Advocacy, 64% of small business owners started their own companies because they wanted to be their own boss and make more money.
Although many other causes were listed, one that didn’t receive any votes in the survey was the desire of business owners to be their own HR department. Many small business owners find aspects of HR confusing, which is a perfectly reasonable position. Let’s look at a few HR essentials for small business owners to keep in mind; we’ll then discuss a promising new HR solution to consider.
Small Business HR Functions and Requirements
Most people who have worked for companies in the past are familiar with the concept of a human resources department, but they might not know everything HR entails. Their main duties include (but are not limited to):
- Complying with federal, state, and local laws
- Payroll
- Setting up employee benefits (if offered)
- Documenting workplace policies and procedures
- Training employees
Many small business HR FAQs can easily be found online with specific advice for your industry. Although most HR functions and legal requirements are universal, some elements may be different for your line of work. A small convenience store and a construction site, for example, will have slightly different laws and regulations to follow, even though many will be the same.
A Quick Guide to Small Business HR
Most small businesses, especially those with under 20 employees, usually don’t need a full-time HR person. Those duties can be handled by the owner or a designated employee. However, as the number of workers and therefore the amount of paperwork begin to increase, having a specific department with a dedicated HR manager becomes essential.
Perhaps the two most important HR responsibilities are making sure employees are paid on time and maintaining compliance with federal, state, and local laws. For most industries, the majority of these will be state laws as these are generally stricter than their federal equivalents.
Maintaining and documenting employee procedures through the use of employee handbooks and other guides is also very important. The old adage that “HR is there to make sure the company doesn’t get sued or to protect the company if they do end up in a lawsuit” is an oversimplification and barely scratches the surface of an HR department’s responsibilities, but it is one of HR’s most important functions.
If a business ends up in a legal dispute, it’s very important to have documentation that backs up the company’s arguments. Maintaining and preserving this paperwork (which includes employee evaluations, rate of pay increases, job descriptions, and much more) can be the deciding factor in whether the company wins in court or loses, which can eventually lead to disastrous consequences like bankruptcy.
There are a variety of software programs and packages tailored to HR filing requirements that can help make sure the right paperwork goes to the right places on time. Individual programs may be less expensive, but there are also benefits to using multiple programs from the same software company. This can be especially important for integration (i.e., having programs “talk to each other”) without having to convert formats or place the same information multiple times into different databases.
Contracting a PEO for Human Resources
A common solution for these small business owners to consider is HR outsourcing to a PEO. What is a PEO? A “professional employer organization,” or PEO, is a third-party company that handles many parts of a business that would normally be covered by a human resources department. These include maintaining and filing relevant paperwork, payroll, risk management, recruitment, and more.
A PEO can be the entity that pays your employees. However, this doesn’t mean that they’re running your company or that they are your employees’ “real boss.” As the company’s owner, you’re still in charge of hiring and firing employees and running the organization as you see fit.
The PEO works as a “co-employer” whose main function is to handle the paperwork so that you can focus on growing and expanding business operations. In simpler terms, they handle the boring and messy parts of HR while you focus on adding new products or services, overseeing employees, marketing, and other aspects of the business that are not only more “fun” but are also essential for the short-term and long-term growth of your organization.
Additional Benefits of Using a PEO
In addition to helping small business owners, their employees also benefit. According to the National Association of Professional Employer Organizations (NAPEO), 52% of employees in PEO-covered small businesses with 10 to 49 employees have a retirement plan, compared to 23% of their non-PEO equivalents.
Employee satisfaction and retention rates are also higher. One possible benefit of having a PEO, can be access to lower-cost healthcare plans.
For employers, PEO-assisted organizations enjoy increases in profitability and are less likely to go out of business. The return on investment (ROI) in cost-savings alone is roughly 27%, which can be significant for most small businesses.
Final Thoughts
Navigating HR requirements for small businesses can be difficult, but with the right amount of research and hard work, it can become easier. However, by outsourcing these duties to a PEO or professional employer organization, small business owners can reduce the amount of paperwork and headaches, leaving them more time to focus on building, growing, and expanding their businesses.
A PEO doesn’t run your company, interfere in day-to-day operations, tell you how much to pay your employees, or stop you from hiring or firing the people you want to employ. Instead, they free you up to focus on growing and expanding your business, instead of spending countless hours every month completing and filing paperwork with various governmental organizations.
Source: FG Newswire