Your small business simply isn’t large enough to warrant a fully-fledged human resources department. Unfortunately, human resources is hardly a one-person job; it takes a team of professionals to shoulder all the responsibilities demanded of HR — or else an experienced professional who is well-equipped with the right supplementary resources.
If your business can’t afford or contain a qualified team of HR professionals, there are other options. Read on to learn about a few more-affordable HR alternatives that provide the services your business needs to succeed.
Software development is booming, and competition amongst developers often pushes many to offer their products for free. As a result, it isn’t difficult to find free HR software solutions that your business can use to facilitate HR tasks — and you are no doubt attracted to this option due to its seeming lack of cost.
Unfortunately, free software typically isn’t totally free. You still need to have workers dedicated to using the software correctly; even if the tools automate certain processes, you or your employees will need to control and monitor the tool to ensure no major mistakes are being made. Worse, many seemingly free software solutions offer only basic tools, and to unlock the capabilities you need you will need to pay — so-called freemium tools that cost more than you expect.
While free software can fill in the HR gaps for especially small businesses with meager needs, they typically don’t provide sufficient services for larger businesses in the long term.
Paid HR software tends to be a bit more robust than free or even freemium options. This means they tend to offer more features to ensure that your business receives the exact tools it needs to provide appropriate HR services to employees.
On the downside, paid software solutions also tend to require constant attention from experienced HR professionals, which means using paid software doesn’t inherently excuse you from hiring an HR team. If you are committed to keeping at least one HR professional on staff, you need to equip them with the right software tools, but if you are trying to eliminate in-house HR entirely, this might not be the best solution for you.
Freelancers and Consultants
Hiring a freelancer might be an excellent short-term option to meet staffing shortages in HR and elsewhere, but you shouldn’t lean heavily on freelance HR providers for a few reasons. First, HR professionals need to have intimate knowledge of a business and its employees and access to sensitive information including contact information and payment accounts. Typically, you don’t want to provide this valuable data to a freelancer, who will only temporarily have affiliations with your business. Secondly, you simply cannot use a freelancer for an extended period of time without becoming non-compliant with state and federal law. Thus, you should only consider relying on an HR freelancer or consultant if you have a plan for reducing their use relatively quickly.
The first of two types of HR outsourcing companies, PEO stands for professional employer organization, which is a third-party HR services provider that functions as a co-employer with your business. Essentially that means that you share employment of your workers with your PEO, who will then assume certain liabilities and responsibilities for their employ. Typically, PEOs perform the simple but time-consuming tasks associated with employment, to include:
- Payroll processing
- Payroll record maintenance
- Payroll tax reporting and deposits
- Paystub preparation and delivery
- Wage garnishment and deduction
- Paid time off accrual
In more advanced agreements, PEOs will also provide recruitment and termination support, employee training and development, survey and feedback management, strategic planning and more. Costs for PEO services vary because services are highly tailored to your specific HR needs. Additionally, most PEOs will scale services with your business to ensure your growth does not result in a lapse in HR coverage.
HRO stands for human resource outsourcer, which is a completely separate business entity that provides you HR services. HROs go by many names, including plain-old HR services providers, but they should not be confused with PEOs because they do not co-employ your workers; they function more like HR vendors. However, like PEOs, HROs will customize your plan to ensure you receive the exact functions your business needs. In fact, HROs are even a bit more flexible than PEOs, allowing you to cherry-pick which functions you will keep in house.
The primary difference between HROs and PEOs is the type of relationship you have with your HR provider. Do you want a service-oriented third party to provide only the HR functions you do not want to handle, or do you want an HR partner that can grow alongside your business to ensure consistent service for your employees?
After using an HR alternative, you might never try to establish an in-house HR department. The modern solutions for HR are so well-developed that many businesses continue using a combination of software and third parties even once they grow large. You should consider your HR options before making a business strategy for the future.