Offering flexible solutions that fit companies of all sizes

Total Team Solutions Blog

Sep 23 2015

Outsourcing key to success for startups

By: John Morlock

 

A recent article in Forbes Magazine (September 2, 2015) outlined six strategies for startup companies.  The core theme of the article was that business owners need to remain focused on producing and selling their products and the best solution for that is outsourcing administrative functions. 

All companies are in business for a purpose, providing a product or service to others for a price that hopefully yields a profit.  However, in addition to operations that actually sell produce and deliver the products, companies also require administrative support services for accounting, payroll, taxes, IT, benefits, regulatory compliance, risk management and a number of other services.  No one person can be expert enough in all of these administrative functions to do it all themselves and even if they were, they would not have any time left to run their operations if they did it all themselves.  Yet, startups and small businesses cannot afford to hire full time professionals onto their staffs to handle these functions.

Realistically though, they do not need them.  You may need a bookkeeper a few hours a week to post transactions and a CPA at the end of the year to file your tax returns.  IT systems are critical to all businesses these days and require support when problems arise, but run fairly smoothly most of the time these days.  Payroll is processed every other Friday, but this is hardly a full time job.  The challenge is to find talented and capable full time employees who are willing to work part time for just the hours you need.

Not any more!  This is exactly what outsourcing firms specialize in.  CPA firms and bookkeepers have been around for many years providing outsourcing long before that term was even invented.  Then with the tech boom IT service firms got into the act as networking, routers, the internet and the cloud made many tasks simpler, but their administration significantly more complicated.  Now it is time to add human resources to the list of time consuming administrative tasks to be outsourced.

Payroll has been outsourced for years, with large companies such as ADP and Paychex and many smaller, local service providers as well.  However, the HR world has become much more complicated these days.  Many new regulations now apply to all businesses, whereas in the past small companies were exempt.  Budget deficits have prompted federal and state agencies to increase enforcement and payroll tax audits of businesses, especially with regard to workers classified as independent contractors.  Employee lawsuits are on the rise with the legal fees to defend often higher than the ultimate settlements.  Most recently the Affordable Care Act has complicated the world of health benefits so that if you do not have a proactive broker or advocate overseeing this, you will likely be overpaying and your employees under insured.

Enter the Human Resources Outsourcing (HRO) firms.  Like the CPA’s and IT companies, HRO’s provide specialists that provide you with the knowledge and expertise that you require, yet you only pay for them when you need to use them. 

Need help with the annual health plan renewal?  Their benefits specialist will work directly with your broker to shop the plan around to find the best coverage you desire at the lowest rates.  Plus, today many HRO’s pool their clients together into large group plans for medical, dental, disability, 401(k) and flexible spending plans that can provide additional significant cost and time savings, while reducing the company’s fiduciary responsibilities.

Having problems with some employees?  Their HR specialists can guide you through the performance review process, disciplinary actions and, if necessary, terminations following procedures that will greatly reduce your chances of an employee lawsuit.  They can also improve your hiring process so you are more likely to hire the right employees in the first place and avoid the aforementioned problem employees.  A recent 2014 study determined that HRO clients had an employee turnover rate that was 10% to 14% lower than comparable companies.

Expanding operations into a new state?  They can assist you in ensuring compliance with regulations that can vary significantly by state, such as minimum wage, paid time off, workers compensation, Family Medical Leave Act, etc…

There are too many benefits of HRO to mention here, but the fact is that businesses that use an HRO are approximately 50% less likely to fail from one year to the next.  For more information on HRO’s and whether Total Team Solutions could provide an HRO solution for you, call John Morlock at 800-836-9678


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