The statistics make the case for HR outsourcing.
Most small business owners want to grow their companies, but once they make the transition from working solo or with 1099s to building a staff, they have added an entirely new dimension to their enterprise. Most business owners went into businesses because they had an idea, product or service they knew was better than the next person – they didn’t go into businesses to be an employer. The business of employment is a complex web of laws, personalities, policies and emotions that can literally make or break a company.
I have seen many well-intentioned business owners stumble simply because they decided to carry the burden of HR on their own backs, or delegate tasks to staff who are ill prepared to handle the often-thorny issues. But the case for HR outsourcing is in the numbers.
Here are 10 facts and figures about the hidden costs of do-it-yourself HR that make the case for HR outsourcing to a trusted advisor.
1. 35% – That’s the amount of time small business owners spend on HR tasks—from dealing with medical benefits, to employee relations issues, to job descriptions to payroll. Based on a 40-hour work week (and we know that most business owners work much more than that), it adds up to a whopping 14 hours a week—at the very least. Think about what you could achieve with that time at your disposal.
2. $88,500 is the average salary plus benefits for a full-time, seasoned HR professional—the type of staff member who can advise you on best practices, offer solutions and keep you in compliance with ever-changing employment laws. The cost of outsourcing HR can be significantly less than that, making this cost typically the most compelling case for HR outsourcing according the the small businesses we consult with.
3. 24 hours a week – Those leaders who take a divide-and-conquer approach to HR are deflecting employees from their main jobs. While splitting the workload among different individuals seems like a viable approach, what often gets ignored is the amount of productive time lost by staff who handle HR by default. It’s a full three days a week according to the Society for Human Resource Management. If you agree that your employees are your greatest asset, you might ask yourself if saddling them with HR tasks is the best use of their time.
4. $2,156/each – Are your records in order? Employers can be penalized if they’re not. For example, ICE can fine you $2,156 for each Form I-9 violation.
5. 78% – Turnover can be devastating to a business, but it can be preventable. Did you know that the cost of replacing an employee can range from one-half to two times their annual salary? But losing employees doesn’t have to be inevitable. In fact, of all the reasons employees quit, 78% could have been prevented by the employer (Work Institute).
6. $160,000 – The EEOC just released its report on discrimination in the workplace. In 2020, the agency secured a record amount of recovery—more than $535 million for victims and resolving nearly 71,000 workplace discrimination charges. Discrimination is just one type of employee lawsuit, which on average, costs an employer $160,000 (Hiscox).
7. 318 days – Employee lawsuits are not only a financial burden they are a time drain. The average employee claim takes 318 days to settle. Is talking with attorneys and gathering proof to build your defense the best use of your time?
8. $100/day/person – Did you know that the American Rescue Plan Act (ARPA) changed COBRA for employers? It provides a 100% subsidy of COBRA premiums for assistance eligible individuals who lost group health coverage due to a reduction in hours or involuntary termination. But failing to satisfy the ARPA COBRA requirements may result in a tax penalty of $100 per qualified beneficiary per day. Typically, the penalty for COBRA violations is $110/day per person, and plan administrators (owners) can be held personally accountable for abuses.
9. $1,100/each+ – The Fair Labor Standards Act requires employers to pay the minimum wage, classify employees correctly (exempt/non-exempt) and pay overtime as required. Penalties can really add up because they are $1,100 per employee plus liquidated damages and retroactive pay. Employers who are found to violate the FLSA repeatedly or willfully can be penalized up to $2,074 for each violation.
10. Ten to one – Companies that choose an outsourced HR provider are more efficient, consolidating ten different vendors into one. Consider the amount of time it takes every month to manage a typical vendor and multiply that by 10. The time savings of consolidation can be a game changer. Think: payroll, employment technology, time and attendance, employee medical benefits, retirement plan broker, talent acquisition/recruiting, third party administrators, workers’ compensation insurance, HR coaches and employment attorneys.
The case for HR outsourcing has never been stronger. The amount and pace of change brought about by the pandemic has been dizzying, forcing many business owners to make difficult and important decisions without the benefit of an experienced HR advisor. The good news is you don’t have to go it alone. The SHRM-certified professionals at NEMR are a phone call away. Chat Live with us to learn more or Email Us.