For business owners, especially those who lead small and midsize organizations, the pace of business is often frantic. The business leader needs to stay focused on the needs of the customer and put out the inevitable fires. That means important functions such as payroll, benefits administration and HR end up getting shuffled to the back of the line and are often given to someone without specific experience in these areas.
“Whether a person knows anything at all about payroll, benefits or HR, the regulations that guide it, or the associated reporting requirements becomes irrelevant,” says William F. Hutter, CEO of Sequent. “These functions are done haphazardly or as needed, rather than with the guidance of a proactive plan and knowledge of the legal boundaries. That can create a very large gap in compliance.”
Smart Business spoke with Hutter about the challenges smaller business face with essential but secondary functions, and how these responsibilities can be better managed.
How can those who own or operate smaller businesses keep up with these responsibilities so they can focus on their company’s core functions, those activities on which the business was established?
It’s almost impossible for an organization to keep up with all the legal changes that happen day in and day out. Under the Obama administration, some 6,000 new regulations have passed that impact employers. Unless there is a specific effort to understand how these laws affect a company today and in the future, it’s impossible for smaller companies to be proactive.
That’s why some companies choose to outsource their benefits administration, HR and payroll functions. Contracting with a specialist means working with an expert. It’s their primary business, not an afterthought.
Typically companies are outsourcing a number of these functions — taxes, workers’ compensation management, insurance, retirement plans and legal help. And while they outsource to various service providers, they maintain liability for their actions. Working with a comprehensive service provider, however, can protect the business from associated liability, while consolidating and very often reducing the total cost, which is an efficient way to manage those aspects of their business.
There still needs to be internal HR staffers involved in the exchange with any provider, whether it be multiple providers or just one. No outsource service provider can manage a company’s employee relations. The people inside the company should be in a position to leverage their partners to create an ongoing dialogue that adds value to the company, while freeing up staffers to focus on their core responsibilities.
What reasons do business owners have for not utilizing an outsource service for these functions?
The No. 1 reason business owners don’t outsource is that they fear they’ll lose control. That’s complete fiction. In fact, business owners find they have more control because they’re not spending hours trying to understand their compliance requirements. Instead, the work is passed over to people who are well-versed in that area, which also offers peace of mind. Owners get to focus on the company’s more meaningful activities — those that drive the business forward — while having the assurance that they’re not running afoul of the law.
What do third-party consultants offer to smaller businesses?
The real value of third-party consultants working with a company is that they have fresh eyes. They get to look at things dispassionately, above the day-to-day activities, and see the operation in a way that owners often can’t.
Consultants shouldn’t just be brought in when there’s a problem. It’s when things seem to be going well that businesses get complacent. And that’s when owners need to look toward the future and make improvements. That’s easy to say and hard to do because the pace of business can be relentless. Third-party consultants can step in and give business owners a chance to catch their breath.
There are always opportunities to improve how a business is run. But it requires change. A business can’t improve and stay the same. Sometimes the best thing to do is ask for help.
Insights HR Outsourcing is brought to you by Sequent