Desperately need a hand with your HR?

| September 14, 2015

Is your HR department drowning in compliance, employee documentation, hiring staff, policy creation, legal claims, and extra projects? A short-term, outsourced HR solution may be the answer.

Small businesses tend to manage their people in an informal way. Business owners are able to rely on the “personal touch” as they usually know every employee. However, as businesses expand and employee numbers grow, it becomes more difficult to manage human resources in this way.

When businesses reach this tipping point, they typically begin to think about investing in HR expertise. Establishing an internal team to deliver on all aspects of HR can come with a hefty price tag – this is where an outsourced HR function can really make sense.

For most businesses, workforce costs account for 50-60% of total operating costs so there is a compelling reason to focus effort to ensure a return on that investment. An outsourced HR solution delivers a flexible approach to meeting both compliance needs and a higher return on workforce investment.

When I begin to work with clients, the first priority is generally on mitigating the risk of non-compliance with the ever-changing and complicated legal environment. That’s an important focus – it’s what keeps business owners out of trouble. Cloud-based technology, designed specifically for medium-sized businesses, meets this need in an efficient and cost-effective way, and removes the need to maintain that expertise internally.

Once compliance is in place, business owners begin to look to maximising the return on workforce costs through workplace improvement initiatives that drive performance and growth. An outsourced model gives medium-sized businesses the flexibility to source this specialised capability on an as needs-basis.

Here are some common HR management pitfalls that I see when I begin to work with clients:

  1. Hasty hiring– from poor job descriptions that attract the wrong candidates to a hurried interview process that results in hiring “warm bodies”. Estimates on the cost of a bad hire vary, but it is commonly accepted to be in the range of 80% to 150% of annual salary when you factor in additional recruitment cost, time to recruit, training costs, missed or delayed business deliverables, impact on the rest of the team and impact on client delivery.
  2. Incorrectly classified employees– this is a very risky area for businesses and stiff penalties can be imposed for getting it wrong. In addition to penalties, companies can be up for back-dated employment entitlements such as superannuation and entitlements.
  3. Outdated (or non-existent) employee documentation– To reduce employee claims, employers should have in place employment contracts that are compliant with the Fair Work Act, as well as work-related policies. Businesses of all sizes should have an employee handbook outlining expectations. Having a handbook isn’t enough however. Policies need to be kept up to date and employees re-oriented at least annually on any changes.
  4. Training takes a backseat– New hires need the tools to hit the ground running, current employees need development to support the business today and into the future, and leadership skills become more important as managing employees is delegated beyond the business owner. Strong leadership leads to strong businesses – hands down. Productivity, communication and relationships hinge on good leadership skills, and research shows that you can gauge overall business performance pretty well based on employees’ view of management.
  5. Performance issues aren’t dealt with adequately– Messy firing can lead to unwanted legal claims. While no termination is a positive one, it can be easier when properly prepared for. If feedback doesn’t solve the problem, then terminating employment may be unavoidable – going about that the right way is critical to avoiding unfair dismissal or adverse action claims.

Owners of medium-sized businesses have survived the life and death struggles of a small company and can begin to see the promise of realising the dream that led them to start their business in the first place.

However, celebration can be cut short by unexpected human resource problems that can impede continued growth. An outsourced HR function can both mitigate compliance risk and maximise sustainability and improvement in a flexible and cost-effective way.