One of the biggest pitfalls for small business owners is that they don’t know what they don’t know.

That can get them in trouble, especially when it comes to human resource functions. Many small businesses can’t afford a full-time HR person. The answer for some: outsourcing part or all of their HR responsibilities.

The most commonly outsourced HR function is payroll, which many companies contract out to accountants or payroll vendors.

HR consultants can provide broader assistance on other important HR issues including compliance with state and federal laws, performance management, compensation planning, employee training and development, and risk management.

FILLING THE GAPS

Oftentimes smaller employers have their in-house accountant or office manager perform HR services, although that’s not their area of expertise, said Marnel Mola, director of the Colorado Springs-based southern regional office of Employers Council.

Even if a company hires a part- or full-time HR person or persons, those people might not have the capacity to do certain projects, whether that be setting up a performance management system or looking at the company’s compensation structure and creating a compensation plan.

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“Sometimes it’s bandwidth — and so it’s not necessarily outsourcing the entire function, but outsourcing components of their job,” Mola said.

Employers Council, which is headquartered in Denver, works with employers with a single employee all the way up to thousands, with the majority being small to medium-sized businesses, she said.

Many of the employers with whom Employers Council works seek assistance on compliance with workers compensation and wage and hour laws, which undergo frequent changes and updates, Mola said.

“The other big piece that sometimes falls short, if there’s not someone fully engaged in that process, is overall employee relations — just having that point of contact for employees, whether they’ve got an issue with their supervisors or with some of the benefits and payroll systems that you roll out,” she said.

Small companies often seek help in managing relationships.

“We promote people into leadership roles because they’re good workers,” Mola said. “But we don’t always give them the tools to be successful at actually managing the people part. … If you have bad leaders, you have unhappy people, and that’s extremely costly.

“It’s a really fine line and balance, because an HR person’s job is to help the employer stay in compliance and make sure they’re doing things correctly, but they’re also an employee advocate to help employees navigate all of the complexities of work.”

Human resources people also play a major role in helping employers build their workforce and fill skills gaps.

“Those companies that don’t have an HR focus are probably missing out on some opportunities to develop their employees,” Mola said.

Employers also should be aware that they remain liable for complying with applicable laws and rules even if they outsource payroll and other HR functions.

“There are a lot of laws and rules that come into play,” Mola said. “You still, as the employer, need to make sure you know the rules.”

AVOIDING RISKS

HR Branches specializes in supporting small and micro businesses that self-administer their HR functions and need affordable help and resources.

Owner Reanna Werner, an HR professional with more than 20 years of experience in human resources and recruiting, started the company two years ago as a companion business to her husband Brian’s accounting firm, BRW Tax and Accounting.

“He was constantly asked HR questions by his small business clients,” Werner said. “We quickly realized that small businesses have been left behind in the world of HR.”

To provide an affordable service for small businesses, Werner combined technology and consulting.

“We’ve created an online library of about 200 HR-related resources — everything from pre-created performance evaluations to prewritten policies, everything that a DIY small business owner needs,” Werner said.

Depending on the level of membership a client selects, HR Branches consultants also may work on-site to perform functions such as managing employee files or creating an employee handbook.

“No two situations ever happen that are the same,” Werner said. “So when my clients have those weird and wonky situations, we’re here to hold their hand and guide them.”

Werner said many small business owners aren’t aware of compliance issues that include maintaining the proper files for all employees.

“That’s a huge risk,” she said. “Also, most small business owners download an employee handbook off of the internet. That usually is a higher risk than not having one at all, because you’re neglecting Colorado state laws and requirements. I’m able to help them out with compliant handbooks that reduce risk.”

Werner said many of her clients ask for help with performance management.

“Probably the majority of my conversations with clients is figuring out how we can work with an employee to improve performance, productivity or behaviors,” she said. “The predecessor to that is developing good job descriptions and hiring. And if you back it up beyond the job description, I work with clients on doing a needs analysis and understanding what will truly fill that need. … Then I’m able to help them go to the market and advertise for that position.”

When it comes to sticky personnel issues like terminations, “small businesses often opt not to terminate a [poorly performing] employee because they’re afraid of what would happen if they were to fire someone,” she said. “We’re able to take that fear out of the equation.”

Werner helps small businesses find their best options for benefits packages and understand tricky areas such as unemployment insurance.

“If you don’t respond with the right information or have the right policies in place, you will likely lose an unemployment claim,” she said.

That happened to Asteris, a company that provides and maintains imaging management software for veterinary practices.

“We’re a small company with about 15 people,” Asteris COO Angela Otis said. “None of us are trained in HR, and we’re not big enough to need a full-time person. Before we outsourced, I relied on my experience and hoped it was correct. We didn’t have an employee handbook. We had assumed that there are things that are right and wrong.”

The company ended up paying an unemployment claim because there were no written guidelines about employee expectations, such as notifying a manager about absences from the office or being late to work.

After Otis sought help from HR Branches, Werner worked with Asteris to develop a handbook and learned how to keep proper documentation on all employees.

“We’re saving a lot of money” by outsourcing those functions, Otis said. “I sleep better at night.”