4 Reasons You Need Human Resources (HR)

Jul 24, 2023 5:00:00 AM / by Payday HCM

Human resources (HR)  is a discipline made up of numerous different tasks and responsibilities. Because it can encompass so many different factors it’s hard to know what exactly it is and why it’s important. If you own or manage a business and have gotten by without any HR services up to this point, you could be at risk of financial penalties, legal entanglements, and other issues that will cost you time and money and lead to undue stress.

HR includes everything from onboarding (filling out I9 and other legal documents for new hires) to managing benefits and PTO. If you are running your own business, you are probably already doing several functions that an HR specialist would typically handle. This is not to say that doing things yourself is a bad approach but you need to be aware of what can happen if things don’t go as planned.

PaydayHCM has been finding solutions to the unexpected and helping businesses out of difficult situations for over 30 years. We are very familiar with the pitfalls that come along with running a business.

In this article, we’ll go over compliance, how to protect yourself and your business, and how all of it affects your bottom line.



1. Being Out of Compliance Comes with a Price

Compliance is a crucial part of ensuring your business is running above board legally. Without a competent individual or team handling your HR needs, you are at risk for hefty fines, back taxes, and interest payments. The penalties can add up quickly. It’s worth avoiding all of this by making sure you have top-tier HR services in place.

Take something as seemingly simple as an I9. The federal government requires this document to ensure an employee is eligible to work in the US. It may seem straightforward but any mistake or failure to submit these forms and result in monetary penalties. Those penalties can range from a couple of hundred dollars to more than $2,000 per violation. Willful violations (meaning you knowingly fail to comply or are indifferent to employee safety) can cost you even more.

Hiring an HR company also creates a system of shared liability. No longer is the business or business owner on their own, they have the backing of a larger and more experienced company. An experienced HR provider will have all of the necessary legal tools and insurance to help keep your business protected from hiring and offboarding mistakes, personnel management, and other compliance issues.



2. Human Errors Can Add Extra Costs

Human error is a factor to consider as well. There are two ways that we see errors happen most frequently. The first is the manual entry of hours, accruals, etc. Mistakes happen when incorrect data is entered by hand.

The second type of error takes place when a business owner or manager is entering information between multiple systems, like one system for timekeeping and a separate program for managing benefits.

The errors happen here as data is entered manually from one program to another or copies over incorrectly. All of these mistakes can become costly, especially when multiplied by several employees. That’s why we recommend automated systems for HR and a single program that has all the features that you need, instead of multiple separate programs. ADP, Workday, and other HCM providers offer single platform options.



3. A Lack of HR Knowledge Can Cost Your Business

Avoiding paying unnecessary unemployment expenses is another way that having HR services can save you money. For any business with high employee turnover, this is a real concern. If an employee is let go and you do not have the knowledge or experience to dispute unemployment claims, your state unemployment insurance will go up, costing you money. 

Again, when something like this happens for multiple employees, costs become significant and can really strain your business.

A lack of HR knowledge can also result in other costs as well, like losing employees because of low morale. Inefficient hiring is also a concern when lacking proper HR services. This can lead to a variety of problems. You may end up with hires that aren’t a good fit, or even employees with unchecked criminal backgrounds.



4. Human Resource Services Are Affordable

Some business owners mistakenly think that HR services are cost prohibitive. To avoid these costs they take on the tasks themselves. This is not a bad idea in and of itself but cost shouldn’t be the main factor behind taking on HR responsibilities in-house. This is because the cost is similar for each option.

You could pay $60-$70 monthly for Quickbooks, a self-managed system. Or you can consider an HCM company that will provide you with more personalized direction and guidance. A service such as that would be in the $50-$60 range per month for a staff of 5 to 6 employees. Either way, it is very affordable and worth deciding which way is best for your business to invest in HR services.

We don’t generally recommend hiring an in-house HR employee for smaller businesses. This is because a low-level HR specialist will still cost $40-50 thousand a year in salary and may not be experienced enough to handle all of your issues. That’s why we recommend choosing one of the options above. Either go with a more hands-on approach through Quickbooks or get more in-depth guidance from an HCM provider. Both are viable options.



You Don’t Have to Go It Alone

If these issues are keeping you up at night, it’s time to lay them to rest. Consider the three factors outlined above and whether they apply to your business. If so, HR services could be just the solution to solving some of your most challenging issues, including finances. Having an HR resource available full-time can save you money. Those savings free up valuable resources that can help your business in other ways.

We can provide further guidance on learning more about the benefits of hiring an HR service. At PaydayHCM, we’ve specialized in this type of guidance for more than three decades. We know our stuff and we are glad to answer any questions you have and help you improve your business through our services.

There is still so much information to share. If you want more expert knowledge, read our article about the health benefits you offer and whether you could be overpaying.

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