6 Ways HR Outsourcing Gives Venture-Backed Companies a Competitive Edge

Group of employees at venture-backed companyIt’s the best of times and the worst of times for venture-backed companies. On the one hand, investment capital is flowing freely right now. There’s plenty of opportunity to capture the attention of investors and scale your company, especially if you’ve demonstrated that you have a sustainable business model and good profit margins.

On the other hand, however, the future is uncertain. Supply chain disruptions, labor shortages, economic volatility, and potential tax increases could all create significant challenges for your company over the next year. To secure your next round of funding, you’ll have to demonstrate stable growth and market traction.

All of this means that founders have a lot resting on their shoulders. Maybe too much.

Why Consider HR Outsourcing?

It’s in these kinds of environments that back-office functions like HR often become back burner issues. And that’s a serious mistake.

HR is the lifeblood of your talent workforce. It’s not just about paperwork and compliance (although those are critical aspects). It’s about adding value by creating experiences that keep your employees engaged, happy, and productive. In our current labor environment, that’s more important than ever before.

But running your HR department that way takes time and money, both of which are in short supply for growth companies.  

That’s where HR outsourcing comes in. If any of the following are true for you, then it’s time to consider a PEO:

  • You’re getting ready for series A funding and you need to get all of your ducks in a row
  • You don’t have budget for an internal HR team
  • You’re getting ready to scale
  • You’ve been doing all of the HR work yourself and you’re burned out

A PEO can help you in all of these scenarios, because it lifts the burden of HR off of your shoulders entirely. By partnering with a dedicated team of HR experts, you can rest assured that your company is compliant, your employees are getting the best possible benefits, and your legal boxes are all checked.

What Are the Benefits?

As a venture-backed company, you have to keep close tabs on your cash flow, burn rate, and profitability. That’s why many founders try to manage costs by handling HR themselves (or have another team member do it on the fly). But the truth is that when you don’t have strong HR processes and structures in place, you’ll actually spend more and open yourself to potentially crippling risks like missed tax deadlines, legal complications, and compliance violations.

Even if you are able to keep all the HR balls in the air, you’ll spend too many hours getting it done – hours that could be better invested in the growth of your company. That’s why you need a PEO.

What specific benefits can you expect when you outsource to a PEO? Here are six:

1. You’ll save money.

Working with a PEO is almost always less expensive than handling HR internally for two reasons:

  • You won’t have to hire and pay an HR team.
  • You’ll pay less for insurance and benefits.  

PEOs operate on economies of scale. Because they are able to group their clients together in a single employee pool, most PEOs can offer better rates for insurance and workers’ compensation than you could get on your own. If you qualify for the PEO’s group plan, you’ll usually pay less than you would otherwise. If you don’t qualify, many PEOs can help you find an alternative plan through a broker, and they’ll still help you get the best possible rate.

2. You’ll save time.

There’s another reason PEOs make good economic sense for your growth company: time equals money. More specifically, more of your time invested in growth equals more profit for the company. The less time you need to spend on HR, the more you’ll be able to invest in profitability and growth.

A PEO can also help you make the most of your time by: 

3. You can provide better benefits for your employees.

In addition to saving you money on your insurance rates, a PEO can also give you access to better quality insurance, again due to economy of scale. You may be able to add additional coverage like dental and vision, and the PEO can also help you manage the process of educating your employees about their options. The PEO will walk employees through open enrollment, monitor usage so you can help employees who may be struggling, and answer any questions about policies, benefit offerings, and enrollment.

4. You’ll stay compliant.

No CEO has hours each week to spend researching changing labor laws. But sometimes guidelines change quickly and failure to comply could cost you thousands. When you partner with a PEO, you can leave all of that responsibility in their hands so you can focus on the daily needs of your business.

The PEO partnership reduces your risk and liability through a relationship known as co-employment. Co-employment means that you share employer responsibilities with the PEO. You also gain access to the legal expertise and compliance knowledge of your PEO team so you can rest assured that every detail is correct.

5. You’ll have access to better HR technology.

If you’re still using manual processes to manage your HR department, it’s much easier for costly errors to slip through. Manual processes are notoriously slow and error prone, and it’s also more difficult to find the data you need when you need it.

Making the switch to a sophisticated HR platform will help you manage your workforce more efficiently, monitor engagement and productivity trends, facilitate onboarding, support employees through an online portal, and much more. When you work with a PEO, you get all those benefits as part of the total solution.

6. You’ll be positioned strategically to scale.

Scaling usually includes a significant investment in the people side of your company. Recruiting, hiring, onboarding, training – all of these things take time and streamlined processes. Outsourcing is often the most efficient and cost effective way for growth companies to manage their growing people needs. It’s the best way to make sure you find great talent, manage all the details of hiring and workforce management, and prevent liabilities.


Grow HR Strategically with HR Outsourcing

As a venture-backed company, you’re accountable to your investors and you need to demonstrate that your company is stable, both financially and operationally. A PEO helps you put the right HR processes in place from the start so you don’t get stuck in a mess later on.

As you continue to expand, you may reach the point where it makes sense to bring some of these processes in-house. For small and mid-size companies looking to manage cash flow and burn rate while still providing a superior employee experience, however, the PEO solution gives you a competitive edge so you can stay focused on what really matters: the growth of your company.


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