Kenneth Orr, Founder/President at BRG Advisory Group | National HR Outsourcing Brokerage

For companies looking to grow and expand their staff and resources, you’ll be looking at a higher expenditure overall. Another concern? The more you grow, the more HR you have to deal with.

When you’re in that rocky limbo of not being able to hire a full-time HR person, this can complicate matters and inadvertently increase your costs. These are costs not even linked to profit which can often be overlooked.

Contrary to those who clock in at 9 and leave at 5 – an office doesn’t run itself.

So, how do you deal with these increasing costs?

“82% of the time, poor cash flow management or poor understanding of cash flow contributes to the failure of a small business.” (PreferredCFO).

Administrative Costs

Considered more along the lines of expenses, this includes general and administrative costs, which are necessities for your business. Some examples could be rent, supplies and even legal fees.

A small startup will most likely have lower administrative costs. So, once you start to grow and expand your team, you need to continually calculate your operating costs against the revenue coming in. This may see a number of employers exploring their options to find some wiggle room and keep their head above water.

But – where you cut costs you can expect setbacks.

“A significant rise in the general and administration expense to revenue ratio may indicate that the investment in general and administration is not as cost effective as it should be” (Plan Projections). 

You can’t operate efficiently if you don’t have a reliable, permanent place of residence for your business when it comes to growth. In 2015, 3.9 million US workers took to remote working, today that’s risen to 4.7 million – which is 3.4% of the population (FlexJobs). 

Whilst this can be a great way to lower operating costs, there are also some negatives. One example is staff being isolated, which can lead to lack of bonding within the team, potentially causing problems or creating friction in the future.

On top of that, isolation can lead to low morale or be stressful for certain individuals. As we all know, stress is terrible for our health and general wellbeing. In saving money on rent, you’re potentially increasing costs when it comes to your workers’ compensation.

Every business will need legal assistance in some form or another during their time in operation. This could be for a number of reasons like employment contracts or taxes. They can be ongoing costs or one-off so you need to ensure these are costs that you can cover.

When you’re a small business looking to branch out, you may lack the experience or knowledge required to grow whilst staying compliant. If you land in legal trouble and don’t have the expertize to get yourself out of it – that could be the end of the line.

Paper-Based Systems

In 2017, Xerox conducted a study that found more than 80% of small/mid-size businesses want to go paperless. This means digitally invoicing, reporting, managing legal and HR and means a huge proportion of U.S. businesses are still not entirely paperless.

Using paper-based systems is not only time consuming, but it could also be costing you money. In the U.S. alone, the use of paper forms costs $120 billion a year to businesses (GravityFlow). Not to mention, time spent sorting through paper-based systems, is time that could be spent on generating more revenue for the company.

In not evolving to a digital system of managing your admin and HR, you’re adding additional money to your operational costs as well as consuming precious employee and management time.

This loss of productivity can lead to further poor time management. Hours cannot be monitored which could invalidate payroll and so the cycle continues. Keeping track of expenditure is crucial in order to reduce business risk, complexity and overspending. For smaller to medium companies looking to expand, that’s a cost you ought not to spare.

So, going digital could save you a lot on your HR costs, but there is an even more efficient method in the form of PEO.

Why A PEO Broker?

A Professional Employer Organization (PEO) is an outsourcing solution to managing your HR, payroll, benefits, workers’ compensation and compliance. This allows employers more time to focus on growing their business in other capacities whilst leaving the PEO to handle itself.

This is a co-employment model that sees your PEO become your employer of record, therefore taking on the responsibility of your company’s HR. In the long term, the saving of these costs for a smaller business is a sure-fire way to help with growth whilst keeping an eye on ingoings and outgoings.

But with so many options and price ranges out there, how do you choose the best option for your business?

Part of the attractiveness of a PEO broker model is that it’s essentially wholesale as it works exclusively through a broker to offer services. This is unlike the traditional model which is full retail on each service item (payroll, benefits, workers’ comp).

You also have to consider the short term costs of solving HR with a quick fix from any old PEO versus having a concrete, long-term solution that is proven to save you money. In not securing a PEO broker to find you the best deal, you could end up costing yourself more by seeking out the option yourself.

A good broker knows how to get you the best service for the best price and draw up a deal that is favorable to all parties. We don’t make more money when you choose a particular PEO service over another – so you know you can trust their guidance.