Why is it imperative to outsource HR functions for your start-up

As per a recent IBM and Oxford study, 90% of the startups in India fail within the first five years of inception regardless of governmental support, funding, mentoring and services. This signifies the level of competition in the market and poor strategy of start-ups and scaling up without adequate preparation.

Startups are different from traditional businesses primarily because they are designed to grow fast. One powerful approach to prepare for rapid growth is to engage a third party to handle human resources functions. By outsourcing HR processes, companies can make sure they are ready to expand and scale up faster in long term. HR outsourcing is less expensive than a fully-functional in-house HR department which requires additional office space, highly trained and experienced full-time HR staff.

Managing human resources efficiently and intelligently is critical to your business success. Start up owners can decide which functions to retain in-house and which to outsource, it makes business sense to sub-contract some or all non-core activities to specialist service providers. It’s vital to find a service provider who can offer the right mix of services. Make sure you choose someone who invests time getting to know you and your organization so that the impact they do have is a positive one; and it will be in line with your vision and goals. The initial time spent choosing the right outsourced human resources Consultants for you and your organization will pay off enormously in the long-term.

Outsourcing HR functions will enable you to focus on other areas of your business, such as market research, promotional activities, product development, advertising, quality assurance and customer service, instead of worrying about the technicalities and micromanagement involved with in-house HR.

How you benefit by outsourcing HR functions

Cost benefits

HR outsourcing reduces the fixed cost of managing employees. It allows start ups to take advantage of sophisticated HR companies instead of building that expertise in-house. By outsourcing, startups are able to eliminate the need to recruit new in-house staff for HR functions and save on salaries, benefits, office space, computers or software required by that staff as you are offloading these responsibilities to a dedicated company wherein the talent and infrastructure are already in place. Outsourcing helps you to financially maintain nonrevenue-generating back-office expenses. Financial liability for start up business decreases due to the shared burden. Furthermore, HR outsourcing costs are variable and can be reduced when business needs warrant.

Time Efficiency

Start up owners spend up to 40% of their time on non-revenue-generating administrative activities, such as creating/updating policies and procedures, preparing hr documents such as employment contract and employee handbook, payroll, benefits administration, recruitment tasks and human resource management. Therefore they get distracted from their foremost responsibility of concentrating on the core business strategies. Outsourcing gives you the ability to focus on the core areas of your business, such as market research, product development, advertising, quality assurance and customer service. Thus outsourcing your human resources will free up your time and your employees’ time, allowing you all to focus on providing the best possible services for your clients.

Improved Compliance

Most of the promoters of start-ups are young and dynamic but they are unaware of different laws, rules and regulations which keep on changing every year. The increasingly complex regulatory environment makes it nearly impossible for startups to stay up to date with compliance issues when they are already occupied with their core business strategies. The greatest challenge is that failure to comply can lead to expensive fines. Outsourcing HR functions to a trusted service provider can help you understand and take action to comply with these laws and regulations. HR outsourcing firms also maintain and audit company policies and practices to ensure your organization and your employees’ best interests are protected. Thus businesses can minimize risk of costly lawsuits.


An understanding of the organization’s current and future business strategy and potential changing business profile is important.  Outsourcing Company provides you with expert, trained and aptly qualified HR professionals who possess an advanced skill set and are comfortable working with workplace technologies, systems, software, and methodologies. This helps your organization easily adapt to new functions and train your workforce on newly added functions. They possess more experience in the HR field. They provide a continuing support and share knowledge

Advanced human resources technology utilized by outsourcing providers help streamline important HR functions, such as payroll, benefit administration and compliance management. Seeking inputs and support from such professionals could help a start-up grow and thrive and make the transitions between different stages of development smoother which helps small businesses compete.

What to outsource

When start up owners considers outsourcing HR, they mostly wonder about what functions can be outsourced. Following are some key HR functions which can be outsourced; many of them include lot of administrative tasks which are time consuming.


If your start up is serious about finding great candidates and getting those key positions filled, then you can outsource your recruiting to source candidates. Many times recruiting activities distracts start up owners from core business activities because they don’t have someone on staff to just work on recruiting. It also helps start ups to be competitive. Recruiting activities include following costs; advertising on job boards, background screening, applicant tracking systems, and recruiting technology. All these costs are rolled into one when you outsource and are usually less than in-house recruiting .Cost-per-hire is often reduced along with time-to-hire because of dedicated recruiting resources. Financial liability decreases due to the shared burden. Streamlined processes eliminate delays. You can pay for specific recruiting activities.

Employee handbooks and Policy manuals

Not having company policies in writing is a big trouble for your business. Your start up need to have some form of an employee handbook which outlines different policies on everything from benefits, to dress codes, leave policy, pay and promotions, company’s legal obligations and expected employee conduct. The policies outlined in the handbook need to be updated on a regular basis and communicated often. The creation of an employee handbook can be an exhausting task for employers therefore HR outsourcing company can take on the burden for employers by ensuring proper compliance with laws and regulations. As laws are updated regularly, employers must be sure to stay up to date with company policies to avoid potential legal issues.

Payroll and Benefits

Payroll processing is a complex and potentially risky business operation and yes it is a repetitive task. No matter how many employees a business has, processing payroll demands a lot of time and attention to detail. You can face a mountain of tasks each and every month from tracking time and attendance, reviewing payments, and reconciling each payroll cycle, calculating payroll each time period, printing, signing, and distributing paychecks, generating reports for in-house and accountant use, preparing and remitting payroll taxes and returns to government agencies. Thus your time is consumed with non-strategic and administrative tasks. A professional payroll company employs individuals who know payroll processing inside and out. These individuals specialize in the complexities of payroll taxes, as well as compliance with government regulations. The outsourced company can be responsible for employee pay slips, advising on tax and deductions and also offer a payroll analysis for accounting purposes.

Training and Coaching

The development, management and delivery of training are a distraction for owners. No company has all the knowledge they need internally to be successful; sometimes it’s necessary to hire an expert to teach internal employees. Being a start up it’s difficult to track down appropriate activities for different training courses and administering complex training processes such administrative tasks can be extremely time-consuming and frustrating. Training is an investment for future success; if you seek an outside support for your training activities you can definitely maximize the return on this investment by saving a great deal of money as well as your precious time. Outsourcer will help you align all the training initiatives to your business objectives and goals and will also assist you in implementing post-training activities. As training is a variable activity you can get outside help based on the demand of training you need when you need them and thus you can control the training cost unlike the training programs which are managed internally; calls for end to end training administration and other hidden costs.

Regulatory Compliance

Startups face numerous legal and regulatory challenges in order to grow into successful companies. Constantly changing regulations in India are affecting different areas in the life cycle of a business. Startups must consider the following key HR compliance areas: State and federal hiring laws, Wage law compliance, Benefits compliance, Contractor or employee rules etc. Outsourcing firms employ HR professionals whose purpose is to stay current on federal and state employment laws. This will help you comply with these laws and avoid costly lawsuits brought on by employees.

Curious about what else can be outsourced? Contact us to learn more about our HR services. Staff Stuffs is here to help you.

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