• Protecting confidential payroll data is key to preventing fraud and potential data breaches.
• Payroll security strategies involve implementing access control systems and training employees in security best practices.
• At EmPower HR, we provide payroll and other HR management solutions to make your business safer and more efficient. Contact us to get started!

Payroll processing involves dealing with a trove of sensitive employee information. To keep confidential data safe and prevent fraud and potential data breaches, companies need to have an efficient payroll security strategy in place.

Yes, we know this can be a complex topic, so we’ve put together a guide with everything you need to know about payroll security. Read on to learn why you need to protect your payroll data, the most common types of payroll fraud, and practical steps to strengthen your payroll systems.

Let’s dive in!

What Is Payroll Security?

Payroll security involves all the processes that a business implements to safeguard the integrity, confidentiality, and availability of payroll data.

When paying salaries and managing employee benefits, companies get access to all kinds of personal information from their employees. This involves names, social security numbers, salaries, addresses, and bank account details. What’s more, they also handle data regarding bonuses, taxes, hours worked, and holidays.

So, payroll security is about ensuring that all this sensitive information is safe to:

• Protect employees 
• Maintain compliance with regulations
• Prevent unauthorized access or fraud

Why Does a Payroll System Need Security?

Payroll systems deal with two critical assets: employees’ salaries and other highly sensitive information. So, it’s not hard to imagine why they need to be protected.

Payroll security breaches can have a very negative impact on your business, from serious financial losses to damaging your brand’s reputation.

In 2023, the global average cost of a data breach was $4.45M

— IBM

Here are some of the main reasons why your payroll system needs to have strong security measures in place:

• To keep sensitive information confidential. Unauthorized access to payroll information could lead to identity theft, financial fraud, or other malicious activities.
• To prevent fraud. Payroll systems deal with financial transactions. Security measures help you avoid fraudulent activities, such as creating fake employees, altering salary figures, or redirecting funds.
• To stay compliant. There are several laws and regulations that protect employee data as well as financial information. Non-compliance could have legal consequences for your business, such as penalties and costly fines.
• To maintain trust. Employees trust you to handle their personal and financial information with care. A breach of payroll security can undermine this trust and hurt your company.
• To protect your business against cyber threats. Ransomware, phishing attacks, malware… your business is exposed to all kinds of digital risks and your payroll system needs to be protected.

The Common Types of Payroll Fraud

Payroll fraud occurs when someone illicitly manipulates payroll processes to gain financial benefits. This can take various forms, here are some of the most common:

• Ghost employees: It happens when fictitious individuals who don’t work for the company are added to its payroll system. The fraudster may create false identities or use the details of former employees.
• Time theft: Employees may manipulate timesheets, such as adding more hours worked or submitting fraudulent overtime claims.
• Salary fraud: Employees or administrators may manipulate salary figures, either by increasing their own pay or altering the salaries of colleagues.
• Employer Fraud: Employers may engage in fraud by misclassifying employees as independent contractors, underreporting payroll figures, or misrepresenting the nature of a worker’s duties to lower insurance premiums.
• Tax fraud: This includes underreporting income, falsely claiming tax credits, or manipulating tax withholding information.
• Workers’ Compensation fraud: Submitting fictitious or exaggerated injury or illness claims to obtain compensation benefits, as well as claiming that an injury occurred at work when it didn’t.

Who Is Leaking Payroll Information?

While payroll fraud often happens internally, payroll information leaks can also involve external actors. According to Verizon’s 2023 Data Breach Investigations Report…

“74% of all breaches include the human element, with people being involved either via Error, Privilege Misuse, Use of stolen credentials or Social Engineering.”

Potential sources of leaks may include:

a – External Hackers

No matter the size of your business, this is the most frequent cause of payroll information leaks. Following Verizon’s report…

83% of breaches involve external actors and nearly all of them are financially driven

External hackers may gain unauthorized access to a company’s payroll systems or take advantage of vulnerabilities in the network to steal payroll information. Also, through social engineering, they can manipulate or trick employees into disclosing sensitive information, including payroll details.

b – Internal Employees

Employees might leak payroll information accidentally, by sending sensitive data to the wrong recipients, leaving documents in public areas, or misplacing physical records. They can also fall victim to phishing attacks.

Finally, disgruntled employees may intentionally leak payroll information as a form of sabotage.

c – Third-Party Service Providers

Leaks may occur if your business outsources its payroll processing to a third-party service provider and the provider’s security measures are inadequate.

7 Tips to Protect Payroll Data

Now that you are aware of the main risks and threats that your business is exposed to, it’s time to see how to keep your data safe!

Here are 7 tips to improve the security of your payroll data:

1 – Implement Access Controls

Limit access to payroll systems and data to authorized personnel only. By implementing role-based access controls, you can ensure that employees have the minimum level of access necessary for their job responsibilities.

Make sure to regularly review and update access permissions.

2 – Encrypt Sensitive Data

Use encryption to protect sensitive payroll data both in transit and at rest. This guarantees that, even if unauthorized individuals gain access to your payroll data, it remains unreadable without the proper decryption keys.

3 – Regularly Update Software and Security Patches

Keep payroll software, operating systems, and security applications up to date with the latest patches and updates. That way, you can decrease vulnerabilities that could be exploited by hackers.

4 – Conduct Regular Audits and Monitoring

Perform regular audits of your payroll data and processes to identify any unusual activities or discrepancies. You should also implement monitoring systems that can detect and alert people to suspicious behavior, providing an early warning of potential security issues.

5 – Train Employees on Security Best Practices

Provide security awareness training to your employees, emphasizing the importance of safeguarding payroll data. Train them to recognize phishing attempts, use strong passwords, and follow secure data handling practices.

6 – Secure Physical Access to Data

If your payroll data is stored in physical form, such as paper documents or hard drives, ensure that physical access is restricted. Implement secure storage facilities, use locked cabinets, and establish procedures for keeping sensitive documents safe.

7 – Establish a Disaster Recovery Plan

Develop and regularly test a disaster recovery plan to ensure that your payroll processes can continue in the event of data loss or system failures.

Finally, back up your payroll data regularly, and store backups in a secure offsite location.

EmPower HR: Payroll With a Personal Touch

Processing payroll involves great attention to detail and handling sensitive employee information. There are just too many tasks to do and little room for error. But what if you could take that weight off your shoulders?

Outsourcing payroll and other HR functions to a trusted partner gives you peace of mind and more time to focus on the strategic side of your business.

At EmPower HR we provide payroll administration services that actually feel like having an in-house payroll specialist. We ensure that all your employees are paid correctly and on time, while keeping your payroll data safe and fully compliant.

Why to Choose EmPower HR for Payroll Administration

We know that managing payroll requires responsible and trustworthy partners. Here are a few reasons to choose EmPower HR:

• Have a payroll specialist available for you, without the associated costs of hiring one on-site.
• Amazing customer service. We are proud of the connections we build with clients and specialize in solving problems.
• Get customized solutions adapted to your business’ specific payroll needs and your sector’s regulations and standards.

Payroll Security Conclusions

Regardless of the size of your business, you need to have payroll security processes in place to ensure your most sensitive data is protected.

By keeping your payroll system safe, you can minimize the risk of fraudulent activities and protect against hackers or other digital threats.

At EmPower HR, we provide a full suite of payroll and HR services to help businesses manage administrative tasks more efficiently, while staying up to date with compliance and security requirements.

Contact us to improve your payroll process with a team of specialists by your side!

Related Links

• PEO Services: A Guide to Grow Your Company
• 9 HR Best Practices for Small Businesses
• It’s Compliance Not Rocket Science | Our HR Compliance Checklist Makes It Easy

So, what are the costs associated with a new hire? Let’s take a look:

Compensation & Taxes

As we probably are aware, wages are one of the highest costs of hiring. However, in the United States, this is not the only area to calculate when it comes to the compensation of your new hire. Depending on the state your employee will be living, various taxes must be included as part of the cost of hire. 

Let’s break this down and use the example of your new US Project Manager you have hired, Nadia, for this overview.

1. Federal Insurance Contributions Act Tax (FICA)

FICA tax is a payroll contribution from both employees and employers. It aims to finance Medicare (national health insurance) and social security (retirement). The FICA tax has two portions. Medicare is 1.45% and Retirement is 6.2%. The payment of FICA taxes also qualifies the employee for disability and life insurance benefits, as long as they meet the criteria.

 How does this impact you as Nadia’s employer?

As Nadia’s employer, you decided to pay Nadia a salary of $70,000 USD for her role as a Project Manager. With that annual salary, her  FICA taxes are 7.65% of her salary, therefore the FICA tax you would have to pay would be a total of $5,355.

2. State Unemployment Tax Act (SUTA)

SUTA refers to taxes placed in a state’s unemployment fund to pay benefits to employees who no longer work for their employers. It’s a big offense to neglect paying unemployment tax, and the consequences are fines, penalty fees, and even criminal charges to the employer in extreme cases. The tax rate differs in each state, coupled with how long the employer has been in the labor market.

How does this impact you as Nadia’s employer?

Nadia lives in a state where the state unemployment tax is 2.7%. With FICA, you are taxed on the first $9,500 of wages you pay to Nadia as an employee. That means, to have Nadia as an employee, you will need to pay $257 (2.7% x 9,500) to the government as part of her expenses.

Federal Unemployment tax (FUTA)

FUTA is a payroll tax of 6% employers must pay on employee wages for the first $7,000 in taxable wages. This tax falls solely on the employer as employees are not required to pay. Payments are due quarterly, and there’s eligibility for up to 5.4% in tax credits if the state unemployment tax is paid in full and on time.

How does this impact you as Nadia’s employer?

The standard FUTA rate is 6% on the first $7,000 of taxable wages per employee. What this means is that the maximum you would have to pay for Nadia would be $420 ($7,000 * 6%). Once Nadia makes $7,000 in gross wages for the year, your payment obligation is complete.

Workers’ Compensation

When an employee suffers a work-related injury or illness, they’re entitled to workers’ compensation benefits. Workers’ compensation is generally tax-free at both the state and federal levels. However, if Social Security Disability Insurance benefits (SSDI) come in, workers’ compensation might be taxed when some benefits have been evened out and balanced. In most states, if an employee receives benefits through workers’ compensation and Social Security Disability Insurance and it amounts to over 80% of average earnings before disability, SSDI benefits will be offset. This offset could be subject to taxes if earnings for the year are high enough.

How does this impact you as Nadia’s employer?

Workers’ compensation costs vary by the role that the employee is occupying as well as the state they work in. For example, Nadia is a Project Manager that works in Michigan. For her role as a Project Manager, the average cost of workers compensation is $0.11 per $100 of wages. Therefore, Nadia’s workers’ compensation total would be $77 annually (70,000 *0.11) /100).

Benefits & Insurance

If you offer health insurance to your employees, it sure won’t come for free as this comes under benefits. Even if you don’t provide benefits depending on the kind of worker hired and the agreement shared, you might still run into insurance costs. Here’s a breakdown of what you’ll need to cover on average as part of your benefits package to cover Nadia as a single-member individual.

• Medical insurance  – $9,000 / year
• Dental coverage – $289 / year, this is with a 20% contribution from the employee
• Vision – $60 / year, this is with a 20% contribution from the employee
• Life Insurance (optional) – $101 ($.12/$1,000 of Salary (1x Salary Benefit Design Assumed))
• Short-term disability (optional)  – This can be an additional coverage Nadia would like to have and therefore would pay for it out of pocket
• Long-term disability insurance (optional) – $210 ($0.30 per $100 up to $10,000 month benefit)
• Optional 401k matching contribution (optional)  – Should consider as additional employees are hired in the US.

Service fees

Here, we’re talking about the cost of working with a professional employer organization (PEO). A PEO works as an external human resources solution for mainly small and midsized businesses to support their back-office operations. Depending on the services they provide as well as your size, the costs can vary, but it is a cost-effective alternative to in-house human resources support. For PEO services on average, you could be paying $400/ month. 

When expanding your business into the United States, the costs of hiring can rack up quickly. Whether as a big organization or a small start-up, you need to ensure you’re hiring at the right time and the right way. Questions such as budget, systems for the onboarding process, and the cost of hiring are questions that should be a part of the planning and strategy stage of your expansion. To help you with this, it is key you have the right human resources partners to help you prepare and make this as easy and seamless as possible.

The 7 Myths about PEO Benefits

So, what are some myths about PEOs that are floating in the marketplace? Here are our top seven myths about professional employer organizations.

1. PEOs are there to compete with the internal HR department

They really aren’t; they’re there to offer support through their focused expertise. It’s safe to say they actually complement each other. Picture a scenario where your HR department can focus more on the human aspect of things by ensuring more engaged, optimistic, and high-performing employees. While PEOs concentrate on the more mundane tasks that include calculating payroll taxes, benefits administration, and labor law compliance. This would be beneficial, leading to higher retention and more business growth—a definite win.

2. PEOs creep into the control seat

You do not lose control over your business by engaging PEOs, as their main focus is relieving HR from administrative burdens. PEOs have ideas and frameworks to make your life easier, but your employees’ hiring, firing, discipline, and other daily decisions still rest with you.

3. PEO is just employee leasing rewritten

No, it’s not. Employee leasing is about placing employees with organizations for temporary or short-term jobs. A PEO, on the other hand, is different as the organization hires the employee, but the PEOs help on the back office elements of HR and allow the company being serviced to retain absolute control over the team as well as critical decisions. Employee leasing doesn’t allow for this.

4. Employees don’t like working with PEOs

PEOs are all about creating good employee experiences that make their interaction with payroll, benefits, and back office elements easy and seamless. From having first-class customer service and quick turnaround times on requests, employees see and feel the benefits of partnering with PEOs.

5. PEOs cost too much

PEO services can vary depending on your employee size and the services required, but cost savings come with those services. Most of the cost savings come from benefits and worker’s compensation plans because, by engaging PEOs, the company can provide a high-quality benefits plan at a cheaper rate due to the number of organizations they serve. This is what we call winning.

6. You need to be ready to bring in a PEO, we aren’t there yet

Who told you that myth? With PEOs, you don’t need to have all your ducks in a row in order to optimize and maximize their services. No matter if you’re still using a paper filing system or a state-of-the-art platform, one of the best benefits of a PEO is that it will help you upgrade and manage your system for ease of use. A little bit embarrassed about some fines or tax paperwork? Don’t sweat it! PEOs can be your best friend in sticky situations like that and give you the guidance, advice, and support you and your business need to get on the right track and the tools to stay that way.

7. If the work structure is remote, then PEOs are not needed

And who says? Going remote has nothing to do with not needing HR services. In fact, with remote teams, you might need to pay closer attention to labor laws, payroll, employee retention, and employee engagement. A PEO will serve as a great addition by helping you stay afloat on the ever-changing laws and trends.

Additional factors are whether the check was lost before or after the employee received it. In case this ever happens, you may want to consider a policy in place to guide the next course of action. With that being said, let’s take a look at some bothering questions:

When Is/Should An Employer Be Responsible For Replacing A Paycheck?

In cases such as the paycheck not arriving due to the address being printed incorrectly or being sent to the wrong address because payroll didn’t update the personnel records, the employer would take responsibility and reissue the check. There may be some other vague and unique situations when it comes to a misplaced check and when this happens, the employer should step in and rectify the situation.

What If The Lost Paycheck Was The Employees Mistake?

When a paycheck is misplaced by an employee, it is still a stressful situation. As an employer, you will still need to help, even if it is the employee’s fault. The employee should notify payroll immediately and work with your team to identify the options of reissuing a check and any fees associated with that process. Also, the missing check will need to be canceled.

What Steps Should Be Taken If A Paycheck Is Lost?

First, advise the employee to wait 1-3 days before declaring the check irrevocably missing. This allows time for the check to turn up or be found therefore avoiding the process of a re-issue if necessary. If they still can’t find the check after the waiting period, the bank has to be contacted to stop payment. Now, if the check has already been cashed, it’s not your duty or the employee’s right to reimburse them if you’re not at fault. If the check has been cashed without the employee’s knowledge, they will need to work with their bank or authorities on recuperating those monies, especially if it was fraudulent.

After stopping payment, the check will need to be reissued. Typically, stopping a check comes with bank charges. It may be unlawful in some states to transfer this cost to the employee, and they’ll need to sign off on deductions before you proceed. If necessary, the employer can ask the employee to make payment separately rather than making any deductions.

How Long Should It Take To Reissue A Paycheck?

The entire process of completing the paperwork, contacting the bank to stop payment on the check, and receiving the new paycheck can take weeks. Lost checks are not a frequent phenomenon, so, understandably, not many companies have fast procedures for this. Documents can take days before they’re processed. Many companies manage expectations by advising that it’ll take around two weeks to receive a reissued paycheck.

Should You Create A Check Reissue Policy?

Yes! By creating a policy, you manage expectations and avoid messy situations where angry employees demand their money. A good policy should contain what the law requires and the actions that would be taken if they’re at fault for misplacing a check.

Knowing things like how long does an employer have to fix a payroll error, can help you correct issues in minimal time. In fact, these mistakes are avoidable with good education, proper planning and having the right tools.

• What’s going to make the process straightforward and less clunky
• What’s going to make it easy and actually usable by your staff

Two significant aspects to look for when deciding if it’s worth outsourcing is the time it will take for implementation and the return on investment.

Payroll outsourcing is a common practice in the business world and refers to using third-party service providers to oversee and handle payroll’s administrative and compliance aspects. This means everything from filing payroll taxes to making payments on behalf of the company. In other words, your payroll provider has your back!

Let’s dive into the pros of considering this payroll outsourcing as an option:

Saves You And Your Staff Time

Studies conducted by Technology Advice show that 26% of small businesses spend an estimate of 5 hours monthly processing payroll manually.

Unifying the payroll process creates a smoother and less time-consuming workflow from beginning to end. This is not surprising as your employees now only have one system to clock in and clock out, request vacations, log sick days and receive accurate paychecks each pay period.

Reduces Costs

Return on investment is a crucial factor and the reason why your organization was set up in the first place. Statistics from Greenhouse show that businesses save an average of about $97,180 annually from outsourcing their payroll function.

This is expectedly linked to the fact that you’ll be reducing the amount of time spent on processing payroll manually. Let’s not forget the fact that you’ll have more time to focus on revenue-increasing and value-adding activities, rather than mundane payroll tasks.

Trusted Expertise

Your payroll provider will pay attention to intricate details and stay up to date on any legislative changes you might be missing, as the costs of making errors or not complying can be costly.

Regulatory bodies must know precisely what money went where. These types of payroll mistakes can be pretty tricky to identify and correct. Non-compliance comes with significant penalties like huge fines and other repercussions. Practice makes perfect, and as this is the specialty of the service providers, they know just what to look out for.

Though there are many pros to payroll outsourcing, there can be a few cons as well, such as:

Cost Of Payroll Services

A payroll services provider will definitely not be getting the tools and technological solutions for free. A good number of payroll services require a price ranging from $10 to $85 monthly on top of a per-employee monthly fee.

This does not include the cost of integration as well as any additional creative services either. Therefore, cost is definitely something to consider, although there’s every chance this cost would be lower than the cost of processing payroll manually for your organization.

Accountability

Though this is rare, packages and outsourced payroll providers do not come with a “100% accountability guarantee.” If the payroll service provider flops and cannot pay business taxes on time, this can hurt your organization and cause it to be vulnerable to fines and penalties.

Are you still contemplating whether it’s a splendid idea to outsource payroll? Consider the risks and benefits for your business carefully. Lurking issues like confidentiality and security protocols are understandable reasons why you might not buy the idea of outsourcing. The good thing is, this cause for concern can be rectified with the right service provider providing the right solutions for your business.

The last thing you want is to pay a lot for payroll services, only to discover they don’t match your business’s needs. For example, you can get caught paying for extra services you don’t want or use, just because a package includes these items.

At EmPower HR, we want to help you avoid paying for what you don’t need when it comes to payroll services — and we’ve put together this handy overview of the various types of services out there to help you make the best choice for your business.

Types Of Payroll Services

Bookkeepers And CPAs

There are accounting and bookkeeping firms that handle payroll processes in addition to doing financial audits. Their con is that they also tend to outsource the payroll tasks given to them depending on their capacity. This can lead to a potential risk of confidentiality and security issues depending on the process. Also, given the vast knowledge across industries and business sizes, they may not know the best advice or support to give you specifically for your personal business needs.

In-House Payroll

This sounds straightforward and convenient as it’s within the organization. However, in-house payroll requires a lot of resources in terms of time, expertise and staffing. And what if there’s an error with regulatory compliance? Your business will bear the brunt.

DIY Software Services

Do-it-yourself (DIY) payroll software is similar to in-house payroll, only without the payroll experts in place. So, you save on the cost of hiring experts in-house, which is the upside. The downside is the increased risk of errors and compliance issues that may arise due to a lack of payroll industry knowledge.

Small Payroll Providers

These providers offer the best of both worlds, as they provide the relevant technology as well as the expertise and personalized services to your specific industry. With this option, you’ll also have a person (or persons) whom you can directly connect with when it comes to payroll questions and needs.

However, some small payroll providers can have limitations, including a:

• Limit on the number of users
• Chance of losing information due to inefficient backup options
• Risk of instability and system crashes

Medium Payroll Providers

As your business grows and expands, so will your payroll needs. As a result, you may need to engage with payroll service providers who work at a greater capacity.

It’s easy to accidentally employ the services of large payroll providers at this stage, so you will need to pay close attention. Most of them offer services in bundles, and you may end up paying for services you don’t actually use.

However, the processes are usually well streamlined, tend to be more thorough, and have many HR service add-ons that will likely be useful. Due to the additional and sometimes complex solutions, they can come with layers of confusion in what they’re providing.

Furthermore, these providers tend to be less personalized as the small payroll providers, as they have a broader scope and more extensive client base. Finding the provider that matches your business is critical.

Large Payroll Providers

As the name implies, large payroll providers are more applicable to sizable organizations with an employee base of more than 10,000. It’ll be more reasonable to consider them as your business continues to expand.

You’ll absolutely love the fact that they provide state-of-the-art technology and top-notch expertise. The thing is, you will lose the personal touch offered by small payroll providers in place of more features and a more versatile approach to solutions.

Understanding the best payroll solutions for your business is one thing, but it is a whole other rollercoaster when you are also growing and expanding. You want to make the right decision for your business today and be ready for growth and expansion tomorrow.

Don’t get carried away rushing off to get an over-the-top service your business won’t need. Taking the time to understand your options, the providers, and the process is essential to ensure you feel confident in this area of your business.

Have you ever wondered how HR functions got simplified even amid the chaos? The word is ‘automation.’ Automating your HR processes using technology will save time, ensure accuracy, and create space and time for HR to handle more complex functions. This saves some of the outsourcing costs as you can be sure only hard-to-tackle tasks are being outsourced.

Softwares have been developed to complete activities like payroll processing which have been true lifesavers. This not only ensures access to data on a secure platform anytime and anywhere, but it also makes you less reliant on traditional methods like Microsoft Excel, which is error-prone.

Streamlining Payroll Management Tasks

A badly implemented payroll process is like a poorly made sandwich. Once you’ve had it, it leaves a bad taste in your mouth and leaves you suspicious of future bites to come. This is the same for payroll management.

Payroll is one of the essential foundations in HR and organizational operations as it involves funds going in and out of the organization. An error here can lead to more paperwork and potentially difficult conversations with employees or vendors that you would rather avoid. To the delight of both employees and organizations, technology has efficiently advanced, providing businesses the benefits of lower cost and resource optimization while employees enjoy uninterrupted and efficient services.

Payroll stands as one of the most procedure-bound and legally demanding HR functions. Simplifying and breaking down the whole process will only bring advantages. Ways to streamline the process include:

Automating Workflow And Employee Involvement

As stated earlier, manual data isn’t the way to go as this method is time-consuming and susceptible to errors. A flowchart can help to re-evaluate your workflows while checking for unnecessary repetition. The merging of employee schedules and digital timesheets is another excellent way to reduce errors as this automatically pulls relevant data. Employee involvement can also be automated by including onboarding, employee hours, and employee scheduling in the process.

Going Paperless

Paper checks are becoming a thing of the past as they are prone to fraud and bad for the environment. Direct deposits are a better option as they ensure accuracy and protect sensitive data while reducing costs by running fewer payroll runs. For those employees who may be “unbankable”, pay cards are a safe and efficient way for employees to receive their payroll funds.

Having A Solid Control System

Errors are inevitable. Through the incorporation of checklists, it can help to prevent and reduce errors. The checklist should include the audit of payroll, compliance, checks, and balances. This would help in breaking down the process while catching mistakes in good time.

Integrating Time Tracking With Payroll

Integrating your time tracking and payroll into one system increases payroll accuracy as it will genuinely reflect time worked. This reduction in errors will save money and the headaches that come with inaccurate payroll information.

Streamlining payroll is just the beginning of finding efficiency and ease of use within the HR functions. Other ways you can streamline can be through:

Investing In Self-Service Portals

Prioritize getting an easygoing HR software that organizes and assists employees better by keeping relevant data and documents easy to find and access. This small but mighty change will eliminate those ongoing, never-ending back-and-forth email chains that everyone loves so much (just kidding!)

Cloud-Based Systems

Still harnessing the many benefits of technology, cloud computing is the way of the future and here to stay for all the right reasons. Not only does it require less storage space, but it is also easy to maintain and is accessible anywhere there’s an internet connection. That means asking for your vacation request while already on the beach sipping your favorite beverage (Oh yeah!)

Instant Connectivity And Interdepartmental Communication

Think instant messaging is not for corporate organizations? Think again. Softwares now have the instant messaging feature, which eases better communication between employees and teams. That means instead of sending an email and getting a reply the next day, you can send a chat message and get a response almost instantly.

Centralizing The HR Function

It becomes problematic when the HR department is scattered, especially if it has a global footprint. Not only will the repetition of tasks be eliminated, but when HR is centralized, it will prevent discrepancies in policies and procedures. HR can spend more time on more pressing and critical tasks that add strategic value to the company through smoother operations.

If the HR team of specialists does not work efficiently, this negatively affects all other organization departments. For this reason, streamlining HR processes, especially crucial areas like payroll, is essential. Streamlining will enable the organization to direct efforts properly while making cost-effective changes to drive the business forward.

There are three approaches to outsourcing HR functions:

1. Business processes: Management of tasks by an external service provider.
2. Shared services: Outsourcing only some of the HR functions.
3. Application and facilities services: External HR providers would be supporting an internal HR unit.

Payroll and benefits administration, employee onboarding, compliance, employee relations, performance management, and HR strategy sit on top of the list of HR functions commonly outsourced. Let’s take a closer look:

Payroll Administration

Studies have rated payroll as the most popular outsourced HR function. The services offered by vendors include payroll calculation, taxes, producing checks, direct deposit, and issuing tax return forms. As this involves complex calculations, allowing payroll experts to handle it helps avoid mistakes that can put a dent in employee relations and incur tax penalties down the line. As a business owner, you definitely don’t want or need that headache.

Employee Benefits

This includes health care, 401k, and additional insurance coverage plans. Outsourced HR specialists help with employee inquiries, enrollments and coverage changes, and tracking to determine eligibility. Organizations may choose to turn to a benefits service provider to obtain better terms than they could negotiate on their own, which will consequentially enable them to offer their employees better benefits packages for themselves and their families. It’s a win-win for everyone!

Employee Relations

Wouldn’t it be amazing as a business owner to have all your employees work together in harmony and peace without any drama? Yeah, nice fantasy! Unfortunately, that is not the world we live in and when you bring people together with different backgrounds, skill sets, and perspectives, you are bound to have a few issues pop up as they begin to figure out how to work and succeed together.
Understanding and navigating employee relations issues are not for managers of the faint of heart. Having an expert who is key in building trust and defusing conflict quickly is essential to ensuring a positive and productive work environment.

Risk Management and Compliance

Laws and regulations impose severe responsibilities for HR. From the time-consuming task of staying up-to-date with legislation to the penalties that come with failure to meet mandates, the organization has the potential to be easily exposed to litigation. Findings have shown this makes up over 50% of HR activities. Claims management is another critical aspect that allows HR to access legal expertise. Additional areas that outsourced HR specialists cover in risk management include unemployment claims administration and workers’ compensation.

Drug Screening

Even if organizations can manage their drug screening protocols, relying exclusively on third-party drug testing service providers is a safer path. This gives protection and prevents potential legal loopholes as well as conflicts of interest that could arise.

Coaching and Development

There have been mixed feelings about outsourcing professional development. While some have argued that coaching is more effective when integrated into the daily agendas, others are of the notion that involving external experts in coaching brings a fresher perspective and vast expertise, which is beneficial. Ideally, every meeting and interaction with your team presents an opportunity to unlearn, relearn and develop.

Policy Development and Enforcement

Not only does establishing clear HR policies provide structure and consistency, but it is also paramount to the success of any business to ensure awareness of obligations and expectations. However, creating your HR policies and ensuring they are enforced accurately is not an easy task and can be pretty complicated, especially if you have remote employees across the country or a global organization.

HR Strategy

Strategy is not just for the revenue-generating factors of a business, it matters all around especially within human resources. Identifying your approach to culture, performance management, training, and talent management are all vital to your competitive strategy in the market which all relay back to your bottom line.

Your HR strategy should embody all elements of your workplace culture and be the vehicle for which change and strategy are implemented. Without a solid strategy, your culture and your people will feel disengaged and as a result, your customers will as well.

Succession Planning

Wouldn’t it be amazing if you won the lottery one day? What if you did – who would be “ready” to operate the business? This is why succession planning for your workforce is so important.

Now we may not all be millionaires one day but the case of the matter is, our employees move on whether it be through attrition, retirement, or relocation, and not everyone will be here forever. Ensuring you have a plan that aligns with your strategy and growth plans will be fundamental for the success of your SMB today and for the future.

As outlined, outsourcing some or all HR functions depends on various factors within the business. However, one key question all leaders need to think about is what path will advance the company’s mission and strategic objectives faster and more effectively. Regardless of the decision, it’s crystal clear that there are great benefits to outsourcing your HR function. The only question is, which areas will you tap into first.