Silicon Valley startups often have specific HR challenges. Recruitment of top talent is highly competitive. Also, a startup’s HR department is often one person or nothing at all, with DIY HR done by the owner or office manager. This means that inexperienced people are doing HR.
Silicon Valley faces the challenge of attracting talent to an area notorious for its sky-high cost of living. Making sure your employees can afford to work for you is key. This, among other reasons, is often why outsourcing HR is a solution for many startups.
Why Outsource HR?
A lot of entrepreneurs are a bit hesitant to outsource HR. After all, it requires a level of trust, and startup owners in particular often want to keep tight control, especially in the early days. It can also be hard to see the benefits. However, there are some solid reasons why you should outsource your HR to a professional employer organization, or PEO.
Reduce Risk
Labor laws are complex and tend to change frequently. California is known for having complex, and ever-changing laws, often requiring more of employers than the federal baseline. Compliance expenses can sink a new company, and the last thing you need is to be sued by one of your employees.
Outsourcing payroll ensures that it goes out on time without errors and outsourcing multiple HR functions in addition to payroll tends to result in a good ROI.
Applicant Screening
Although focusing only on attracting talent is a bad thing, you still need to think about getting the best people. Part of this is by screening and onboarding applicants properly. A PEO can help by providing applicant tracking software that helps you keep track of background checks, filter out the resumes of unqualified people, and then move successful candidates through onboarding properly.
This also helps you spend more time on selecting candidates who are not just eminently qualified but fit well within your culture.
Improved Benefits
Good benefits are often more important than salary for attracting and retaining top talent. As healthcare costs continue to rise, companies that don’t offer comprehensive health coverage are bound to lose out. New applicants will look elsewhere, and existing staff will be prone to joining ranks with your competitors.
A PEO can help you provide better benefits by allowing your employees access to their master plans. These plans are negotiated at scale by experienced people, and thus you can offer better coverage at a lower price. This also goes for retirement benefits and other perks. You may find you can offer benefits you simply would not have been able to consider without a PEO.
Tax Remittance
A PEO is capable of remitting your employment taxes, taking on both the added paperwork and the risk. They have the expertise to ensure that taxes are paid correctly and on time, avoiding any nasty surprises come tax time.
This reduces risk and also frees up time that HR or, worse, other employees might otherwise be spending struggling with payroll taxes. This improves productivity.
Hi-Tech HR Software
You are startup people. You know all about having the best software. But unless HR software is your business, you won’t have the best available. Smaller companies often can’t afford enterprise-level software or find that the expense per employee is much higher.
An experienced PEO knows exactly what HR software to use and can afford the bulk licenses needed to make the cost reasonable. Their people also know exactly how to use it, so you don’t have to spend time and money on training. Time and attendance tracking can also be particularly important for startups.
Outsourcing to a PEO can give you these benefits and others. You can avoid the various temptations new companies face and the issues surrounding DIY HR. A trusted PEO can help you reduce risk, screen applicants, pay your taxes on time, and provide better benefits. They can also give you access to the best software for applicant tracking, employee management, and payroll.
Choose a PEO that has worked with Silicon Valley startups and understands your specific needs. They know exactly what you need to operate HR smoothly so you can concentrate on what you do best. Check out our blog for more information about how PEOs can help your startup.
