How Much Does Outsourced HR Cost for a Small Business in Texas?
Running a small business often means wearing more hats than you ever expected. One day you are focused on growing the business. The next, you are answering a payroll question, dealing with an employee issue, interviewing candidates, updating a policy, or trying to figure out how to handle a difficult termination. Eventually, many business owners reach the same point: Do we need HR, and if we do, can we afford it? For many Texas small businesses, there is a middle ground between handling everything yourself and hiring an internal HR department. That is where outsourced HR comes in.
But how much does outsourced HR actually cost?
The short answer is that it varies considerably. Some businesses may spend a few hundred dollars per month for limited HR assistance, while a company looking for an outside team to manage payroll, employee support, recruiting, benefits and ongoing HR needs could spend several thousand dollars per month. The more useful question is not simply how much outsourced HR costs. It is what level of support your business is actually getting for that price.
What is outsourced HR?
Outsourced HR means hiring an outside company to handle some or all of the responsibilities that would traditionally fall to an internal HR employee or department. Depending on the provider and your agreement, that could include payroll administration, onboarding, employee questions, recruiting, benefits administration, performance management, policies, employee relations, terminations and manager support. The important thing to understand is that “outsourced HR” can mean very different things depending on the company providing it. One provider might give you access to HR software and a phone number to call when you have a question. Another might assign an HR professional to your business for a few hours each month. Other companies operate more like an extension of your actual team. That difference has a major impact on price.
How much should a Texas small business expect to pay?
There is no universal price for outsourced HR because businesses have very different needs. A five person company that wants occasional HR guidance does not need the same level of support as a 50 person restaurant group managing payroll, turnover, recruiting, employee conflicts and multiple managers. Outsourced HR companies commonly charge using a flat monthly fee, a per employee fee, hourly consulting, project based pricing or a combination of those models.
At Hatch & Huddle, we use a monthly partnership model. Our HR and payroll plans currently start at $2,000 per month, with more comprehensive HR partnerships starting at $5,000 per month.The reason we use a monthly model is pretty simple. We do not want a business owner deciding whether an employee problem is worth another billable hour before calling HR.
If we are part of your team, we want you to call us.
What are you actually paying for?
This is where comparing outsourced HR companies based on price alone can get tricky. Suppose one provider charges $500 per month and another charges $2,000. The $500 option sounds like the obvious better deal until you discover that it primarily includes software, templates and limited access to an HR advisor. Meanwhile, the $2,000 service may include payroll administration, onboarding support, employee communication, manager support and someone your employees can actually contact when they need help.
Those are two completely different services. When considering outsourced HR, ask exactly what happens after you sign the agreement. Who handles an employee's payroll question? Who helps your manager prepare for a difficult conversation? Who coordinates onboarding when you hire someone? Who helps when an employee resigns unexpectedly? Most importantly, who are you actually going to talk to when something goes wrong?
The answers to those questions tell you much more about the value of an HR service than the monthly price alone.
When does outsourced HR become worth the cost?
There is no magic number of employees where a company suddenly needs HR. Sometimes a 15 person company has significantly more complicated HR needs than a company with 40 employees. Instead, we recommend looking at what is actually happening inside the business. You may have outgrown your current HR setup if:
Employees constantly come directly to you with payroll and HR questions
Hiring and onboarding have become difficult to manage
Managers are handling employee situations inconsistently
Performance problems are not being documented
You are creating policies only after something goes wrong
Recruiting is consuming too much of your time
You are uncomfortable handling terminations on your own
Nobody clearly owns HR inside the company
People problems are regularly pulling you away from running the business
One or two of these issues does not necessarily mean you need a full HR department. But when several of them start happening at the same time, the business is usually telling you that it needs more structure.
Outsourced HR vs. hiring an HR employee
This is usually the comparison that matters most for growing businesses. An internal HR employee can be a great investment. There are absolutely companies where hiring HR internally makes the most sense. The challenge for smaller businesses is that hiring one person does not necessarily create an entire HR department. You still have salary, payroll taxes, benefits, paid time off, equipment and other employment costs to consider. You are also relying on the experience and availability of one individual. Outsourcing can give a growing company access to broader HR support without immediately taking on the cost of building an internal department. There is a large gap between “the owner handles HR” and “we need an entire HR department.” For many small businesses, outsourced HR fills that gap.
Does your industry affect what HR costs?
Absolutely.
HR needs can look very different depending on the type of business you operate. A restaurant with hourly employees, shift changes, frequent hiring and multiple managers has different challenges than a private medical practice with a smaller clinical team. A senior care community may be managing caregivers, administrative employees, clinical staff, scheduling issues and higher hiring demands at the same time. That is one reason Hatch & Huddle focuses heavily on understanding how our clients actually operate instead of treating every company exactly the same. We provide specialized support for restaurants and hospitality businesses, senior care communities, and medical and wellness businesses across Texas. Your HR structure should make sense for the people you employ and the business you are actually running.
Do you need payroll support or full HR?
Not every business needs comprehensive HR support right away. Maybe payroll is becoming overwhelming, but you are still comfortable handling most management responsibilities yourself. Maybe payroll is fine, but employee relations and recruiting have become your biggest problems. Or maybe you have reached the point where payroll, onboarding, benefits, recruiting, performance management and employee communication all need a clear owner. Those businesses need very different solutions. This is why our plans and pricing offer different levels of support rather than assuming every company needs the same thing. As businesses grow, however, something interesting tends to happen. Payroll leads to onboarding. Onboarding leads to policies. Policies lead to performance conversations. Performance conversations require documentation. Hiring turns into recruiting. A handful of employee questions eventually becomes dozens. What originally looked like a payroll problem becomes a people operations problem. That is usually when having consistent HR support starts to make a noticeable difference.
What should you ask before choosing an outsourced HR company?
Before signing with an HR provider, ask them to explain exactly how the relationship will work. Who will be your primary contact? Can employees contact the HR team directly? Is payroll included? Is recruiting included? Will they help your managers? What happens when an employee situation becomes complicated? How quickly can you expect a response? You should also ask whether you will consistently work with people who know your company or whether you will contact a general support center each time you need something. There is not necessarily one correct model. But you should know which model you are paying for.
What does outsourced HR look like at Hatch & Huddle?
Hatch & Huddle was built around a simple idea: small businesses should be able to have real HR support without immediately building a corporate HR department. We are a Texas based team, and our clients work with real people who learn their businesses, their teams and how they operate. Our role can include payroll, employee support, benefits, recruiting, performance management, policies, manager guidance and broader operations support depending on the partnership. You can meet our team to see the people behind that support. We call ourselves the people behind your people because that is really what good HR should be. Your employees need someone to turn to. Your managers sometimes need guidance. And the person running the entire company deserves support too.
Every business is different. If you are not sure what level of HR or payroll support makes sense for your team, you can book a call directly with the owner of Hatch & Huddle. We’ll learn more about your business, what you are currently handling internally, and where you may need additional support. No call centers and no complicated sales process. Just a conversation about what your business needs.
Is outsourced HR right for your Texas business?
Outsourced HR is not the right solution for every company. If your team is very small and employee administration takes almost none of your time, you may not need it yet. But if you are spending hours every week answering employee questions, managing payroll, recruiting, onboarding, dealing with performance issues and trying to make sure everything is handled correctly, it is worth looking at what that time is costing your business. The goal of HR should not be to make a small company feel more corporate. The goal should be to give the business enough structure and support to grow without everything continuing to land on the owner's desk.
If you are trying to figure out what level of HR support makes sense for your company, you can view Hatch & Huddle's plans and pricing or talk with our team. We would be happy to learn more about your business and tell you whether we think H&H makes sense for where you are right now.