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Companies can save time, money by outsourcing HR

admin//September 11, 2009

Companies can save time, money by outsourcing HR

By admin

//September 11, 2009

When William Parraga started his Rockville-based company, Diversified Financial Mortgage, in 1997, he handled all the human resources tasks himself — including payroll, taxes and unemployment insurance. But even with just four people on staff, he quickly realized he was not using his time well.

“After a couple of months, I said, ‘I’m spending too much too much time doing this stuff rather than trying to grow my business,’ ” he recalled. Instead of hiring somebody, he decided to outsource the work. He tapped Scott Smrkovski, who has been handling his human resources ever since.

Parraga said it made financial sense for him to turn to an outside firm instead of hiring a human resources staffer. He benefits from all the resources and expertise of Smrkovski’s Olney firm, Infiniti HR, at a fraction of the cost.

“You’re getting the equivalent of a huge company and their resources for less than the price of a single person,” Parraga said. He has about 15 employees, and estimates he spends less than $20,000 a year on human resources. “It’s a lot cheaper for me to outsource,” he said.

Parraga is part of a growing trend, as more companies turn to outside firms for human resources services. Companies ranging from one-person shops to major national chains are sprouting up to help.

Smrkovski said he has nearly 400 clients, ranging in size from two-person operations to one with about 180 employees. “It used to be that five to 100 employees was really our target market,” he said. “Now we’re seeing that even the larger companies, up to 200, can outsource.”

Start-ups benefit from his services, as do companies that need to hire many people quickly to fulfill government contracts, he said.

And national firms like Administaff, which is traded on the New York Stock Exchange and serves companies with as many as 2,000 employees, have opened the door for smaller firms by increasing awareness that such a service is available. “I think our industry is becoming well-known,” Smrkovski said.

Eileen Levitt is president of The HR Team, a Columbia-based company. When she started the company 13 years ago, she said, people did not seem to understand what she did. “Now it’s much more acceptable,” she said.

Her firm handles human resources functions including developing employee handbooks, keeping track of taxes and administering employee benefits.

Most of her clients have fewer than 100 employees and previously handled human resources themselves, she said.

Levitt said many executives at small businesses make critical mistakes related to human resources. They make promises to new hires, using phrases such as “probationary period” or “permanent employee” with specific legal connotations that can make firing that person more difficult.

 Or they take a different company’s handbook and modify it, instead of creating a handbook specifically for their own company. She said many company executives are not well versed on the differences between contract workers, hourly employees and salaried staff.

 As companies grow, she said, “A lot of companies mistakenly think they can wing it.” Their efforts to save money in the short term can be expensive down the road, she said.

 One company that decided not to take chances is Minnick’s Inc., a Laurel heating and air conditioning company founded in 1954 by William Minnick. His grandson, Rob Minnick, will be part of the third generation to own the company, which now has 22 full-time employees. Rob Minnick said human resources functions were once handled in-house, but they have grown more complex over the years.

 People are no longer hired with a “good old fashioned handshake,” he said. “You have to make sure every T is crossed and every I is dotted.”

He considered hiring an HR employee on a part-time basis, but didn’t like that there would be times when somebody had a question and nobody would be available to address it.

So he turned to The HR Team. “We figured it would be a good thing to try out and we’re still using it now,” he said. “It just took up too much valuable time for me to handle that.”

Parraga says it’s important to find a human resources company that understands the specifics of your business. A general contractor with seasonal employees, for example, might have different needs than a high-tech firm. Smrkovski has been a good match, he said.

“It’s just like anything else,” he said. “You build a relationship, and if you seem comfortable and it’s a good fit for you, you stick with it.”


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