For small employers, the end of the year is crowded. There are holiday schedules to juggle, year-end tax forms to send, benefit plans to renew and, in many states, new wage or leave rules that start on January 1. If you're the owner, you're probably also the HR department, and that's when mistakes slip in. The right kind of HR help for small business can take a lot of that off your desk, but the options sound alike and work very differently.
This article is general information, not legal, tax or insurance advice. Employment rules vary by state and business size, so confirm details with an employment attorney, a CPA or a licensed insurance professional.
Signs you've outgrown doing HR yourself
There's no magic headcount. Watch for these signs:
- You spend more than a few hours a week on payroll, paperwork or employee questions
- You're not sure your policies match current state or local rules
- You've hired in a new state, or have remote workers in other states
- You want to offer health or retirement benefits but don't know where to start
- An employee complaint or a workers' compensation claim caught you off guard
- Your employee handbook is old, or you don't have one
If two or three sound familiar, it's time to look at outside help.
Which kind of HR help for small business fits you?
A payroll service
What it does: Runs payroll, withholds and files payroll taxes, and produces year-end forms.
Good fit when: You mainly need pay and taxes handled correctly, and you're comfortable managing everything else.
Keep in mind: Most payroll services don't advise on policies, hiring or employee issues.
A professional employer organization (PEO)
What it does: A PEO enters a co-employment arrangement with your business. It typically handles payroll, payroll taxes, workers' compensation and benefits administration, and often provides HR support, while you keep running the daily work. Because a PEO pools many small employers, it may be able to offer benefit options that are hard for a very small business to get alone.
Good fit when: You want payroll, benefits, workers' compensation and HR support bundled together.
Keep in mind: Fees are often per employee or a percentage of payroll. You may have less choice about benefit plans, and leaving a PEO takes planning. Read the contract carefully, including what happens at the end. The IRS runs a certification program for PEOs, so you can ask whether a provider is certified.
An HR consultant
What it does: Gives expert help with specific HR needs: writing or updating an employee handbook, reviewing policies, training managers, handling a tough employee situation or checking compliance.
Good fit when: You want advice and documents without handing over payroll or benefits.
Keep in mind: Consultants usually bill hourly, by project or on retainer. They aren't lawyers, so for legal disputes you'll still need an employment attorney.
An employee benefits broker
What it does: Helps you compare and buy group health, dental, vision, life and disability coverage, and helps with renewals and employee questions.
Good fit when: Benefits are your main concern and you already handle payroll and HR.
Keep in mind: Brokers are often paid commissions by insurance companies. Ask how they're paid and which carriers they work with. Our guide to choosing an insurance agent covers useful questions.
Many small businesses combine these, such as a payroll service plus a benefits broker, or a PEO plus an occasional employment attorney.
A year-end HR checklist
Whatever help you choose, these year-end tasks come up for most employers:
Confirm employee names, addresses and tax info
so year-end forms go to the right place. W-2s and many 1099s are generally due by January 31.
Review benefit renewals.
Many group plans renew January 1. Compare costs and coverage before you sign.
Check new wage and leave rules.
Many states and cities change minimum wages or leave requirements at the start of the year. The U.S. Department of Labor at dol.gov covers federal rules, and your state labor department covers local ones.
Update your employee handbook
for any policy changes and have employees sign the new version.
Look at holiday and PTO policies
, including how unused time is handled under your state's rules.
Prepare for your workers' compensation audit
, if your carrier does one, with accurate payroll by job type.
Tidy up hiring files
, including required employment eligibility forms for each employee.
Talk to your accountant
about year-end payroll and tax planning. Our guide to choosing the right accountant helps if you need one.
How to choose an HR provider
Ask every provider the same questions:
- What exactly is included, and what costs extra?
- How is pricing calculated, and how often can it change?
- Who is my contact, and how fast do they respond?
- Do you work with businesses my size and in my industry?
- Do you support employees in every state where we have workers?
- How do we leave if it isn't working, and what notice is required?
- Can you share references from similar businesses?
Get proposals from at least two or three providers and compare them side by side.
Examples listed on Listings Junkie
On Listings Junkie, many HR, payroll and benefits providers are listed under business and professional services, with pages for states like Florida and Ohio. Benefits and insurance specialists also appear under insurance services and financial services in Florida.
A few examples:
- J. Gregory PEO in Arcadia, Florida, describes PEO services, including HR, payroll, benefits and workers' compensation, for small and mid-sized businesses.
- Teache in Columbus, Ohio, describes HR support, training design and HR software for small and mid-sized businesses.
- Financial Designs in Miami describes itself as a family-owned employee benefits agency focused on making group insurance easy to understand.
These are examples, not endorsements. Compare a few and ask the questions above.
Frequently asked questions
What is the difference between a PEO and a payroll service?
A payroll service runs payroll and payroll taxes. A PEO usually does that plus benefits, workers' compensation and HR support through a co-employment arrangement.
How much does HR help for a small business cost?
It depends on the type of help, your headcount and your state. PEOs often charge per employee or a percentage of payroll, consultants often bill hourly or by project, and brokers are often paid by insurers.
Do I need an employee handbook?
It isn't always required, but a clear, current handbook helps set expectations and can reduce disputes. Have an HR professional or employment attorney review it.
When should a small business switch HR providers?
Benefit renewals and the start of a new year are common times, since changes line up with plan years and tax years. Plan ahead so payroll isn't interrupted.
If you run an HR, payroll or benefits firm, or any small business that's growing, you can list your business free on Listings Junkie. There's no credit card, listings are checked before they go live, and you can update your details whenever your services change.
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