When a business has a small number of employees, a bad hire could have a huge impact. If a job applicant commits resume fraud — concealing criminal convictions and past terminations, for example — it could mean trouble ahead.

Increasingly, businesses are performing background checks on employee prospects before extending job offers. However, many small businesses lack the resources to perform them, which frequently require access to the criminal justice system as well as public records.

Licensed investigators can perform routine background checks. Specialized background screening services not only provide this service but also may identify a range of issues omitted on a resume that could affect job performance. Superior screening companies may conduct substance abuse testing, perhaps at their own labs, and develop programs to detect and prevent workplace violence, theft, injuries, and negligent hiring lawsuits.

Do it Yourself Guide

If you want to conduct your own background screening, you are pretty well limited to checking references. To do so, you simply call the employment and personal reference that the job candidate gave you on your job applicant.

While this level of checking is useful, it is very limited. For example, it does not address the information available through the criminal justice system or public records.

Executive Search Firms (also know as headhunters) recruit senior individuals to client organizations.

Search firms often specialize in particular market sectors and have very strong networks in their area of specialization. This network is utilized along with other techniques to find the best people in the market place for a particular role.

Note:

This Buyer Guide discusses recruiting executive level employees. Refer to the Recruiting Firm Buyer Guide for information about recruiting clerical, staff, management or technical employees.

Normally the individuals targeted by the search firm are not actively looking to leave their current position. The search firm's job is to approach these individuals with a goal of taking them out of their current company and placing them in another, often a competitor.

Executive searches are performed in one of two fashions: Retained Executive Search and Contingency Search. In the first, a retained search firms will get paid a fee regardless of whether a successful placement is made. A contingency search, on the other hand, is structured so that the firm is paid a fee only after successfully placing a candidate in the position.

A variation of a retained search is a delimited search. This type of search requires an up-front payment from the client before the firm befores the search. Unlike most retainers, however, this fee is refundable if the search firm fails to fulfill certain deliverables defined in the contract.

Fees for a contingency search in the private-sector generally fall in a range of 30 to 40 percent of the first year’s salary. The search firm is generally responsible for any expenses incurred during the search, such as advertising, travel, and lodging.

Executive search firms generally commit to off-limits agreements. These agreements prevent a firm from approaching employees from their clients as candidates for other clients. For example, if the firm recruits an executive for the ABC Company, they will agree not to recommend ABC Company executives to other companies.

Do it Yourself Guide

Recruiting a senior executive to your company is one of your most important responsibilities. Here are some of the things you should consider before deciding to conduct the search independently:

• Do you have access to a network of qualified people who would be a good fit for the position?
• Do you have the time it will take to locate prospects, conduct the initial screening plus the in depth interviewing required for a senior level position?
• Do you trust your instincts to independently evaluate the strengths of the prospects you interview?
• How difficult will be be to locate the type of person you are looking for?

If you are concerned about the above items, you should strongly consider hiring an executive search firm to assist you.

Human resources departments deal with benefits administration, health insurance, workers’ compensation and discrimination and harassment issues. But a major part of human resources (HR) has always been staffing. This includes a great deal of behind-the-scenes work such as:

• Placing classified ads
• Performing reference checks
• Performing background checks
• Writing letters of hire
• Organizing and presenting at new-employee orientations
• Writing job descriptions
• Writing and maintaining an employee handbook

Those responsibilities involve a number of skills, including doing research, writing effectively, organizing events, and presenting in front of a group. It is rare for a small business to maintain an HR staff — let alone one employee — who has all these abilities.

Along with information technology, telecommunications and building maintenance, human relations are among the most common business segments being outsourced. The theory is that letting outsiders manage these necessary but diversionary processes frees a business to devote its resources to core products and services.

Further, human resources (HR) has become so complicated, proponents of outsourcing say, that it takes a team of specialists to keep tabs on all the administrative, compliance and legal issues related to staffing, payroll, workers’ compensation, benefits, health insurance and other areas.

While you certainly should consider cost-effectiveness in deciding whether to outsource your HR, there also is an intangible: Your HR department may be the most visible form of “the company” to your employees. An HR department should effectively serve your employees in a way that makes them feel good about working for you.

If you are thinking about outsourcing your HR, you should consider the following:

• Is the cost of outsourcing worth the benefit?
• Is there an agency in your area that’s familiar with your industry?
• Does the agency have adequately trained staff?
• Where does your business fit in on the agency’s priority list?
• Will the agency allow you to retain your benefits administrators or will it insist on new ones?
• Does the agency have a flexible or a one-size-fits-all approach?
• Are there any red flags?

Do it Yourself Guide

Yes, you certainly can do it yourself. And chances are, that's what you're already doing.  Unless you've already engaged an HR outsourcing firm, you are managing your Human Resources internally.

The question is, did you consciously make this decision, or did you simply take on your HR responsibilities? Depending upon your business and your interest in dealing with HR administrivia, you may want to consider the outsourcing option.

On first glance a deceptively mundane detail, job descriptions that are accurately prepared and faithfully followed can improve employee productivity. Accurate job descriptions also prevent responsibilities from “slipping between the cracks.” This can result in delays, inefficiencies, and finger-pointing and, if not checked, loss of your business’s reputation.

A well-prepared job description begins with a job analysis, which considers the roles and responsibilities of a position, as well as the necessary knowledge, training, and skills. The analysis is then written up, and revised as necessary.

This may be easy to do with a small staff; as your work force grows, however, the task can become challenging and time-consuming, diverting your energy and resources from core business responsibilities.

Online companies have created libraries of job descriptions, as well as software templates that can simplify the writing (which you still have to do). Prices for annual unlimited use start at $100 or so. However, such a cookie-cutter approach may not fit your business.

Other companies will write job descriptions from a questionnaire you fill in. Prices are higher than for template services. The downside here is that if these companies don’t know your business keenly, they still could fail to accurately assess the job requirements and qualifications.

Job description services are available online; look for them locally in your Yellow Pages or through a web search. Alternatively, professional employer organizations (PEOs), which manage human resources for businesses, may offer this service. If your business already uses a PEO, ask your representative whether job description services are available.

Do it Yourself Guide

If you want to write you own job descriptions you will ideally have an HR background or a good job description template on which you will base your documents.

Many of the online services are especially useful for do it yourselfers in that they provide templates that can be easily updated by business owners who are knowledgable of their specific job duties. This is often the most cost effective strategy for a small to medium sise business.

A payroll outsourcer is an accounting firm or service bureau that processes payroll for other businesses. The typical client is a small business - one large enough for payroll to become a hassle, but small enough to not merit its own full-time payroll department.

The following services are typically included in a payroll outsourcing agreement:

• Printing of employee pay checks on time for payday
• Direct deposit of pay into employee bank accounts, when desired
• Appropriate calculation and withholding of federal, state, and local taxes
• Calculation of payroll taxes (Social Security and Medicare) to be paid by employer
• Filing of quarterly and annual payroll reports
• Depositing of withheld amounts with tax authorities
• Printing and filing of year-end employee tax documents, including W-2s.

Additional services may include:

• Management of retirement and savings plans
• Health benefits or "cafeteria" plans
• Timekeeping

In the United States, it is customary for the payroll provider to absorb the cost of penalties or liabilities incurred as the result of a mistake made by the payroll provider.

Do I need it?

Every company needs to pay its employees. The question is whether you should process payroll yourself, or outsource it to a payroll provider.

Here are the key considerations when evaluating 'doing it yourself' vs. outsourcing:

• Your expertise. Do you have sufficient payroll expertise to insure that you are in compliance with the applicable state, federal and local regulations?
• Nature of your work force. Do your employees work varying hours per pay period? Do you have high turnover or utilize seasonal workers? if so, doing it yourself becomes increasing more difficult.
• Multiple States. Do you have employees in multiple states? If so, your payroll becomes more complex.
• Simplification. What is it worth to not be saddled with the hassles and complexity of processing payroll? Are you prepared to pay a vendor to take over this job?

What does it cost?

Your actual cost for outsourced payroll services will, of course, vary by the vendor you select and the specific services included in your agreement. As a rule of thumb, however, most small to medium businesses end up paying their provider roughly $3 to $5 per each paycheck processed. When evaluating a vendor, be sure to understand the services that are included in your per transaction fee -- as opposed to the services that may require additional payment.

How do I buy it?

Once you've decided to outsource your payroll, you need to select a vendor.

Here's a checklist to guide you through the selection process:

• Services. Can you customize your program so that you receive the services you want, without paying for services you do not need? Ideally, you can select and pay for services from a menu that contains the following options:
  
  
  • Basic payroll processing
    (calculations, withholding, check distribution and reporting)
  • Direct deposit
  • Payroll deduction for employee benefit plans
  • W-2 processing
• Duration of the Agreement. How long are you obligated to stay with this vendor?
• Service Quality. How flexible and responsive is the vendor when you need assistance? What are the hours of operation of their call center? Is their user documentation understandable?
• References. Can you check references - and preferably ones that are within your geographic area and of a comparable size as your own business?
• Relaying Payroll Information. You need to "call in" your payroll data for each pay period. What options does the vendor provide for relaying this information? Typical options include telephone, fax, modem, courier or web.
• Tax Filing Services. Will the vendor file your company's state and federal payroll taxes on your behalf? Does the vendor support the Electronic Federal Tax Payment System (EFTPS), which is required when your company exceeds $200,000 in federal taxes.
• Payment of Penalties or Interest. Will the provider pay interest or penalties that may be imposed because because of a mistake they make?
• Price. What is the total cost for their service? How long is the fee guaranteed, and what services are subject to additional fees? How will the price change if you increase staff or downsize?

Professional Employer Organizations (PEOs) are companies that assume the tasks traditionally undertaken by a business’ human resources department. The increasing popularity of PEOs comes from the realization that a small business may not have the staff and budget to concentrate on core products and services as well as tend to the increasingly complex areas of human resources, including:

• Staffing
• Payroll
• Health insurance
• Benefits administration
• Workers’ compensation
• Unemployment insurance
• Government compliance

Some PEOs can assume as much or as little of the HR duties as a business wishes. Others insist on a comprehensive all-or-nothing menu, though these may be tailored to the size of a business.

In assuming these responsibilities, a PEO becomes a virtual employer and is legally responsible for following appropriate laws and regulations. However, not all states have established regulations governing PEOs, and the legal status and responsibilities of PEOs are evolving. The laws and regulations that have been established are inconsistent among the states.

PEOs frequently assume management of risk issues such as health insurance and workers’ compensation, so HR outsourcing (HRO) increasingly is being offered by risk management services.

Do it Yourself Guide

Yes, you certainly can do it yourself. And chances are, that's what you're already doing. Unless you've already engaged an HR outsourcing firm, you are managing your Human Resources internally.

The question is, did you consciously make this decision, or did you simply take on your HR responsibilities? Depending upon your business and your interest in dealing with HR administration, you may want to consider the outsourcing option.

A recruiter is an individual or firm which solicits people to fill open job positions. Recruiters can be divided into two groups: those working internally for one organization (i.e., internal recruiters), and those working for clients through a third party relationship. Third party recruiters are frequently referred to as headhunters.

Note:

This Buyer Guide discusses the recruitment of non-executive level employees. Refer to the Executive Search Firm Buyer Guide for information on recruiting senior executives.

Internal Recruiters

An internal recruiter is member of a company, typically working in the Human Resources Department (HR). Internal recruiters may serve in an HR generalist capacity (i.e., multi-functional responsibilities, including hiring, firing, exit interviews, employee disputes, contracts, benefits, recruiting, etc.) or specialize in recruiting.

The internal recruiter may be a permanent employees or a contractors for this purpose. Contract recruiters tend to move around between multiple companies working at each one for a short stint as needed for specific hiring purposes.

For small firms the recruiter role is generally filled by the company owner or office manager.

Third Party Recruiters

Third party recruiters offer an option to small or medium size businesses who, for one reason or another, need additional assistance in finding and hiring quality employees. Typical reasons a business decides to utilize a third party recruiting firm include:

• Access to quality candidates.

  Successful recruiters maintain a strong network of individuals in specific markets. These networks facilitate locating individuals with the desired skill set, credentials, and salary requirements.

• Convenience.

  Many small business owners prefer to outsource the recruitment process so as to save time, and allow the owner to focus on their core business operation.

• Rapid expansion.

  When times are good, companies may find it difficult to fill all their open positions in a timely fashion. Third party recruiters can expand their efforts to meet the demand for open positions.

• High turnover.

  Companies with traditionally high amounts of turnover may find it advantageous to establish a relationship with a recruiter to 'keep the employee pipeline filled.'

Do it Yourself Guide

Recruiting quality employees to your company is key to your success. Here are some of the things you should consider before deciding to conduct your job searches independently:

• Do you have access to a network of qualified people who would be a good fit for your open positions?
• Do you have the time it will take to locate prospects, conduct the initial screening, personal interviews, and detailed background screening on your job prospects?
• Do you trust your instincts to independently evaluate the strengths of the prospects you interview?
• How difficult will be be to locate the type of employees you are looking for in the current job market?

If you are concerned about the above items, you should consider hiring a recruiting firm to assist you.

Businesses historically have depended on temporary staff to fill specific needs. But unlike the typists or keypunch operators of previous generations, these “temporaries” may be highly trained specialists, such as computer network engineers or marketing consultants, whom your business relies on for months or even years.

Regardless of their responsibilities, these people must have references checked, be hired, be paid, and perhaps have benefits administered. The staffing agency you contract with may offer a package rate or charge a fee for each service provided.

The U.S. Small Business Administration estimates there are 8,000 staffing services agencies in America. Many focus on specialized services such as technology or communications. The larger agencies may typically charge a 50 percent markup.

If you need temporary staff, you may want to check your newspaper’s “situations wanted” classified ads first; you just might find a person whose skills match your needs.

Usually, you can find at least one locally owned staffing service agency where you live; metropolitan areas generally include offices of the large nationwide agencies as well. You should have a concrete idea of what you’re looking for, including number of hours worked and pay scale. You also should be clear about which of you is responsible for what tasks, and who pays for them.

A professional employer organization (PEO), which handles human resources for a business, may hire temporary staff for you. Since these organizations are frequently part of risk management solutions, your insurance broker or representative may be familiar with these agencies and the services they provide.

Do it Yourself Guide

Yes, you certainly can do it yourself. The biggest challenge when doing it yourself, though, is finding and acquiring the temporary workers when you need them.

You essentially pay the temporary agency to make sure you have access to the right people when you need them. You have to determine, based on your own needs and labor force in your area, whether it's worth using an agency.

Keeping track of your employees’ time and attendance is a powerful responsibility that can affect morale as well as productivity. This may not be an issue if all your employees are given the leeway of flexible time or all are on salary. But many small businesses have a combination of salaried and hourly wage employees.

Computer-based time and attendance systems have become increasingly popular. Basic systems keep track of hours worked, as well as vacation and other time off. (“Biometric” systems match each employee with his or her fingerprints, so no one can punch in and out for them.) Some applications also can note how many hours were spent on a particular client. Others add schedule analysis to help you deploy your staff more effectively.

A basic time-and-attendance system may cost a small business with few employees as little as $1,000. The price may include administration and training, or you may have to pay extra for these essential services.

If employee time and attendance management is beginning to strain your business, you might want to engage a supplier of these systems. You can buy directly from the manufacturer or, more commonly, from a reseller. You should check out the reseller to make sure it is thoroughly familiar with the software, including installation, training and support, and is available on short notice for repair.

Time management also may be offered by a professional employer organization (PEO). If you have outsourced your human relations to a PEO, you may be eligible for this service.

Do it Yourself Guide

As an alternative to buying or leasing a system, you can manage your Time & Attendance yourself. Keep in mind, though, that the complexity and hassles will expand as you increase staff or add locations - especially if you have locations in multiple states.