How Much Does Inefficient HR Cost You?

PRemployer on August 3, 2022

How Much Does Inefficient HR Cost You?

Human resources are part of the glue that holds your company together. If it is not running smoothly and efficiently, it can lead to problems ranging from knotty and expensive compliance issues to low employee morale. 

Smaller companies often have issues due to insufficient personnel to run HR well. That leads to crucial tasks falling to the owner or delegated to non-HR personnel, reducing productivity. 

The Risks of Inefficient HR 

Specifically, several risks of inefficient or ineffective HR can interfere with your company's growth and viability. Here we cover the key risks inefficient HR can cause. 

Risks Lower Employee Productivity 

HR is essential in providing guidance to employees and ensuring they have access to training. Without this guidance, employees may perform their tasks less efficiently, lowering productivity. New hires will take longer to get up to speed and waste more time trying to work out what they should be doing. 

All of this makes your company's output more costly and cuts profit. Low productivity also means employees may feel obligated to work more hours, including C-suite employees and the owner. You may need to hire more staff than you otherwise might to avoid people feeling overworked when, in fact, they are underutilized. 

Improved training and onboarding help improve productivity and make employees feel more valued. 

Causes a Decrease in Morale  

The lack of guidance and support also negatively impact employee morale, and low morale reduces productivity. The elements that lower productivity can also lower morale, such as an employee being frustrated as they struggle with a task or having to stay late more often. That can turn into a vicious cycle of reduced productivity and engagement. 

Low morale also increases absenteeism. Employees with low morale are more likely to take paid sick leave for reasons other than being ill or because their mental health is becoming an issue. Low morale can also increase stress, resulting in lowered wellness in general and also increasing absenteeism. 

Finally, low morale increases carelessness, resulting in a higher risk of accidents, injuries, and related downtime. Raising morale requires making your people feel as if they are valued and welcomed, providing the necessary support to do their work well, and knowing their company is there for them. 

Increases Your Turnover Rate 

Ultimately, employees with low morale are more likely to seek positions elsewhere. The same goes for employees who are not receiving the training they need. Younger employees, in particular, want to feel that the company invests in its growth. Otherwise, they will likely decide that the best way to advance is to change jobs. 

High turnover costs companies a lot of money. Not only is hiring itself expensive, but when employees leave before they reach peak productivity, companies remain stuck in a cycle of constantly training less productive new hires. Efficient onboarding and training reduce turnover and shorten the time to peak productivity. 

Employees need to feel supported from day one and throughout their career, or they will likely decide they have made a mistake and leave. If you invest in their growth and give them that support, they will appreciate your loyalty to them and will likely stick around. 

High turnover also restarts the cycle by lowering morale. When half of your coworkers quit, it can feel like the only option is to follow them. When employees do, they will likely be uncomfortable in their roles. 

Incurs Fines and Legal Issues 

Inefficient HR will more likely make mistakes, which can incur issues and fines for your company. Payroll errors carry a high cost from potential fines or employee lawsuits. Filing payroll correctly is crucial. You must correctly file it, do so on time, and take responsibility for any errors. 

Poorly done HR can also result in employees being misclassified as exempt, making you liable for thousands of dollars in back pay or wrongly classifying an employee as an independent contractor.  

The expense from compliance issues can set your company back significantly. Also, nothing lowers morale more than one or more employees or former employees bringing suit against you over payroll issues. 

Improve Your HR Efficiency With a PEO 

One way to improve HR efficiency is working with a professional employer organization. A PEO can take over the mundane tasks and ensure accuracy. Unlike payroll providers, they even file your payroll taxes for you, avoiding the risk of late fees. In addition to payroll, they can also administer your benefits and retirement plans, save you money on workers' compensation, and provide you with a wealth of information and advice from their experience handling thousands of employee issues across hundreds of different types of businesses. 

That means your HR staff don't have to beg for help from other departments and have their own time freed to provide better employee support, design improved onboarding processes, and ensure that everyone gets training. Working with a PEO is the best way to streamline your HR processes, ensure accuracy, and give you the support you need to manage employees better. 

Inefficient or ineffective HR can lower productivity and morale, increase turnover, and elevate your risk of fines and legal issues. Partnering with a PEO helps streamline HR and free up your team to do the most crucial part of their job: Ensuring your employees are supported. 

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