A lot of what we talk about in this space is how a small business can pay someone to do things that aren't part of the core business so that it can concentrate on what is core.
We'll soon be posting Best Practice stories on handling human resources and payroll through or , which can be excellent, cost-effective solutions for managing benefits, sick days, vacation, and the like for as few as 5 employees or as many as 50. Another solution is something called a Professional Employer Organization. PEOs say they'll help you recruit, hire, do background checks, handle some HR functions such as benefits and legal compliance, and even assume some of the liabilities. They also can get you better rates on benefits and worker's comp because they aggregate a bunch of businesses and buy in bulk.
There are a few challenges, though, so you'll want to be careful before you use one. First, it's hard to know who's good. There are hundreds of PEOs in the United States, and while there are professional organizations that set standards, you'll probably want to check up on ones you're considering and ask some hard questions, as well as get references. Second, as with much outsourcing, you're giving up control and the chance to learn and develop expertise; while you're not an expert in human resources, by handling some of the functions, even with an online vendor, you'll develop some expertise that could help inform your business and assist in hiring later. And while PEOs can save you time and keep you focused, they may not really save you money: generally, they charge a percentage of your payroll, as much as 3 percent (as noted lower down in this story).