Human Resources

Top Benefits of Fractional HR Services for Growing Companies: Unlocking Potential and Flexibility

HR operations have undergone a significant evolution, transitioning from traditional administrative tasks such as managing payroll and benefits to assuming a more strategic stance, emphasizing talent acquisition, fostering employee engagement, and facilitating organizational development. Various factors, including globalization, advancements in technology, and shifts in workforce demographics, have spurred this shift.

In response to these changes, companies are increasingly seeking adaptable and cost-efficient solutions to address their HR requirements. Consequently, there has been a surge in the adoption of fractional HR services, wherein businesses engage HR professionals on a part-time or as-needed basis rather than maintaining a full-time, in-house HR team. Fractional services provide the necessary expertise and support for HR functions while enabling companies to tailor their HR resources to match their specific needs and financial constraints.

In this article, we will deeply explore the top benefits of fractional HR services for growing companies.

What are Fractional HR Services?

Fractional human resources (HR) is a flexible HR solutions model where companies engage HR professionals on a part-time or limited basis instead of maintaining a full-time, in-house HR team. This approach proves particularly advantageous for small to medium-sized organizations that may lack the workload or resources to justify hiring a full-time professional yet require specialized expertise in HR management.

Fractional HR services offer flexibility, allowing businesses to scale their HR support up or down based on changing needs. For example, they can increase support during peak periods like recruitment drives or scale back during quieter times. 

As a cost-effective HR solution, this model operates as flexible and scalable solutions that provide businesses with access to tailored HR expertise. So, here’s how it typically works for a business that opts for this model: 

  1. The business identifies its HR needs, whether it's recruitment, compliance, employee relations, training, or policy development.
  2. The business then engages a fractional HR service provider based on their specific needs and the provider's expertise.
  3. The provider conducts an initial consultation to understand the business's goals, culture, and challenges. This helps tailor their services to the unique needs of the business.
  4. The provider and the business agree on the scope of services, duration of engagement, and pricing structure. This may involve a retainer fee, hourly rate, or project-based pricing.
  5. The provider offers ongoing support to the business, either remotely or on-site, depending on the arrangement. They may handle day-to-day HR tasks, provide strategic guidance, or support specific projects as needed.
  6. The provider maintains regular communication with the business to address any HR issues, provide updates on progress, and collaborate on strategic initiatives.

Essentially, fractional HR providers bring expertise in various HR areas, including compliance, employee relations, performance management, and talent acquisition. They offer guidance and best practices to help businesses navigate HR challenges effectively.

While getting acquainted with the company, they adapt to the evolving needs of the business and industry trends, staying updated on changes in employment laws and regulations to ensure compliance and mitigate risks.

However, the core reason most businesses opt for this is that fractional HR services offer a cost-effective solution for businesses that may not have the resources to hire a full-time HR team. Businesses pay for only the services they need. Hence, they can access high-quality HR expertise without incurring the overhead costs associated with hiring full-time staff.

In contrast with other forms of HR services 

Fractional HR stands out due to its flexibility, a key difference from traditional HR practices where full-time staff handle all functions internally, incurring significant costs. Outsourced HR also offers flexibility but may lack personalized attention. In contrast, fractional HR engages professionals on a part-time basis, bridging the gap between traditional and outsourced models. It allows access to specialized expertise without full-time commitments, offering personalized attention to the organization's unique needs and culture.

Launching HR support often stems from identifiable needs. These might include lacking a dedicated HR professional, navigating an HR staff transition, experiencing rapid company expansion, or requiring specialized HR expertise for a particular project.

Recognizing these needs lays the groundwork for addressing gaps effectively. Fractional providers like Levy offer valuable assistance by conducting comprehensive HR audits. With these audits, we delve into an organization's policies and practices, pinpoint potential issues, and evaluate the efficiency of existing procedures.

Subsequently, we provide a tailored fractional HR professional or team that can be assembled to meet specific requirements and skill sets. It starts with a conversation to understand your business’s HR needs. 

But first, let’s look at the benefits you get to enjoy when you implement fractional HR in your organization. 

8 Top Benefits of Fractional HR Services for Growing Companies

  1. Cost-Effective HR Solutions

The ultimate benefit businesses get from fractional HR is its cost-effectiveness. Fractional HR allows businesses to tap into top-tier HR expertise without the commitment of a full-time team. Paying for services on an as-needed basis, these companies can then avoid the overhead expenses tied to permanent staff.

Cost-effectiveness in flexible HR support can occur in several ways:

  • Cost-Efficient Expertise: Fractional HR allows businesses to access specialized HR expertise without the expense of hiring a full-time HR employee. Instead of bearing the costs of salaries, benefits, and overhead associated with a full-time hire, businesses pay only for the services they need when they need them. This can result in significant cost savings, especially for small and medium-sized businesses with limited HR budgets.

  • Flexible Arrangements: Fractional HR offers flexibility in terms of engagement, allowing businesses to tailor their HR support to their specific needs and budget constraints. Whether it's on a part-time, project-based, or hourly basis, businesses can scale their HR support up or down as needed, reducing costs during slower periods and ramping up support during busy times.

  • Reduced Overhead Costs: With fractional HR services, businesses can avoid the overhead costs associated with maintaining an in-house HR team. These overhead costs include office space, equipment, training, and administrative expenses. Fractional HR providers operate independently, eliminating the need for businesses to invest in these resources.

  • Elimination of Recruitment Costs: Hiring full-time HR staff involves recruitment expenses such as advertising, screening, and interviewing candidates. With fractional HR, businesses can bypass these costs as they engage pre-vetted professionals with the necessary expertise. This saves both time and money associated with the recruitment process.

  • Avoidance of Compliance Risks: Compliance with employment laws and regulations is critical for businesses to avoid costly fines and legal issues. Fractional HR providers are typically well-versed in relevant laws and regulations, reducing the risk of non-compliance. This can save businesses significant costs associated with legal fees and penalties resulting from compliance violations.

Let’s give a quick example: 

ABC Company is a growing tech startup with 50 employees. They are considering their options for managing HR functions efficiently while minimizing costs.

Initially, they decided to opt for a full-time HR manager to handle all HR functions internally: 

  • The average salary for an HR manager in their area is $70,000 per year, excluding benefits and taxes.
  • Additional benefits such as healthcare, retirement plans, and vacation time add approximately 30% to the base salary, bringing the total cost to around $91,000 per year.
  • Office space, equipment, training, and administrative expenses for the HR manager amount to an estimated $20,000 per year.
  • The total annual cost of maintaining an in-house HR team is approximately $111,000.

However, to reduce costs, they halt the hiring plans and decide to go for the fractional HR advantage instead:

  • They estimate their HR needs to be around 20 hours per week, equivalent to half-time.
  • The fractional HR provider offers services at an hourly rate of $75.
  • Assuming 20 hours per week for 52 weeks, the total annual cost for fractional HR services is approximately $78,000.

In comparison:

  • With in-house HR, ABC Company incurs a total annual cost of $111,000, including salary, benefits, and overhead expenses.
  • By opting for fractional HR services, the company saves approximately $33,000 annually.
  • Additionally, fractional HR still offers flexibility, scalability, and specialized expertise without the commitment of a full-time hire.

With this, ABC Company can allocate resources more efficiently and focus on its core business objectives. 

  1. Access to Top-tier Talent and Expertise

One of the top benefits of fractional HR Services is that it empowers growing companies with specialized expertise and adaptable support, perfectly suited to their evolving requirements.

The nature of the fractional HR model makes it easier to find specialized service providers than generalists. Even if you are looking for a generalist, you are sure to find experts in the field because these providers are either former full-time HR officials with experience or they’ve worked with several clients and know how to navigate this model. 

Hence, you are sure to get access to top-tier talents and expertise. As a growing company,  your business can benefit immensely from the expertise of experienced HR professionals in several ways. 

These experienced fractional HR professionals can help growing companies attract top talent and retain valuable employees. They have the expertise to develop effective recruitment strategies, conduct interviews, and implement retention programs that align with the company's goals and culture.

  1. Scalability and Flexibility

Scalability and flexibility are two significant benefits of fractional HR that make it an ideal solution for companies at various stages of growth. 

Fractional HR services are scalable, meaning they can easily adjust to accommodate changes in a company's size, structure, and HR needs. This scalability allows growing companies to access the right level of HR support as they expand without the commitment and overhead of hiring full-time HR staff.

  • Resource Allocation: As companies grow, their HR needs evolve. Fractional HR services will allow these companies to allocate resources efficiently by providing access to HR expertise on an as-needed basis. This ensures that companies have the support they need to manage growth effectively without overburdening their budget.
  • Flexible Engagement Models: Fractional HR professionals offer flexible engagement models that can be tailored to match the company's growth trajectory. Whether it's a few hours per week or full-time support for a specific project, companies can scale their engagement with fractional HR professionals to meet their changing needs.
  • Support for Expansion: Fractional HR professionals can support companies during periods of rapid expansion by assisting with recruitment, onboarding, and talent management. They can also help establish scalable HR processes and systems that can accommodate a growing workforce, ensuring that the company can scale smoothly without compromising on HR quality.

The flexible nature of fractional HR allows companies to access a wide range of HR expertise and services tailored to their specific needs. This flexibility enables companies to respond quickly to changing business conditions and HR challenges without being constrained by traditional HR structures.

  • Customized Solutions: Fractional HR professionals provide customized solutions that address the unique needs of each client. It could be setting up HR processes, developing policies and procedures, or providing strategic HR guidance; fractional HR professionals tailor their services to meet the specific needs of the company.
  • On-Demand Support: Fractional HR professionals offer on-demand support, allowing companies to access expertise whenever they need it. Whether it's handling a sudden HR issue, implementing a new HR initiative, or providing guidance on compliance matters, fractional HR professionals are available to provide timely assistance, ensuring that companies can address HR challenges effectively.
  • Adaptability to Change: Fractional HR professionals are adaptable and agile, able to pivot quickly in response to changing business conditions and HR requirements. Whether it's scaling up to support growth initiatives or adjusting strategies to address emerging HR trends, fractional HR professionals can adapt their approach to meet the evolving needs of the company.

  1. Enhanced Focus on Core Business Functions

One of the major distinctions of the fractional HR model is the provider’s strict focus on outlined deliverables in the contract.

When you have an in-house HR official, the lines may be blurred. Let’s face it: even with their job roles and KPIs clearly mapped out, your in-house staff members might still be borrowed from time to time to help out with other tasks. A fractional HR staff, on the other hand, is working “strictly on agreement”. Hence, their attention is not waving. 

Fractional HR allows a company's leadership to focus on core business functions by taking on the responsibilities of managing the stipulated HR functions, thus freeing up time and resources for executives and managers to concentrate on driving the company's growth and success. 

These professionals are adept at managing routine HR tasks such as payroll processing, benefits administration, and employee onboarding, so when business owners delegate time-consuming tasks and administrative burdens, they can now focus on strategic priorities.

They can streamline processes, reduce administrative burdens, and improve overall efficiency. With routine HR tasks handled more effectively, employees can focus their time and energy on core business activities, leading to increased productivity across the organization.

Fractional HR professionals bring expertise in HR best practices to the table, enabling them to establish efficient HR processes and systems that support the company's goals. Whether it's developing performance management systems, conducting training and development programs, or ensuring compliance with labour laws, fractional HR professionals handle these tasks, freeing up company leadership to focus on high-level strategic planning.

  1. Risk Mitigation and Compliance

Just like in-house HR professionals would do, fractional HR providers acquaint themselves with rules guiding HR practice. But they tend to take it more seriously. 

When an in-house HR official defies the rule, the company may bear the consequences entirely. However, when a fractional HR official flouts, they’re more likely to pay more due to the nature of their services. They are not attached to the company; hence, they may not enjoy the immunity that being employed full-time gives. Therefore, it’s natural for these experts to pay more attention to compliance than in-house staff members.

Fractional HR providers play a crucial role in helping companies navigate the complex world of HR compliance and reduce risk by staying abreast of ever-changing employment laws and regulations. Here's how they accomplish this and why staying current with employment laws and regulations is paramount:

  • They have deep expertise in HR compliance, including knowledge of federal, state, and local employment laws and regulations. They help companies understand and comply with legal requirements related to areas such as wage and hour laws, discrimination and harassment prevention, employee classification, and workplace safety.
  • They conduct thorough risk assessments to identify potential compliance gaps and areas of exposure. They analyze company policies, procedures, and practices to ensure alignment with legal requirements and best practices.
  • Fractional HR providers assist companies in developing and implementing HR policies and procedures that comply with applicable laws and regulations. They ensure that company policies are up-to-date, legally compliant, and effectively communicated to employees. 
  • Depending on the agreement or as the need arises, fractional HR providers may also offer training and education programs to help employees and managers understand their rights and responsibilities under employment laws. They guide topics such as diversity and inclusion, anti-discrimination policies, sexual harassment prevention, and safety protocols. 
  • Fractional HR providers conduct regular audits and assessments to ensure ongoing compliance with employment laws and regulations. They review HR practices, records, and documentation to identify areas for improvement and address any deficiencies promptly. 

However, even as a business leader employing the services of an independent HR provider, focusing on core business functions should not stop you from compliance. Here’s why: 

  • Legal Compliance: Compliance with employment laws and regulations is not optional—it's a legal requirement. Failure to comply can result in costly fines, penalties, lawsuits, and reputational damage for companies. Staying current with employment laws ensures that companies remain in good standing with regulatory authorities and avoid legal consequences.
  • Protecting Employees: Employment laws are designed to protect the rights and well-being of employees. Staying current with these laws demonstrates a commitment to upholding employee rights, promoting fairness and equality in the workplace, and fostering a safe and respectful work environment.
  • Preserving Reputation: Compliance with employment laws is essential for preserving the reputation and integrity of a company. Non-compliance can damage a company's reputation, erode employee trust, and deter top talent from joining the organization. Staying current with employment laws helps safeguard the company's reputation and maintain trust with stakeholders.
  • Business Continuity: Compliance with employment laws is critical for ensuring business continuity and mitigating operational risks. Non-compliance can disrupt business operations, lead to legal disputes, and jeopardize the company's ability to operate effectively. Staying current with employment laws helps mitigate these risks and ensure the smooth functioning of the business.

  1. Customization of HR Services

Fractional HR services are highly adaptable and can be tailored to meet the specific needs of a growing company at various stages of development. Their services can be customized to address the unique requirements of a growing company at any stage. 

  • Flexible Engagement Models: Fractional HR providers offer flexible engagement models that can be customized to match the company's size, budget, and growth trajectory. Whether it's part-time support for basic HR functions, project-based assistance for specific initiatives, or interim HR leadership during periods of transition, fractional HR providers can adjust their level of involvement to meet the company's evolving needs.
  • Scalable Solutions: Fractional HR services are scalable, meaning they can grow or shrink alongside the company's workforce and HR requirements. As the company expands, fractional HR providers can ramp up their support to handle increased HR demands, such as recruiting, onboarding, and compliance management. Conversely, during periods of slower growth or downsizing, fractional HR providers can scale back their services to align with the company's reduced needs and budget.

Fractional HR providers offer customizable service packages tailored to the specific needs and priorities of the company. These packages may include a combination of services such as:

  • Recruitment and Talent Acquisition: Assistance with sourcing, screening, and hiring top talent to support the company's growth objectives.
  • HR Policy and Procedure Development: Development and implementation of HR policies and procedures that align with industry best practices and comply with applicable laws and regulations.
  • Employee Relations and Conflict Resolution: Guidance and support in managing employee relations issues, resolving conflicts, and promoting a positive work environment.
  • Compliance Management: Monitoring changes in employment laws and regulations, conducting compliance audits, and ensuring that the company's HR practices are legally compliant.
  • Performance Management: Design and implementation of performance management systems, including goal setting, performance evaluations, and feedback mechanisms.
  • Training and Development: Development and delivery of training programs to enhance employee skills, knowledge, and performance.
  • HR Technology Implementation: Assistance with selecting, implementing, and optimizing HR technology solutions to streamline HR processes and improve efficiency.
  • Strategic HR Consulting: Strategic guidance and support to align HR initiatives with the company's business objectives and growth strategies.
  • Interim HR Leadership: Provision of interim HR leadership during periods of organizational change, such as mergers, acquisitions, or leadership transitions.

Examples of customizable service packages for a growing company might include:

  • Startup Support Package: This package would be typically designed for early-stage startups that need assistance with foundational HR tasks such as employee handbook development, recruitment process setup, and compliance basics.
  • Expansion Package: This package is tailored for companies experiencing rapid growth and includes services such as full-cycle recruiting, onboarding program development, and HR strategy consulting to support expansion initiatives.
  • Compliance Assurance Package: This package focuses on ensuring legal compliance and includes services such as compliance audits, policy updates, and employee training on key compliance topics.
  • Project-Based Package: This package is ideal for companies with specific HR projects or initiatives and includes services such as HR technology implementation, performance management system design, or employee engagement surveys.
  • Interim HR Leadership Package: This package provides interim HR leadership support during times of transition or change, such as a temporary absence of HR leadership or organizational restructuring.

While it’s expected that your chosen provider brings their structured service package for you to pick from, you may also design one based on your company’s needs at specific times. 

  1. Quick Implementation and Integration

Fractional HR services offer several advantages in terms of speed of implementation and ease of integration compared to hiring full-time HR staff. Here's how:

  • Speed of Implementation: Fractional HR services can be implemented much more quickly than hiring full-time HR staff. When a company decides to engage a fractional HR provider, they can typically start receiving support within a matter of weeks or even days, depending on the provider's availability and the complexity of the company's needs. In contrast, hiring full-time HR staff involves a lengthy recruitment process, including sourcing candidates, conducting interviews, negotiating offers, and onboarding, which can take several months to complete.
  • Immediate Access to Expertise: Fractional HR services provide immediate access to specialized expertise and resources that may not be available internally or through a traditional hiring process. Fractional HR providers bring a wealth of experience and knowledge to the table, enabling them to hit the ground running and start addressing the company's HR needs from day one. This rapid access to expertise allows companies to address pressing HR challenges more effectively and efficiently than waiting for a full-time hire to come on board.
  • Flexibility in Engagement: Fractional HR services offer flexibility in engagement, allowing companies to tailor the level of support to their specific needs and budgets. Whether it's a few hours per week or full-time support for a particular project, fractional HR providers can adjust their level of involvement to match the company's requirements. This flexibility enables companies to scale their HR support up or down as needed without the commitment and overhead of hiring full-time staff.
  • Ease of Integration with Existing Processes: Fractional HR services are designed to seamlessly integrate with existing business processes, systems, and culture. Fractional HR providers take the time to understand the company's unique needs, challenges, and objectives, allowing them to align their services with existing processes and workflows. Whether it's integrating with existing HR software systems, collaborating with internal teams, or adhering to company policies and procedures, fractional HR providers ensure a smooth and seamless integration with the company's operations.
  • Minimal Disruption to Operations: Engaging a fractional HR provider typically involves minimal disruption to ongoing business operations. Fractional HR providers work remotely or onsite as needed, allowing them to collaborate with internal stakeholders and support HR initiatives without interrupting day-to-day business activities. This minimizes downtime and ensures that HR functions continue to operate smoothly while the company transitions to working with a fractional HR provider.

  1. Fast Start for Businesses

"Fast start for businesses" refers to the advantage that fractional HR services offer in enabling companies to quickly establish and optimize their HR functions without the delays associated with traditional hiring processes. 

When a company engages in fractional HR services, they gain immediate access to experienced HR professionals who can hit the ground running. These professionals bring specialized expertise in areas such as recruitment, compliance, and employee relations, allowing businesses to address HR needs without the time-consuming process of hiring and onboarding full-time staff.

Moreover, fractional HR services enable businesses to rapidly deploy HR resources to address pressing needs or capitalize on emerging opportunities. Whether it's implementing HR policies and procedures, launching recruitment initiatives, or conducting compliance audits, fractional HR professionals can start working on critical tasks right away, accelerating the company's progress and growth trajectory.

If you need short-term fractional HR support, explore Levy’s fractional HR services further or reach out to us today for assistance. We provide HR services for SMEs, cost-effective HR solutions, and flexible HR support for businesses of all sizes. 

Fractional HR services provide growing companies with a multitude of benefits that profoundly impact business growth and agility. Access to specialized expertise, coupled with flexibility and scalability, allows companies to optimize HR functions without the need for full-time hires. This empowers businesses to concentrate on core competencies, foster innovation, and swiftly adapt to market changes. Moreover, fractional HR services aid in risk mitigation, ensure regulatory compliance and enhance operational efficiency, leading to heightened productivity, employee satisfaction, and overall business success. Embracing fractional HR services positions growing companies for sustained growth and increased adaptability in today's ever-evolving business landscape.

Now that we’ve unlocked the top benefits of fractional HR services, your growing company can gain access to Levy’s specialized expertise and flexible support tailored to your evolving needs.

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