What is Fractional HR: Top Benefits for Small Businesses

In the world of small business management, human resources (HR) is a critical area that often gets overlooked. 

Many entrepreneurs struggle with HR tasks while trying to manage costs. 

Fractional human resources teams offer a solution that is different from traditional outsourced HR services. 

What is Fractional HR? It is not just another name for outsourced HR; it is a unique approach to handling HR functions. 

At TROIS Collective, we work hard to help our partners understand how fractional HR can change their business for the better. 

So, in this blog you will learn everything you need to know about Fractional HR and how it can help businesses deal with the challenges of HR management.

What is Fractional HR?

Fractional human resources (HR) allows businesses to hire HR experts on a part-time basis instead of having a full-time HR team.

The term “fractional” means that companies can get an HR leader or team that suits their needs, which is especially helpful for small to medium-sized businesses that may not have enough work or money for a full-time HR employee but still need help with HR issues.

Is fractional HR the right choice for every business? Not always. 

HR is important for any leadership team, but many small to mid-sized companies struggle to pay for a full-time HR person or don’t have enough work for one. This is where fractional HR can be beneficial.

Some people think of HR consultants as being disconnected from the company. 

However, fractional HR consultants work closely with the leadership team. They help drive the business’s success and are available to support employees when needed.

What Fractional HR is not

Before we dive deeper, let’s clarify what Fractional HR is not:

• It’s not a full-time HR resource that businesses feel they must have based on old practices.
• It’s not an external consultant who comes in for a one-time workshop, gives a checklist of actions, and then leaves without ensuring lasting change.
• It’s also not an outsourcing HR service that only provides basic services.

How does Fractional HR work?

Many HR companies, such as TROIS Collective, provide fractional HR services, working when needed instead of full-time. They can work remotely, on-site, or in a mix of both.

The process usually involves:

1. Meeting: A first consultation to talk about your needs and challenges.
2. Assessment: Reviewing your HR practices to figure out what services you need and when.
3. Implementation: Working with your staff to customize and integrate their services.
4. Follow-up: Giving a report and recommendations at the end of their temporary work with you.

What are the benefits of fractional HR?

Fractional HR services offer several advantages that can help companies work better and adapt more easily. 

Here’s a simple overview of these benefits:

• Flexibility: With fractional HR, businesses can increase or decrease their HR services as needed, hiring more help during busy times and cutting back during slower periods. This means they only pay for the services they use while still having expert support.

• Cost-Effectiveness: Hiring a full-time HR professional can be very expensive. In contrast, fractional HR services usually cost about 40% of that amount, making them a more affordable option.

• Accounting Benefits: Consultants and temporary workers are often treated differently in financial reports compared to regular employees, which can help businesses manage their costs better.

• Ease of Termination: Ending a contract with fractional HR professionals is usually easier and less costly than firing a full-time employee. There are typically no severance packages or long-term commitments involved.

• Expertise: Fractional HR professionals bring a lot of experience and specialized knowledge. They are familiar with the latest HR best practices and compliance issues, helping businesses navigate complex HR needs.

• Focus on Core Activities: With fractional HR support, companies can focus on their main goals and growth without getting distracted by HR tasks. 

• Customized Solutions: Fractional HR providers offer tailored solutions to meet the specific needs of each business. Whether a company needs help with hiring, employee relations, or policy development, fractional HR ensures that services are customized to fit the organization’s goals.

Why is the Popularity of Fractional HR Growing?

The demand for fractional HR is increasing, thanks to changes after the pandemic and new market challenges: 

• More businesses are questioning the traditional 40-hour workweek; the push for a 4-day workweek shows that productivity and value can be measured differently.

• Small businesses often have tight budgets, making fractional HR a cost-effective solution.

• HR can be complex and has many legal requirements. Small business owners see the benefit of having professional HR support to avoid expensive mistakes.

• As businesses expand, their HR needs change. Fractional HR can easily adjust to meet these new requirements.

• Fractional HR experts offer skills that small businesses may not be able to hire full-time.

• The rise of remote work also makes it easier for businesses to find and use fractional HR services.

Fractional HR vs Outsourced HR

Fractional and outsourced HR are alternatives to traditional in-house HR teams. Let's define what each of these services offers. 

Fractional HR

With fractional HR, you can hire part-time team members to support your existing HR staff.

This setup focuses on strategic initiatives and helps build a stronger connection to your organization, leading to better integration into your corporate culture and planning.

The fractional HR team acts as an extension of your organization, taking on tasks usually handled by full-time HR staff without the need for full-time commitments.

In simple terms, fractional HR services, like those from TROIS Collective, work like having part-time employees who assist your current team. 

It’s a partnership that enhances your HR efforts rather than replacing them.

Outsourced HR

Outsourced HR means hiring an outside company to take care of some or all of your human resources tasks. 

This can include specific functions like payroll processing or employee benefits administration. 

Typically, an outsourced HR team replaces your in-house HR team. 

However, sometimes, it can be a strategic partnership where your existing team collaborates with the HR company to perform similar or complementary tasks.

When to Consider Fractional HR

If you're unsure whether fractional HR is right for your business, here are some situations to think about:

• Small businesses often have few resources. If you don’t have a full-time HR employee, hiring a fractional HR expert can provide the help you need at a lower cost.

• If your need for HR support varies, it’s time to hire someone part-time during busy times and save money when you don’t need their services.

• If your business is growing or changing quickly, fractional HR is for you. 

Conclusion

What is Fractional HR? It is an affordable and flexible solution that helps businesses manage HR tasks without spending too much. 

By using fractional HR, small businesses can concentrate on growing while leaving HR details to the experts.

In today's fast-paced world, fractional HR is a useful tool for small businesses that want to succeed against competitors.

If your business is ready to make the change, contact us here.