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Why Should an Accountant Offer Human Resources?


Why are we talking about expanding advisory service lines into the unknown world of HR when there are so many core accounting items we could be talking about with clients?

Jun 1st 2021
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If you are paying attention to the profession right now, everyone is talking about accountants can help with HR service advice.Why?

For my business, we started an HR service line three years ago, before it was trendy. It has been wildly successful. In this article, we will analyze five key reasons that this service line makes sense for an accounting firm.

1. Clients Ask for It

According to a study by ADP®, 62 percent of small businesses say that they need HR insights from their accountant. 62 percent! And I would wager a guess that the other 38 percent do not yet see the value because they have not experienced it.

At High Rock, our clients directly asked for it. They may not have said “please offer an HR service line,” but we read between the lines of their other questions. We were offering payroll for years, and with that, clients started asking us HR questions. Here is a great one we got the other day “I hired someone in Ohio that wants to be paid monthly, how can I do that?”

On the surface, this sounds like a direct payroll mechanics question. However, I know from experience that Ohio law requires payments to be made more frequently than monthly. This is actually an HR compliance question – not a software mechanics question. If we were not there to support HR and charge for it, we might have inadvertently set them up with a monthly payroll and helped them break the law, or we could have given them free advice not to do that.

Clients ask HR compliance questions all day long. Setting up a firm with the backend resources to support them is critical to good advice and capitalizing on this service line.

2. Small Businesses Do Not Do This Well in House

According to the survey HR Staffing and Resources 202: XpertHR Survey Report, in the small business category (defined as under 250 employees) only 41 percent have internal resources dedicated to HR. That means 59 percent of small businesses do not have this specialty at all in house.

This survey also reported the specialties of the HR professionals that are in house. Of them, only 25 percent (at the maximum) had any kind of specialty abilities to support their companies. These specialties include responsibilities like employee relations, state and federal compliance, handbooks and policy, diversity and inclusion, communications, metrics, learning and development, and other incredibly important human resources activities. This means, they are likely hiring contractors or firms to fill in the gaps here. Or, if they are not, they are overreaching skills and experience.

3. There is a Giant Viable Market

Again, 59 percent of small businesses do not have an HR person in house. Let us extrapolate out a bit and estimate the size of the market. Now, there are varying degrees of data on number of businesses in the US, the size of the employment, and the age of the data sets.

What we do know, is there were approximately 34 million employer and non-employer businesses in the US in 2019 according to the census. The census also collected data about employers in 2019 and reports that there are about 8 million employers in the US.

Yes, that means that 26 million businesses are sole proprietorships or otherwise do not have any employees. While some of the non-employer businesses might need HR advice (think partnerships) we can eliminate them from our fast calculation on total market size.

Now, let’s break it down into segments. The most recent breakdown of the number of firms by number of employees was done in 2014 by the SBA. If you download the dataset, they are reporting that there were roughly 5 million businesses with fewer than 250 employees in the US in 2014.

While I am sure that number has grown, it will not make a material difference for our purposes. The math shows that 5 million small businesses multiplied by 59 percent is 2,950,000. There are approximately 3 million businesses in our country that need HR help right now.

So, how can we extrapolate even further and calculate out a market cap? Yes, I am totally an accountant and I justify my decisions with financial and statistical metrics. According to the same survey I referenced above, businesses spend an average of $1,278 per employee on HR services.

Okay, so let’s go back to that dataset we downloaded from the SBA that includes a listing of the total employment in firms under 250 employees. The total number of people being employed by our target market is about 51 million.

If we multiply that by the average spend per employee, we arrive at our total market cap of $65 billion. We can limit this to the 59 percent cited about to arrive at our target market. The potential target market for HR service being provided to sub 250 employee companies is $38 billion.

And this is assuming that none of the companies that have in-house HR support would be part of the market and that none of the non-employer businesses would be part of our market; this is a very conservative estimate.

4. Accountants Are Better Equipped To Help These Companies

The biggest objection I hear accountants give is that they are not HR specialists, so what gives them the right to offer this service? Well, let me tell you, I am not an expert in every modicum of tax law, but I know exactly what resources to use for what to help clients. That is exactly how to approach HR services.

There are resources available from HR and payroll companies to support accountants on their HR journeys. These research databases are not available to the average small business. They have no idea where to turn for help.

On top of research databases, many HR and payroll companies are offering HR professional time to answer questions or point you in the right direction. There are handbook writers, policy templates, situational guidance, statistical information, and stores of knowledge available.

Not only do we have access to the information now; accountants make good advisors. We are good at interpreting complex information and presenting it to our clients. HR is no different. We are well equipped to balance the risk and rewards and work with companies to enhance their employees’ experiences.

5. Many Firms Are Already Offering Payroll Services

Some firms simply do not know the difference between payroll and HR. From a high level, HR digs more into the experience of humans. It includes:

  • employee onboarding and off-boarding (currently frequently handled by accountants)
  • employee relations
  • performance management
  • internal compliance (handbooks, policy, etc.)
  • external compliance (filings, state registrations, payroll taxes)
  • benefits
  • recruiting
  • HR strategy
  • diversity and inclusion
  • occupational health and safety
  • workers comp insurance management

Most small businesses need primarily compliance and small advice in other areas. It is an easy lift to add in HR advisory on top of a payroll practice and you do not have to offer every piece of HR on day one, or even at all.


Now, if I have convinced you to at least think about offering HR services to your accounting clients, come back next week to read how and register for my free upcoming webinars where we will dive in depth on this topic and give more real-life scenarios on how to build a profitable HR service line. Thinking this is a good idea is only part of the equation, execution is what matters.

Grow your practice with HR Advisory Services. Sign up for this free, two- part webinar series. Register today

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