Updated: Apr 6
Are you lacking the expertise and time for a human resource (HR) job that needs to be completed? If you do, you must outsource your human resource management tasks to an outside company.
Your Human Resources team is a crucial part of your company. They’re the ones who handle everything from hiring to firing, from benefits to payroll. And yet, most small and mid-sized businesses don’t have an HR department on staff. Why?
It’s because they don’t feel they can afford it, they lack the budget for it, or they don’t consider it necessary. However, when you look at the other areas of a business where outsourcing makes sense, like customer service and IT, HR is another area that should be considered. To grow your organization or address compliance concerns, you may want to consider hiring a company to do some of the work you need to do.
It is a reality that some tasks that you need to do need specialists. Nevertheless, hiring an expert in your company will generally be too expensive and take a long time. If you outsource it to businesses and consultants, you will realize cost savings in terms of salaries while gaining the company's knowledge and consultant expertise.
Outsourcing Your HR: Why It's the Best Choice for Your Business
The Human Resource Department
The human resource department is a critical component of any business, especially small to mid-sized businesses. The HR department handles the hiring process, learning, compensation, payroll, and benefits. They also ensure that the company follows all applicable labor laws, helping the company mitigate people risk management concerns.
A variety of human resource practice areas have seen an increase in outsourcing,
including payroll, benefits administration, human resources administration, and recruiting to national and other companies off-shore, depending on the needs of the business.
The use of offshore HR outsourcing firms from countries such as China, the Philippines, India, and other developing nations can save businesses on fees, but there can be language barriers, technology barriers, quality problems, and other challenges.
If you don't want to engage with an offshore business, HR outsourcing is still a viable option because there are local and national suppliers who can provide organizations with advantages when done correctly.
What is HR Outsourcing?
HR Outsourcing (or Human Resources Outsourcing) is when a company hires an outside firm to handle its HR needs. The HR outsourcing company will do everything that a traditional HR department would do, such as interviewing and hiring new employees, managing the payroll, maintaining benefits, and more. They'll provide all the necessary support for your business to be successful.
What does an outsourced HR company do?
Outsourced HR companies have the experience and expertise required to get your HR departments up and running quickly. They can help you find, hire, and retain top talent with an efficient process. A third-party company will handle all of the things that are time-consuming, like benefits, packages, and payroll. They will do it at a lower cost than hiring someone on staff.
The Benefits of Outsourcing Your HR
Here are seven reasons organizations should consider HR outsourcing for your business:
1) Ongoing Costs. It’s much more expensive to have an in-house HR staff than to outsource it to another company. Companies know this, which means they can offer you lower prices for their services while still creating immense value for your business. Not only are they cheaper upfront, but they're usually less expensive over time as well (since they charge on a per-hour basis).
2) Expertise. When you outsource your HR, you're partnering with experienced professionals who know how to navigate labor laws in the United States and all 50 states. In understanding these laws and how they might affect your specific business needs, these hr function experts have the knowledge and experience necessary to guide you through.
3) Recruiting Process. Using recruitment process outsourcing, RPO, you can save money on recruitment fees by outsourcing your recruitment process. Your organization will also benefit from receiving "real time" market intelligence on compensation data as they speak with job seekers to help your organization create and provide competitive compensation packages.
4) HR Management. Avoid the headache of HR management. If you're hiring someone internally, you'll also have to deal with the headache of managing that person. You'll need to make sure they're doing their job, that they're not slacking off, and you'll need to train them how to do their job effectively. With an outsourced solution, the company you work with will handle all those responsibilities for you. They know how to hire the most qualified people and how to manage them well on the job.
5) Eliminates stress. Outsourcing eliminates stress from your day-to-day life. Managing an in-house hr team is time-consuming and stressful as it is - never mind if they don’t perform well! As an owner of a business, there are already enough things on your plate without adding this additional responsibility to the mix. By outsourcing your HR needs, you can focus on what matters most: running your business efficiently and making money while doing so.
6) Morale Boost. Outsourcing can boost morale among employees who remain at your company since they know that if they have questions about their benefits or other human resource issues, someone is always available to answer them via phone or email.
7) It frees up employees to work on other responsibilities.
What Companies Outsource Their HR?
Every company needs HR support, but it's not always necessary to bring HR in-house. It all depends on how many employees your company has. If you work with a small team and don't have much turnover, then the in-house human resource infrastructure model might work for you. However, if you're a larger business with more employees, or if you experience high turnover rates, then outsourcing your HR department, HR processes, HR administration, and HR systems is the best way to go.
If your company doesn't have an HR department, chances are it's because they feel like they can't afford one or that it's unnecessary for their size of business. This is why so many small businesses make the mistake of attempting to handle their HR duties on their own.
By partnering with human resources professionals, hr consulting or an hr outsourcing firm, organizations can leverage their human resources services as needed to optimize their hr functions and hr tasks. In many cases, HR outsourcing services are cheaper and can be more efficient than handling HR tasks internally.
Given that hr outsourcing can conserve a lot of money, your company will be able to cut expenses in personnel headcount. Having the right HR partner will allow your company to concentrate on more vital elements than human resources. With the right HR partner, your company can concentrate on more vital activities and key strategic initiatives for your human resources functions.
In periods of rapid growth, a company's back-office department usually expands. Regardless of how big or small your company is, rapid expansion can tie up your resources and sabotage your core activities.
Outsourcing can help you scale your company and improve efficiency. This will allow you to focus on the most important issues facing your HR team while ensuring you receive quality services at competitive rates.
In the event the organization faces hiring or budget constraints, this can provide it with the opportunity to explore creative strategies to meet its workforce initiatives without having to sacrifice quality, or hire additional staff.
Companies of all sizes, from start-ups to large businesses, may choose to outsource all or part of their human resource practices, saving money as opposed to building or increasing their own human resource department.
The fact is that many HR outsourcing providers have current technologies that may not be attainable for some organizations to purchase, so having an HR outsourcing service that currently has the technology means you do not need to invest money in these evolving technologies. In this way, you can leverage the services of an outsource human resource partner that will provide innovation for you and only charge for the services they provide.
Why HR Outsourcing Is Important?
When you outsource your HR, you can save money on overhead. You don't have to pay for office space or salaries, and you don't need to hire people who specialize in things like benefits and payroll. If your company is already small or mid-sized, it's important to find ways to save money on unnecessary costs as much as possible.
HR outsourcing will free up your time so you can focus on running the rest of your business. Instead of trying to handle everything by yourself, outsourcing means you can delegate tasks that take up time but don't add value to your business.
Your company will be more attractive to potential hires as outsourcing benefits allow you to promote growth and develop internal staff. For example, Candidate A is deciding between two companies with the same title and salary. Candidate A is most likely to choose the company with established staff development because it appears to offer more opportunities for advancement.
HR outsourcing has numerous benefits, such as the ability for a human resource manager to focus on their core tasks like candidate selection, leading to quicker hiring decisions. However, having a full-service HR department in-house, each hiring decision will go through a long approval process before any offer can be extended, which means it could take days or weeks before anyone is hired.
Consequently, creating a scenario where the company could miss out on hiring their top candidate due to having a longer time to offer. Using best hr outsourcing services provides the existing hr department with greater flexibility when making hiring decisions and getting things done faster.
Outsourcing HR is beneficial because it helps you reduce legal risks, saves money, enables you to focus on your primary activities, and gives you the opportunity to acquire services you otherwise would not have.
Outsourced Recruiting Benefits
One of the most important parts of HR is recruiting. Recruiting is time-consuming and it can be hard to find the right person for the job. If you don't have an HR team, finding a new hire and onboarding them could be difficult. But outsourcing recruiting makes things easier.
By partnering with the right HR outsourcing service, you'll be able to attract and engage a more diverse pool of applicants and hire better-quality talent because your HR team is freed up to focus on more crucial tasks rather than time-consuming sourcing efforts.
Outsource hr services include staffing for jobs or outsourcing recruiting through recruitment process outsourcing, rpo services. Recruitment process outsourcing is a form of business process outsourcing that involves the delegation of some part or all of your permanent recruitment needs to an external service provider.
The providers of external RPO services are usually recruitment specialists with talent acquisition as one of their core competencies.
In HR and recruitment, recruiting process outsourcing refers to delegating the responsibilities of identifying the right talent, as well as other recruiting tasks, to a third-party company known as the RPO provider.
A Good HR Outsourcing Company Should Offer the Following Services
The best HR outsourcing services companies should offer a variety of services, HR solutions and HR software. These services include, but are not limited to:
- Performance management
- Employee relations
- Employee training
- Compensation and benefits management
- Exit interviews
Some of these services might be best handled by someone who specializes in that particular area. For example, your HR team might handle hiring and exit interviews while another team handles performance reviews. When you outsource your HR, you’re able to take advantage of specialists who can provide the best service possible for each function.
It’s also important to know what type of service they offer and how they charge. Some companies may charge on a per-hour basis while others may require a monthly retainer fee. Whatever you decide is right for your business, it's important that you find out as much information about the company before making your final decision.
What are the disadvantages of outsourcing hr?
With all the advantages that human resource outsourcing can provide you, there will always be some downsides.
If you are going to let another company handle your human resources functions, you will be providing them with sensitive and proprietary information. Therefore, make sure that the outsourced service you hire will be able to protect your company's information and meet your deadlines.
Another drawback is that when you outsource your human resource department, you will be directing your workforce to the hr outsourcing service. As a result, you will lose direct interaction with your staff and might even find that internal communications break down if there are service quality issues. In order to ensure the service levels and key performance indicators (KPIs) of HR outsourcing agencies are met, Accendi Group recommends that you have a project manager from your internal HR staff who will communicate with the HR outsourcing firm's point of contact.
It is always important to keep the strategic roles of your company in-house, but you can partner with a third-party consultant for a predetermined period to provide additional areas of expertise as needed.
If you do, then you need to define what is most critical initiatives for your organization where you can benefit from outsourcing. Is there a resource constraint? Do you lack payroll processing or health insurance expertise? Do you have benefits administration? Does your organization have the knowledge and resources to fill the talent acquisition goals of the business? The questions described are just a few of the factors that can influence an organization's decision to outsource human resource services to an HR services provider.
With the increase in the various laws and regulations, constant digital transformation, and lack of talent, organizations will need to consider now more than ever opportunities to leverage third-party hr service providers and their resources, such as outsourcing hr services and on-demand hr services to ensure they address any gaps in skills, knowledge, and abilities to remain competitive and compliant with their hr practices.
Keeping these things in mind will help you determine if outsourcing your human resources department is right for you. All these factors will contribute to quality outsourcing services.
HR Outsourcing is a great way for any size business to increase productivity, cut costs, and focus on revenue-generating activities. However, not all HR Outsourcing companies are the same. Finding the best HR Outsourcing service for your business can be challenging, so the more you know about the benefits, types, and areas of expertise of the HR outsourcing provider, the easier it will be to choose a good HR outsourcing provider.
Understanding the benefits of an outsourced HR outsourcing firm and their HR services can keep you from wasting time and money on solutions that are neither effective nor suitable for your business needs.
Best of all, HR Outsourcing is an easy way to leverage HR solutions and HR professionals while you focus on what matters most: your company's success.
This article was written by Fawn Hentrel, Managing Partner.