Why outsource HR
Gone are the days when entrepreneurs had to raise an entire organization of employees on their own from scratch — the modern age now allows you to outsource entire departments to skilled professionals, eliminating some of the hassles normally associated with starting a business.
Outsourcing is becoming an increasingly favored option for businesses, especially among small ones and those that are just starting out. The market is adjusting to this interest as well; professional outsourcing firms have popped up, and provide a wide range of services you can tailor to your preferences.
The first benefit is you can cut down on costs. Running an entire effective HR department takes a lot of time, energy, and money, especially for startups. Independent HR firms can guarantee that they’ll run a tight ship, because the talent and infrastructures required are already in place.
This is a big advantage for small businesses or those that are just starting out, because they can offer a wider range of benefits to their employees, like more insurance options, retirement plans, and voluntary benefits.
You don’t need to outsource everything — it is still advisable to keep some human resource staff on to focus on communication with employees in areas that are more related to their core business.
They can also help you become more efficient & compliant. In an increasingly interconnected world, you’ll have to deal with many laws and regulations. There is a constant threat of lawsuits for sexual harassment, wrongful termination, safety violations, and more. HR can help with all the paperwork and processes safeguarding your company will require, and can also provide a compliance specialist that will help you keep your business running.
Outsourcing firms employ HR professionals that regularly keep themselves updated on federal and state employment laws, and staff that will help comply with these laws to avoid costly lawsuit brought on by employees. Furthermore, HR firms maintain audit company policies and practices
Lastly, they can work with you on employee development. Providers can implement performance management plans that ensure employees comply with company policies and procedures, and successfully meet business goals. They regularly monitor your employee’s performances and report their findings to management. This reduces the workload of managers by minimizing the amount of administrative responsibilities they must work on.
Have we helped change your perspective on outsourcing HR? What kind of contracts should you consider, if you ever decide to do so? Outlined below are the most prevalent types of arrangements found in the field.
Software-as-a-service (SAAS) is a software licensing and delivery model where software applications are remotely hosted by a service provider, and made accessible to customers through a Web browser. This model of software delivery allows for greater organizational agility and helps you cut costs. In the field of HR, employers usually pay for talent management and payroll applications.
Business-process outsourcing (BPO) is an arrangement wherein the employer contracts a single business task, such as payroll, to a third-party service provider. The difference between BPO and SAAS is that in BPO, the provider offers the service along with the software. The most common BPO arrangement for HR is the outsourcing of the benefits administration, which alleviates some of the heavy and specialized functions for benefits auditing, processing, and reporting to a third-party.
Single-source outsourcing is when HR professionals access just one service provider to meet their needs — from welcoming new hires to managing turnovers, and all the tracking involved in between. This includes time and labor management, payroll, talent management, benefits administration, and the separation-of-employment process.
Shared services and shared-services centers refer to the consolidation of commonly used business functions across several departments within an enterprise to a skilled internal department or group. When the services offered by the team becomes combined into a central operation, they are then called shared-service centers. HR processes that may be a part of a shared-service plan include payroll, procurement, accounts payable and receivable, travel expenses, health benefits enrollment, and pension administration. Under this model, the administrative functions can be handled in-house our outsourced.
Professional employer organizations (PEO) are firms that provide a service under which an employer can outsource employee management tasks, like employee benefits, payroll and workers’ compensation, recruiting, risk/safety management, and training and development. Employment responsibilities typically become shared between the PEO and the employer; the employer keeps management control over the work performed by the employees, while the PEO assumes co-responsibility for benefits, taxes, and payroll. As co-employer, the PEO pays the wages and employment taxes for employees out of its own account, collects and reports taxes to state and federal jurisdiction, maintains a long-term relationship with worksite employees, and has a say in the right to hire, terminate, and reassign employees. The employer reimburses the PEO for these expenses and pays a monthly administration fee based on the number of employees employed.
Despite the wide variety of outsourcing arrangement available for you and your company, handing over an integral part of your business to a third party may seem daunting. However, the trends show that the outsourcing industry, particularly in HR, is growing — PrismHR, a platform provider for Human Resource services, notes that for the year 2016, HR service providers have reported 27% growth. This means that slowly but surely, people are welcoming the idea of outsourcing HR into their companies — and getting the results they need.
