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How Outsourcing Human Resources (HR) Can Help Your Business

Author: Dave Rietsema - Matchr CEO

Human Resources deals with a company’s most important asset – the employees. There is a multitude of different tasks an HR department must complete, such as recruiting, creating policy manuals, benefits administration, drug screening and more. Some things, like talent development, are better handled in-house. Other functions, such as payroll, can take time away from tasks that need personal attention.

Over the last ten years, outsourcing has become much more common. It is a great way for businesses to save money because it allows them to trim the HR budget while delegating task to firms that specialize in Human Resource functions. However, it is often difficult to determine what should be outsourced and what should stay in-house. 

When Should You Outsource HR?

Many companies may hesitate to consider outsourcing HR because of the costs associated with it. However, there’s a point at which keeping all HR in-house costs more money and time than outsourcing would. But how do you know when your company has reached that point?

HR Staff Are Overwhelmed with Administrative Tasks

If your HR staff are so busy with administrative tasks that they don’t have time for anything else, it may be time to consider outsourcing those administrative tasks. HR is so much more than just processing forms and inputting data. With those administrative tasks outsourced, your HR team will be free to contribute more to strategic planning.

HR Software Doesn’t Support Remote Work

Remote work is becoming more and more common. It’s a popular perk that employees look for in a company. Plus, thanks to the coronavirus pandemic, it’s more of a necessity than ever before. If your HR system isn’t able to support remote work, it’s outdated. HR data should be cloud-based so it’s accessible wherever your HR staff may be working. This may mean an upgrade to your HR software, but outsourcing may be more cost-effective.

HR Costs a Lot of Money

If HR is running inefficiently, it can end up costing a lot of money. In fact, high HR costs can be a sign that you need to make some changes to how your HR department is run. Outsourcing inefficient processes can not only make those processes more efficient but also can save money.

There’s No Employee Self-Service

Employee self-service can help make HR processes more efficient by removing the burden of managing employee information. It also reduces the number of questions that employees may have for HR professionals. If your current system doesn’t have employee self-service, that’s a sign that outsourcing may be beneficial.

Keeping up with Regulations Is Difficult

It can be difficult to keep track of legal regulations and requirements. Not only must companies remain compliant with federal laws, but there are also state and local laws. If a company is international, then there are the laws of each country to factor in as well. If keeping up with these laws and requirements is overwhelming for your HR staff, a HRIS upgrade or outsourcing may help.

Benefits of Outsourcing

Why should you outsource HR? HR outsourcing can offer many benefits to a company. If your HR department wasn’t running as efficiently as it could, outsourcing could save your company money. On top of that, it can free up the time of your HR staff for more important, bigger picture tasks instead of HR staff getting bogged down in repetitive administrative tasks that can be easily automated.

Free up HR Time

HR professionals are busy people. There are a lot of tasks they’re responsible for. However, outsourcing can help free up their time for more important tasks. With other HR tasks outsourced, your existing employees can focus on more important things. If you have a dedicated HR team, they can focus on bigger picture tasks and strategy. If you don’t have a dedicated HR team, outsourcing HR tasks can free up your employees for their actual job responsibilities.

Automate Administrative Tasks

Administrative tasks can take up a lot of HR time. If these aren’t automated, they can eat into your employees’ time. Administrative tasks are necessary but don’t necessarily have to be done by a person on-site. They can be automated by HR software if you have it. Outsourcing HR can also take care of those tasks.

Access Specialized HR Professionals

Outsourcing HR means that you’ll have access to the expertise and experience of specialized HR professionals. If you don’t have a dedicated HR department already, then that means you’ll have all of the benefits of one without having to employ one directly. If you do have dedicated HR employees on staff, the HR professionals you’re outsourcing to can provide assistance and advice as well as taking on some of the HR tasks.

Save on HR Costs

HR costs can add up. It’s a department that doesn’t generate revenue on its own but is necessary for the running of the company. The resources HR requires to do that can end up costing a lot of money. Outsourcing HR can help mitigate some of those costs. It can help make your HR processes more efficient and cost-effective. Additionally, outsourced HR can take on functions like payroll and training.

Which HR Tasks Can Be Outsourced?

Outsourcing HR functions can be hugely beneficial. But if you do choose human resources outsourcing, which HR functions can be outsourced? There are some that may still require personal attention from someone within your organization. However, many tasks, especially administrative ones, can be safely outsourced.

Payroll

Payroll is much more than just cutting checks to employees. Not only does it involve paying employees, but it also includes calculating the wages of hourly employees, withholding taxes, and more. There’s also federal, state, and local regulations regarding payroll that companies with which companies must remain compliant. Outsourced HR can take on all of these payroll tasks for you.

Benefits

Employee benefits range from health insurance to 401(k) retirement account contributions. They often require a lot of time-consuming paperwork. It can also require a lot of expertise from your HR staff. Outsourcing ensures that a specialized HR professional is available to handle all of these processes.

Training

While some training, such as for employee jobs, may need to remain in-house, there are general training requirements that can be outsourced. These include diversity training, sexual harassment training, ethics training, and more.

Pre-Employment Screening

If your company has certain pre-requisites for employment, such as specific skills or other requirements, those can be handled by outsourced HR. This can help you screen out unqualified candidates before the reach the hiring decision-makers. The same applies to background checks.

Recruitment

Although the final decision of who to hire would remain with your company, the rest of the hiring process can be outsourced. The outsourced HR can handle everything from advertising vacant positions to sorting through resumes. They can perform any pre-employment screenings and schedule interviews with you.

Best Practices for Outsourcing

Outsourcing HR duties is a smart move for any business. It will enable you to streamline your business, save you money and give you access to outside experts. But what steps should you take to start the outsourcing process. Here are six tips to determine the best ways to utilize outsourcing. 

Define HR’s Function

What is the overall mission of the HR department? If the priorities are things like recruiting or training, it might be wise to consider outsourcing more of the clerical duties like payroll and policy writing. Learn which duties can only be accomplished by someone inside your company.

Determine What Can Be Outsourced

The HR duties not on the above list are all candidates for outsourcing. Things like temporary staffing, drug screening, background checks, and relocation are important to every company but none of these things are the driving force behind the company. Sometimes, items like regulatory compliance are actually handled better by an outside agency with more knowledge and experience in current rules and regulations.

Team Building

Business demands more efficient methods, which often means less staffing. It is very rare to find a few people who are specialists in all fields of Human Resources. Outsourcing allows you to build a solid HR team. You will be able to find experts in each aspect of Human Resources to assist your on-site staff.

Find Firms You Trust

Many companies worry that outsourcing leads to sub-par quality, but if you review a variety of firms, you should have the opposite experience. Check up on the firm’s background, make sure they have Better Business Bureau accreditation, and contact companies that have used their services. If it is unclear why a particular firm adds value to your company, don’t sign any offers – remember that outsourcing HR tasks is supposed to streamline your own company.

Group Purchasing Organizations

Group purchasing organizations (GPOs) offer pre-negotiated contracts with places like staffing firms or managed service providers. The GPO does all the research, and it is their time and effort used to negotiate and manage several contracts. Most GPOs deal with health care but there is a growing market of GPOs focused on HR outsourcing.

Complete HR Outsourcing

Some companies may find it advantageous to use a professional employer organization. These organizations assume all of a company’s HR duties. By hiring your company’s employees and being the employer of record, your employees could see major improvements like access to 401k plans, health insurance, life insurance and other benefits. This is called co-employment or joint employment and it is a common practice among smaller businesses.

Is your company looking for a HRIS to manage HR processes and tasks to help free up HR staff time? Let us help you find the right software for your business’ needs. Visit our Software Match page to start your search.

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