Seeking to outsource HR can be a cost-effective road to the support and efficiency your business needs. Here’s what to weigh in the decision-making process.
Here's what you need to know:
- Outsourcing allows you to develop and streamline HR processes so you can save time and money
- Reputable HR outsourcing companies like Zenefits can provide a full range of services, including recruiting, onboarding, payroll, benefits, and staying compliant with employment laws
- However, there are also reasons some companies may choose to keep HR in-house
- Ultimately, the decision comes down to 2 factors: how much money you're willing to spend on HR and how vital HR is to your business
In today’s dynamic and ever-changing workplace environments, many businesses choose to outsource some or all of their human resources functions. Seeking a solution to outsource HR is often a cost-effective way for an organization to improve efficiency. For many, it reduces the time and resources needed to maintain a full on-site HR department.
Before pursuing outsourcing HR administration and other HR tasks, businesses should assess their needs. It’s important to first determine whether outsourced HR solutions will help save money while filling gaps in key HR services.
There are pros and cons to turning over vital functions to an HR outsourcing firm. Here we’ll introduce reasons to consider outsourcing your HR team — saving time and money being the most influential factors. We’ll also share insight to why you may not want to use HR outsourcing services — top reasons involving control and privacy.
What does outsourcing human resources entail?
A common misconception is that outsourcing HR equals offshoring it. This is not necessarily the case. Defined, offshoring means replacing or removing internal staff in favor of remote workers overseas. Outsourcing is defined differently.
Partnering with an HR outsourcing company means placing HR responsibilities into the hands of skilled HR professionals either domestic or abroad. This way, your employees need not shoulder HR tasks, such as processing payroll or providing recruiting services, beyond their defined duties.
What will a reliable HR outsourcing provider do?
As your small business grows, so will your need for an effective HR team. You may not have a robust staff to handle daily HR functions nor the budget to integrate modern HR technology. Outsourcing allows you to develop and streamline HR processes so you can tend to your employees while ensuring you’re effectively managing other important tasks. Typically those involve:
- Payroll administration.
- Payroll processing.
- Health insurance and employee benefits administration.
- Compliance with laws and regulations.
- Employee recruitment process, hiring process and employee training.
- Cybersecurity and HR compliance risk management.
It helps when small business owners identify any weaknesses they possess. Where gaps exist, partnering with an HR outsourcing service can help reduce costs, increase efficiency, and attract top-tier talent. Utilizing HR services also frees up time to focus on other critical business matters.
Why your business should consider HR outsourcing companies
Here’s a look at numerous ways small businesses benefit from their investments in HR outsourcing services partnerships.
Business owners who outsource all or segments of the human resources services they need no longer pay the costs associated with staffing and running an HR department.
Moving from an in-house HR team to human resources outsourcing can also help better manage employee benefits and retirement plans. Working with an experienced HR outsourcing company avails employers of expert advice and guidance for critical business decision-making. And if they can’t afford the latest HR software, chances are their HR outsourcing partner can provide it.
One of the key components of a successful business is operating efficiency. You’ll want to get the most out of your team while minimizing waste. Going forward with outsourced HR administration can help a company be more organized, streamlined, and focused.
Businesses often outsource their HR functions to save on a full-time employee’s cost and gain access to specialized expertise. Some reputable HR outsourcing companies, like Zenefits, can provide end-to-end services. These range from recruiting and onboarding management to benefits and payroll administration, compliance, and beyond.
Greater focus on core business activities
If someone else handles the paperwork and administrative HR tasks, your company can tend to productivity within its core function. This is essential in an ever-evolving business world. And it frequently requires partnering with an HR support team. Although HR is a critical function, it can also be time-consuming and expensive to manage in-house. So instead, focus on what you do best and leave the rest to the experts.
Ease of scalability
Choosing a partner who can offer you the best HR outsourcing solutions over time can help you manage your company’s growth. For instance, when you work with a professional employer organization, you can quickly scale business operations while keeping costs low. Furthermore, the right HR services provider will have the ability to grow with you as you bring more talent aboard.
When should your company keep human resources in-house?
Most often, working with outsourced HR services offers businesses a competitive advantage. Still there are times when outsourcing HR services isn’t the right course of action. For some companies, outsourcing HR functions in an attempt to save money can be a costly decision. They risk losing control over such activities and programs as:
- The hiring process.
- Employee benefits.
- Employee onboarding, training, and development.
- Regulatory compliance, which could lead to trouble if the provider is not current on all the latest laws.
Serious issues could lead to diminishing employee morale, reduced productivity, increased employee turnover, and/or legal consequences for the company.
Here are a few reasons why companies keep HR in-house.
Greater control over processes and procedures
With HR in-house, you can oversee that you’re using the most up-to-date and effective HR software and systems, customized to your needs. Additionally, having HR on-site allows for more direct communication between managers and employees when confusion, questions, or problems arise.
Ability to quickly address employee issues
Any organization would benefit from having an HR department that quickly addresses employee issues. Employees who believe their concerns are being heard and addressed are more likely to be productive and optimistic within the workplace.
With an in-house HR team, it’s easier to establish camaraderie with HR staff. This can lead to better employee satisfaction and higher productivity.
More personal connection with employees
As companies grow, it becomes more challenging to keep HR in-house. Maintaining personal connections is important for creating a positive work environment.
Employees who feel connected are more likely to be honest with HR. Without such a connection, your team may be less likely to report issues until they become too big to ignore.
Ease of training and developing HR staff
Since hiring an HR professional can be costly and time-consuming, you might consider training and developing HR staff internally.
It is expensive to recruit, interview, and train new HR professionals. If your internal HR staff is already familiar with your company’s culture and values, they can build a pool of qualified candidates for future roles.
Familiarity with company culture and history
An in-house HR team better understands the fundamental values that drive a company’s culture. This understanding can also help HR make better decisions about where to place employees within the company to capitalize on their strengths.
Additionally, by being aware of a company’s history, HR teams can avoid making decisions that could negatively impact employee morale.
May be more affordable than outsourcing
In some cases, the cost of outsourcing can be greater than that of an internal HR department. Compare such factors as company needs, budget, size, and complexity of HR tasks, and the level of expertise needed to perform those tasks.
Some businesses outsource HR because they don’t have the resources or expertise to handle specific tasks themselves. Others outsource to save money. However, outsourcing can be expensive. For companies equipped to handle HR, it may be more affordable to keep it in-house.
To outsource or not to outsource HR? That is the quandary.
The decision to outsource your human resources team is a tough one. There is no one-size-fits-all answer.
Ultimately, the decision comes down to 2 factors when choosing the best HR outsourcing services to utilize: 1) How much money you’re willing to spend on HR and 2) How vital HR is to your business.
If either of those factors is low, outsourcing may be a good option. You can benefit from an HR support team while investing budgetary resources in your core competencies.
Want to learn more about outsourcing? Workest is a resource dedicated to providing businesses and HR professionals the important information they need. To learn more, visit daily.