Obtaining outsourced HR services involves working with an external company to accomplish a number of HR functions, for instance running payroll and managing tax information, coordinating employee benefits, and handling a number of other administrative tasks. There are some considerable benefits to getting outsourced HR services, and there’s no real downside to it.
You might think that an area as sensitive as Human Resources should not be handled by a third party, but in actual execution, outsourcing does not interfere at all with the human aspect of the function. Generally the most difficult HR administrative tasks are the ones targeted in outsourcing, for instance administering employee benefits or running the payroll system. When you do get outsourced HR services, it will allow you to focus on your employees and the efficient conduct of your business.
Why Get Outsourced HR Services?
Most companies do not consider outsourcing their HR operation during the first few years the company is in business. However, after your business has become stable and you have a solid customer base, your business is probably then big enough that it can become advantageous to have some of those back-office operations handled by a specialty company. Rather than tie up your own personnel, you could have a third party do all the interviews, sending out offer letters, managing employee benefits, running payroll, and managing employee relations.
There are an awful lot of functions that are typically addressed by the HR department, and that means your company would probably have to maintain a significant staff of HR people just to carry out normal business operations. By outsourcing all those tasks, you can reduce your internal staff size, or you can allocate that personnel to more business-specific roles.
Which Tasks Can Be Covered by Outsourced HR Services?
Since there are so many functions that an HR department typically is obliged to carry out, it can be difficult to sort out which of those tasks are suitable for outsourcing, and which should remain in-house. A good first step toward considering outsourcing would be to identify the precise role that you want HR to play in your particular organization.
As a general rule, the functions typically accomplished by HR which are most suitable for outsourcing, would be those which can be easily automated. Payroll and tax calculations are one of the most time-intensive tasks that an HR department can be involved in, and it’s also one that is prone to a great deal of error if you don’t comply with federal and state tax requirements.
Some outsourcing companies provide highly automated versions of payroll and tax calculations, even offering direct deposits, hourly payroll calculations, record keeping, and managing paid time off. Managing benefits for employees is another big area that might easily be accomplished by an outsourcing company. It can really be a full-time job keeping employees informed about their benefit options and managing all of these to keep them current.
An outsourcing company can help manage health coverage for employees, as well as other benefits such as 401(k) plans, transportation benefits, and sometimes even expense accounts. In some cases, an outsourcing HR company can provide access to a business for high-quality benefits which might normally only be affordable by enterprise-level companies.
There are a number of employment laws that must be complied with, and an outsourcing company can manage all of that on your behalf so that you don’t run afoul of federal or state authorities. For instance, Workmen’s Compensation is a big area that an outsourcing company could manage for you, as well as compliance with hiring processes, and sexual harassment training requirements. Rather than tie up your own personnel on these tasks, it would be very advantageous to have it outsourced to a specialty company.
One more aspect of Human Resources functions where an outsourcing company could provide a real benefit is to assist with mental health coordination for your employees. Outsourcing HR companies can provide access to Employee Assistance Programs as well as mental health counseling, so your employees can receive the support and care which they need to be effective on the job and to be happy in their lifestyle.
Which Businesses Are Best Suited for HR Outsourcing?
You might think that small businesses with less than 10 employees are not really good candidates for outsourced HR services, but in truth, even the smaller companies would benefit by outsourcing. When you’re bogged down with trying to manage all the functions typically associated with Human Resources, it will definitely take away time that could be better-spent building product, coordinating with investors, and trying to make worthwhile business improvements.
Even though there are just a few people in the company, that means at least one or more individuals will be tied up full-time with coordinating HR functions. When you work out the dollars and sense of it, it’s more economical to outsource the function even for a small company, than it would be to do it all in-house and dedicate one or more employees to the tasks.
If your company has somewhere between 10 and 50 employees, a bigger concern might be ensuring that all your employees get paid on time, that hiring new employees is done efficiently, and that you are in compliance with all state and federal regulations. This size company will probably have a dedicated HR manager and possibly one or two more individuals on the team as well. When it gets to the point where you have to consider adding more personnel to your HR team, that’s probably the appropriate time to start considering outsourcing as a viable approach to managing employee relations.
When you have a large size company of more than 50 people, you’ll have to worry about recruiting quality candidates, and this can be a very time-consuming and expensive process. In some situations, it might be better to have an in-house HR staff so that strategic projects can be carried out which will implement company growth. One good example of this is the administration of training programs, so as to improve employee skills and contribute to professional development.
These are the kinds of things that are very specific to a given company and are probably not ideally suited for outsourcing. Even in cases like this however, it’s still highly advantageous to have certain HR functions like payroll and tax calculations be handled by an outsourcing agency. The truth is, on just about every size company and at every level, getting outsourced HR services can be a huge benefit to an organization, as long as the specific functions outsourced are those which can be easily automated.
