With today’s emphasis on company culture, the role of human resources management and the types of benefits a company offers has become increasingly important for a business’s future. As such, managing human resources has become a critical role in managing a business. Yet for some businesses, the various functions of the HR department are too comprehensive and complex to maintain in-house. Smaller companies often don’t have the budgets to support the necessary personnel. Also, sometimes HR issues can be so convoluted that it takes experts to navigate them successfully.
As you know, there are several HR specialty areas, including payroll services, recruiting, management training, benefits, compliance and more. In some businesses, an HR generalist may be asked to perform more than one of these HR functions, and that can often result in less than optimal results.
A cost-effective and expertise-effective solution to this situation can be achieved by outsourcing your HR management.
Benefits of HR outsourcing
One of the biggest advantages to outsourcing HR functions is the fact that it can save your company money. Overhead costs associated with performing HR services are typically very high. A fully-functional HR department requires additional office space and highly trained and experienced HR staff. Because of this, many small businesses can’t afford the expense. Outsourcing HR to a Human Resource Outsourcing (HRO) organization helps reduce your costs and helps you avoid trying to financially maintain non revenue-generating back-office expenses. Furthermore, HR outsourcing costs are variable and can be reduced when business needs warrant.
Here are a few examples of where outsourcing can save your company money:
- Salaries: The average human resources manager earns more than $75,000 per year, plus benefits. Depending on the size of the HR department, a small to medium-size business can easily spend hundreds of thousands of dollars on HR staff. Outsourcing those jobs to a HRO can significantly reduce that expense.
- Payroll Services: The outsourced company can be responsible for employee pay slips, advising on tax and deduction questions and also offer a payroll analysis for accounting purposes. This frees up time in calculating the payroll and dealing with different and sometimes difficult employee situations.
- Hiring and Training: Research from the Society of Human Resource Management found that it costs an average of $4,129 to hire an employee, and more than $1,200 to train him. A HRO not only helps ensure that businesses hire the right people to reduce turnover and associated expenses, but also has the resources in place to cut the costs of hiring.
- Time: Spending less time on HR functions frees up time to spend on strategic sales and growth goals, increasing revenues. According to Chron.com, “research shows that despite working an average of 50 hours or more per week, business owners only spend about 30 percent of that time on actual business functions. The rest of their time is spent on administrative and other tasks that don’t contribute to revenue.”
Ensuring compliance is one of the major functions of any HR department, and it’s a complex job, with malfacitated areas. Employment and wage laws are changing all the time, and companies must adhere to not only federal rules, but also state, county and local regulations regarding employment. Handling employee issues, such as harassment claims, discipline and termination are also an important part of compliance. Many small businesses struggle to keep up, especially with insurance claims management and benefits regulations. Failure to comply can lead to serious financial consequences.
Outsourcing HR services to a trusted provider can ensure that your employee management practices are within the scope of the law. A HRO will help you handle these issues, making sure policies are fair, legal and clear, and that any actions you take are within the scope of current laws.
Maintaining an efficient and productive workplace is critical, especially with the aforementioned emphasis and importance of company culture. Outsourcing HR management creates greater efficiency within human resources systems. By hiring providers with advanced human resources technology, they can help streamline important functions such as payroll services, benefit administration and compliance management. All of which lead to a more efficient, effective workplace.
Your employees are the heart of your business and they need to be treated well. Outsourcing HR functions can help you manage employee performance and development. HR providers implement performance management plans to ensure employees comply with company policies and procedures and successfully meet your business goals. They can also provide management training to help your team grow even stronger. This reduces the workload of your managers by minimizing their administrative responsibilities.
Bonus Tip: What to Know Before Outsourcing
According to Forbes, “you need to balance what you can afford with what your company needs to provide in order to achieve a desired position within your industry. A startup will have different needs—and use different tools to attract talent—than a somewhat mature company looking to climb the next level of its growth curve.
When researching HR consultants, you will find ones that offer benefits brokerage services, consulting, optimization, and renewal management, as well as some that will take full ownership of your HR administration. That way you will be taking on a partner of sorts who will take over the day-to-day responsibilities for the HR arm of your organization.
For more information on how a HRO can help your small to mid-size business, please contact VertiSource HR® today!