Is Outsourcing Human Resources Right for Your Business?
by Guest Author, Lin Miltenberger
Every business looks for ways to be more cost-efficient, successful and relevant. After all, who wants to become the next Blockbuster, Toys ‘r Us, or Sports Authority?
One option to keep moving in the right direction is by outsourcing Human Resources, a step many businesses, both large and small, have chosen to adopt. This can be done via Human Resource Organizations, Administrative Service Organizations, or Professional Employers Organizations (PEOs). A PEO is an organization that enters into a joint-employment relationship with an employer by leasing employees to the employer, thereby allowing the PEO to share and manage many employee-related responsibilities and liabilities. One study by the National Association of Professional Employers Organizations estimates over 170,000 small businesses work with Professional Employer Organizations (PEOs).
Like everything, when considering outsourcing HR services, there are benefits and challenges to consider. While not a comprehensive list, let’s review a few of the most important benefits and a perceived challenge.
Benefits of Outsourcing Your Human Resources
Saving money, No. 1 on everyone’s want list! Sources suggest that businesses can expect to reap anywhere from 9% to 30% savings annually. HR departments do not generate revenue, yet must have enough skilled employees to handle the myriad and time-consuming tasks they perform, such as compliance with ever-changing local, state and federal laws, oversight of workplace conduct, awareness of mandated employer-employee requirements (e.g. The Fair Labors Standard Act, and Family and Medical Leave Act, etc.), benefits administration, payroll, recruiting, hiring, training and, inevitably, termination. That’s a lot to do, and it takes quite a few folks to take care of it all effectively.
Redirecting limited resources. Money freed up can be spent in-house on other areas of your business, including Research and Development, marketing, technology, operational costs and foundational upgrades.
Increased purchasing power and leverage that comes from working with an outsourced service provider that has a vast number of resources. As such, these providers may be able to offer a more thorough and less expensive range of benefits to your employees, such as comprehensive health, vision, dental, mental health, and disability plans, and financial services, such as retirement plans.
Accessibility to higher-end data management systems, and risk management and mitigation tools.
Expertise. Rather than wait for an internal HR team to acquire working knowledge on a variety of topics, outsourced HR groups often have veteran staff steeped in knowledge about the potential issues that may be encountered. Outsourcing taps into skilled individuals and teams who have years of accumulated expertise, something an in-house department may lack. And if that means reduced legal exposure, especially if the business works in a heavily regulated field like health care or finance, this could be a game-changer.
A Perceived Challenge
Possible loss of control and access. Some companies believe if they outsource their HR services they will lose control of an important part of their business operation– that they’ll sacrifice autonomy for efficiency. Others fear loss of access and familiarity with their HR colleagues. “Employees want a familiar face when they have HR issues; replacing a human with an 800 number is not a positive exchange,” writes Wendy Reynolds in a 2017 Biz Fluent posting.
This is why it’s critical to select an outsourced HR partner who takes the time to understand your business and collaborate alongside you to meet the needs of your organization and its employees. Make sure your future provider and partner is curious by nature, asking questions and listening at the onset of your relationship to ensure they’re providing valuable solutions that help you focus on your growing business and achieve your organizational goals.
Keep in mind it is not necessary to outsource all HR functions. Many providers, including Larson Gross, offer a la carte options or customized service plans, allowing a business to build a program to meet its specific needs. Our services can be provided in a variety of ways to fit your unique needs. We understand some businesses have HR needs that are ongoing and repetitive, while others may be seeking project-based service to fulfill a specific gap. Once we learn more about what you’re looking for, we begin to collaboratively shape how the service is delivered and on what frequency. This ensures you receive exactly what you need, no more and no less.
Next step? Research.
For businesses with 1000+ employees, check into Human Resources Organizations, with which a business can enter into a co-employment (they complete some HR functions) or full employment relationship. Businesses with less than 200 employees should look into Professional Employer Organizations, which, as stated earlier, also feature a co-employment model. Businesses in-between those numbers might consider Administrative Services Organizations, which provide some but not all HR functions without co-employment.
When exploring possible partnerships, SHRM suggests examining a provider’s track record by contacting the company’s references, clearly understanding their fees and clearly specifying expectations of the business relationship.
How Larson Gross Can Help
Administrative responsibilities can tax any company, but for small businesses, managing human resources can be a heavy burden. When you run a small company with limited time and resources, the last thing you want to do is divert your attention from the core business activities that are your bread and butter. Outsourcing human resources functions can reduce your administrative workload and free up your time so you can focus on your business objectives.
Contact us today to learn more about our wide range of Human Resources services – from recurring and ongoing activities to project-based consulting.
Call us at (360) 734-4280 or fill out the form below and we'll contact you to discuss your specific situation.