What are the benefits of outsourcing your HR department? It starts with saving time. Research has shown that entrepreneurs spend up to 40% of their working day on HR-related tasks. Wouldn’t your organization be more productive if you could dedicate that time to other crucial tasks (like growing your business)?
Another big advantage is cost reduction. An average HR manager earns $80,000 per year. That figure is only a fraction of the total cost of maintaining an in-house HR department, which can easily exceed six figures a year. You could reduce that cost by outsourcing your HR department.
And that’s not all. You could also shield your business from liability, cut down on costly mistakes, and garner other benefits by outsourcing HR functions. Your business’s productivity, its ability to manage risks, and talent acquisition might improve too. Here’s how.
Advantages of Outsourcing Human Resources
Here are ten advantages of outsourcing human resources department:
Outsourcing Helps You Stay Compliant with Regulations
Business owners have to stay up-to-date with federal and state regulations to ensure their business remains compliant with both. Otherwise, they risk paying hefty fines or, in the worst-case scenario, their business operations being shut down altogether.
An outsourced HR department will prevent this from happening by staying on top of regulations. They’ll also carry out regular audits to make sure that your business remains compliant. You can also count on them to ensure that your employee management practices are within the scope of the law.
Outsourcing May Cut Down on HR Mistakes
Here’s another reason why you might want to outsource the HR department. More than 80% of small business owners handle human resources independently, with about 33% of them reporting payroll errors, including overpayment of employees, late pay disbursement, and poor record-keeping.
You can avoid all these mistakes by outsourcing HR functions. Apart from freeing up your time to focus on tasks that are critical for your business’s health, you’ll also end up saving up to 18% over your rival companies that haven’t outscored their payroll.
Outsourcing Leads To Reduced Hiring and Training Costs
According to Glassdoor, an average company spends about $4,000 to hire a new employee and takes almost two months to fill a vacant position. Furthermore, research by the Association for Talent Development has put the average cost of training a new employee at $1,250.
One way to reduce both these costs is to hire the right people for the job. This will ensure that they stay on the job for longer periods and reduce turnover. That’s precisely what a professional employer organization (PEO) does. And it also has the necessary resources to slash hiring costs.
Companies That Outsource HR Spend Less on Benefits
Research tells us that an average company spends almost $36 per hour on employee benefits and financial compensation. Around 70% of that amount is contributed by salary ($25), with the remaining 30% ($11) coming in the form of benefits.
Professional Employer Organizations, which can entice potential employees with their large pool of clients, can negotiate better rates. This means that your company would end up forking out less money in benefits than if it had hired the new employee on its own.
Improve Employee Loyalty and Reduce Turnover
Do you know that most employees start looking for another job because of three major factors? One of the top reasons employees leave is that they don’t feel valued or have a good relationship with their boss. Your company can mitigate this risk by putting HR programs in place to help employees feel more appreciated and help employers and supervisors build stronger relationships.
Another reason is to make more money. Almost 50% of workers start looking for a new job after experiencing paycheck problems for only two months, and even if payroll is on time, better pay is near the top of the list for reasons that employees leave. That’s because two in every three Americans would face financial difficulty if their paycheck were delayed by seven days.
Finally, many employees leave because they feel trapped in their current roles. The job they are doing isn’t flexible enough for them, or it doesn’t offer enough growth opportunities. Outsourcing your HR department to people who are experts in these fields will keep these issues from surfacing. That, in turn, will improve your employee loyalty and reduce your turnover rate.
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HR Outsourcing Leads to Increased Efficiency
Human resources personnel are responsible for five core functions. They include:
- hiring and training new employees
- day-to-day business administration
- managing relations between the employee and workforce
Each of these functions can be subdivided into a wide array of activities.
What would happen if you outsource all these functions? The efficiency of your in-house workforce will improve. With their workload no longer massive, both they and you would be able to train your sights on your business’s core aspects.
Outsourcing Human Resources Improves Talent Acquisition
Finding and hiring top-tier talent is a time-consuming process. You have to post available positions, pre-screen the applications of candidates, and send forward the names of top candidates for consideration. It’s hardly surprising, then, that this process takes most businesses between 1-4 months.
By outsourcing recruiting, businesses can not only save their time but also improve the quality of hires. That’s because an HR manager, who has other responsibilities besides hiring, may not be as good at screening and selecting candidates as a professional, full-time recruiter.
HR Outsourcing Can Mean Better Payroll Management
A PEO doesn’t only ensure that payroll checks are processed and issued on time. They also assume the risk (and responsibility) of regulatory reporting, wage and hour compliance, record-keeping requirements, and other areas of payroll management.
The payroll administration services provided by PEOs include: online payroll services (client and employee access), direct deposit and tax filing deposits, paid time off, new hiring reporting, detailed real-time reporting, and other administrative tasks. These services can save you a tremendous amount of time and give you insights into your payroll data that you might not have gained on your own.
Reduce Liability by Outsourcing Human Resources
When you decide to outsource your HR department, you’re passing the responsibility of keeping your company in the green to the PEO. That’s because it’s the PEO that will then be held responsible for multiple HR-related responsibilities like these:
- Employee hiring
- Benefits for employees
- Employee handbooks
- Workers’ compensation
- Legal compliance assistance (discrimination, harassment, immigration, etc.)
- Professional workforce training (safety, sexual harassment, etc.)
Get Better Employee Coverage
Do you know that your company can get better employee benefits by outsourcing its HR department? That’s because HR companies have a large pool of clients and help small businesses tap the kind of coverage that’s mostly only available to multinational or large corporations.
Now that you’re aware of HR outsourcing benefits, it’s time you take the next step and choose the HR firm you want to work with. Doing that shouldn’t be difficult given that you can hire the perfect HR company for your needs from anywhere in the country, which means the options out there are limitless.