Companies that use an HR outsourcing strategy generally enjoy lower operational budgets, greater efficiency, and more focus on other parts of the business. It is no wonder that the outsourcing industry is worth $131 billion as of 2020.
There are many types of outsourcing companies, but this article focuses on HR outsourcing companies and how they serve their clients. Are you thinking about making the switch from internal HR to an outsourced one?
If so, you are in the right place. We will explain the advantages, disadvantages, and what to expect if you take your business this route. Keep reading for the ins-and-outs of outsourcing.
What Are HR Outsourcing Companies?
Human resource outsourcing or HRO companies, as they are sometimes called, take on the responsibility of some or all administration tasks involving employees for an organization. HRO companies help any size business run smooth with expert professional knowledge that’s essential to the business’s success – HR duties.
HRO companies offer a variety of services and products including:
- HR software solutions
- Employee training and development
- Payroll solutions
- Workplace safety classes
- Worker compensation and unemployment claims handling
- Management development systems and courses
- Tax and other government compliances
- National PEO
Basically, anything that has to do with your employees and your staff’s needs, an HRO company is prepared to partner with you to get your HR running smoothly and effectively.
Benefits of HR Outsourcing Companies for Small Businesses
Over the years technology has changed everything. These days, computers and ever-smarter software make running payroll and other HR tasks much easier. Yet, an even easier way is to outsource your HR tasks to an HRO company and enjoy benefits like:
- Free up leadership time
- Save over inhouse HR specialists
- Professionals with experience and highly skilled
- Experts in compliance and employment law
Keep in mind, every strategy has its drawbacks. For example, an outsourced HR could leave some employees feeling distant and out of touch with the important functions of things like payroll and health benefits. For more details on the many benefits and the drawbacks of HR outsourcing, read this article.
Important Facts to Consider
Any business leader that doesn’t first consider all the facts before making big moves, takes quite a risk. Before you decide to jump in with both feet here are 8 important things you should know about HR outsourcing.
1. Stay Compliant
The law can be a fickle thing. We know you would never intentionally break employment laws and risk having the government come and give you heavy fines are even shut the business down.
One of the biggest benefits of outsourcing HR is you take the burden of legal obligations off your shoulders. The HRO company takes on the legal obligation to keep your HR department running inline with local, state, and federal employment and tax laws. That is one less thing to worry about.
2. Development VS Management
There is an important distinction between human resource development (HRD) and human resource management (HRM). Both of these are part of the human resource (HR) role but encompass very different parts of the department.
Human Resource Development
HRD is geared towards developing, training, and educating employees as part of their career development. This type of HR is fast becoming the most sought after feature of the job market. As a new generation of workers enter the workforce, companies are finding out just how important it is for employees to have a chance to develop their skills.
These young workers are particularly ambitious and are less likely to stick with the same company if they feel like there are better opportunities elsewhere.
Many HRO companies have industry-leading development programs that give employees what they need to succeed in today’s highly competitive corporate world. It is a win-win for the company gets ever better performing employees and the employee feels valued and making progress in their professional goals.
Human Resource Management
HRM is the nitty-gritty recruiting, hiring, paperwork, tax forms, government oversite, and such. These tasks may not be the most complicated of the many responsibilities that fall under the HR umbrella, but mistakes here will surely cause serious problems for business operations.
Generally speaking, most outsourcing HR companies will offer to help with both HRD and HRM tasks.
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3. Find Good People
Recruiting is often one of the most difficult parts of running a business. Finding suitable people to fill available positions is a common task companies outsource. The HRO company normally charges a recruitment fee that could be a one-time fee or a percentage of the employee’s salary during the time they work for their client.
4. Enterprise-Class Solution for Anyone
A professionally run HR department is easier said than done and many small businesses simply don’t have the experienced personnel to make sure everything runs smoothly. With outsourcing, you are hiring a specialized company that knows the HR business. In this way, you assure your HR tasks are completed just as well as the seasoned big players in the market.
5. Software Solutions
There are various degrees of outsourcing. Some companies prefer to keep a more hands-on approach to their HR systems. For these companies, having good HR management software is key.
HR management software is designed to trade technology for labor and automate many common HR tasks. For example, the hiring process, the employee onboarding process, and the benefits enrolment process can all be streamlined with HR management software. Ask our experts about software solutions that will save you the effort, time, and money that could be better placed elsewhere.
6. Avoid Costly Mistakes
To error is human. Yet, these mistakes can end up costing a small fortune when it comes to running a business. Companies that proactively work with their employees to improve their skills, tend to see their investments return over and over.
Perhaps the best part of HR outsourcing is the fact that you don’t have to go it alone anymore. The HRO brings much to the table in experience, they know what works, and they know what doesn’t work.
HR professionals often struggle with one or more of the following duties:
- Staying informed of laws and government regulations
- Keeping track of employee work time
- Retention rates (keeping employees happy and loyal to the company)
- Handling training and employee development
- Dealing with employee discipline
All of these tasks are far from simple and it is easy to see how mistakes can be made. The problem here is that bad HR is costly.
7. Don't Sacrifice Company Culture
In order for a business to thrive, a strong, healthy, and positive company culture is critical. Outsourcing HR services doesn’t have to weaken the connection with your team. In fact, working with these HR professionals may open up new doors that will potentially strengthen and build your company culture.
In the era of the internet and social media, diversity and intercommunication has become a big part of society. As employees spend a large chunk of their life at work, they hope to have deep connections and valuable relationships with their co-workers. Some common complaints employees have about the company culture they are a part of include:
- They have to conform to rather than help shape company culture
- Feel undervalued by the company and management
- The company’s leadership doesn’t listen to them or notice their good work
- The company only offers things like game rooms and exercise equipment to “make them happy”
There are hundreds of important points to make when getting into the subject of employee satisfaction and company loyalty. The main thing to remember is a weak or toxic company culture crushes productivity and causes a high turnover, both of which must be avoided at all costs if the company is to succeed.
8. HR Solutions Vary
Just like every company has different HR needs, Human resource outsourcing companies vary in what they offer. Human Resources Hero™ prides itself on being a partner company you can rely on. From free resources to a variety of paid resources and services, we have what you need when you need it.
Our HR service partners are the best at what they do. Feel free to ask lots of questions to find the right HR solutions to fit your business and company growth goals.
Get Your Feet Wet
Most outsourcing companies will require you to make a commitment to their HR solution packages before they will work with you. That is not the way we work. We believe in offering real value with free resources for our clients to get started and see how we can help them with their HR business needs.
Are you ready to hire a full-service HR outsourcing hero to help your company grow? Browse our HR service partners and be sure to check out our free resources. Wishing you and your company the best from the Human Resources Hero team.