There are many reasons why your business may choose to outsource HR. Perhaps you don’t have enough time to complete all of the tedious administrative tasks you have to tackle, or you need assistance staying compliant with labor laws and regulations. Maybe you want to increase your employee retention rate or gain access to better health benefits for your employees. Human resources outsourcing (HRO) is a strategic approach for businesses looking to delegate HR duties either partially or entirely, offering a cost-effective alternative to hiring an entire HR department.
Whatever the case may be, outsourced HR (human resources) services may be the right solution for you.
Outsourcing HR is a strategic approach that involves trusting a third party to provide HR services for your company. This arrangement allows businesses like yours to focus on core operations while offloading tedious administrative services and having access to specialized expertise and resources in HR management.
By outsourcing your HR needs, you can streamline your processes, reduce costs, enhance efficiency, and ensure compliance with HR regulations and employment laws.
As a small or medium-sized business, you may be overwhelmed by the number of HR tasks on your plate. While you would love to take advantage of the numerous benefits HR outsourcing services provide, you are not quite sure where to begin.
Here are six steps to help you successfully outsource human resources management to an HR outsourcing team. By leveraging HR support, businesses can receive tailored assistance with HR tasks, ensuring they meet regulatory requirements and employee needs efficiently.
Human resources incorporate numerous responsibilities. Depending on your company’s size, the skillset of your existing staff, and those staff members’ bandwidth to meet your company’s needs, you may need just a little or a lot of help.
To begin, consider the following commonly outsourced HR functions:
Next, assess how your team is currently handling each of these HR functions with the following questions:
Determining what you want to outsource and assessing how you currently handle your HR functions by answering the questions above will give you clarity and set your company up for success with an outsourced provider. Outsourcing HR services can be a strategic move to manage costs effectively, especially when comparing the average cost of in-house HR management with the potential savings from outsourcing.
By now, you should have a good sense of which HR tasks your business should outsource to outsourced HR services. However, there are still some important items to consider before moving forward.
When choosing an HR outsourcing partner, consider the following factors:
There are three main types of service providers for HR outsourcing to consider: Professional Employer Organizations (PEO), Administrative Services Organizations (ASO), and Business Process Outsourcing (BPO). Check out our full HR outsourcing guide to learn more about what each handles so you can choose the right HR partner.
It is crucial to not only evaluate what a PEO, ASO, and BPO offer but to research specific companies within those categories. Selecting the right HR outsourcing company is essential to avoid any negative impacts on your business.
To evaluate potential HR outsourcing companies and providers, consider asking the following questions:
By asking these questions, you can get a better understanding of the HR outsourcing firm’s values, mission, vision, and culture to ensure that it aligns with your business.
The final aspect to consider when choosing an HR outsourcing partner is the service level agreement (SLA) offered by different HR outsourcing companies. This outlines the scope of services, performance expectations, and responsibilities of both parties involved. By carefully comparing the SLA, you can ensure that you choose a provider that aligns with your business goals and meets your specific needs.
Here are some factors to review and compare:
Take the time to compare multiple providers, review their proposals, and ask questions to ensure you make an informed decision that best supports your business needs.
To successfully implement an HR outsourcing solution for your business, you should follow these suggested steps with your new HR partner:
By following these steps, your business can successfully implement an HR outsourcing solution.
Some PEO companies like Stratus HR offer an Implementation Specialist to get the ball rolling. All you need to do is send over any data needed for setup and the Implementation Specialist will handle the rest.
We start by sending out any necessary communications. Next, we import employee data and facilitate system and payroll training, then handhold through a few payrolls to make sure everything is running smoothly.
After implementation is complete, you are introduced to the Service Team. Your certified HR expert conducts the HR roadmap, and your Business Development Consultant conducts a client care meeting after several payrolls have been processed to ensure you've had a positive experience.
Measuring the effectiveness of your HR outsourcing provider is a way to validate what many CFOs see as an expense. Some key performance indicators that will help you gauge the success of your efforts may include:
Checking in to evaluate the performance of your HR outsourcing partner will help you ensure that you’ve made the right decision and selected the right outsourcing firm for your business.
The duration of implementing an HR outsourcing solution can vary depending on factors such as the complexity or number of HR functions to be outsourced, the number of your employees, and the readiness of your data and systems. In most situations, the more data and information the outsourced HR company can get upfront, the quicker the implementation.
That being said, smaller businesses that have all the information, data, and answers needed for setup will take much less time to get started with HR outsourcing than larger businesses that may need more time gathering information and data.
Yes, outsourcing HR administration is especially beneficial for small and midsize businesses like yours. Outsourcing to HR service providers allows you access to specialized HR expertise and helps you save costs, improve HR efficiencies, and ensure compliance with HR regulations, just like larger organizations. Outsourcing HR services can be a cost-effective strategy, offering potential savings and customization options that align with your business's specific needs compared to the average cost of in-house HR management.
When choosing an HR outsourcing provider, make sure they understand the unique needs and challenges of your business’s size. Find one that works specifically with small or midsize businesses, or who has experience working with them. The right outsourcing partner will be able to offer tailored solutions that align with your specific requirements and provide scalable services as your business grows.
Outsourcing HR functions is a strategic decision that brings numerous advantages to businesses of all sizes. By following the steps we’ve outlined, you can effectively outsource your HR functions and reap the benefits of cost savings, increased efficiencies, specialized expertise, and improved compliance.
Stratus HR is a Professional Employer Organization (PEO) designed to help your business succeed and grow. By partnering with Stratus, you can outsource your HR needs to our certified HR professionals, gain access to our HR software, hand over benefits administration, improve risk management, and so much more.
To begin outsourcing your HR functions and experience the benefits firsthand, reach out for a consultation.