July 14th, 2023

4 Undeniable Benefits of Outsourcing Your HR

Smaller to mid-sized businesses are looking for ways to save time and money and redirect their focus from managing day-to-day tasks to driving business growth. HR outsourcing services are an increasingly smart way to go.

Outsourcing can stand in for an HR team if you don’t have one, but it doesn’t have to replace your existing team. You or a small team of employees may still handle it. Instead, outsourcing certain HR functions supports both. It can fill in or act as support for your existing HR staff. By choosing to outsource HR, you’re gaining administrative bandwidth and specialized knowledge when it’s needed.

There are signs you’re ready to outsource your human resources, from lack of time to increasing costs, to compliance issues. If you notice signs that your HR department is stretched thin, consider the benefits of outsourcing HR and whether it’s right for you. Below, you’ll find some of the major benefits of this practice.

1. Save Costs

If you’re concerned that outsourcing is just an added expense that will hurt—not help—your bottom line, this may set your mind at ease. Here’s why you can spend less time worrying about that when it comes to HR services.

The costs associated with having employees go beyond simply paying their wages. Outsourcing helps your business save on some of the most expensive HR costs—from healthcare and benefits to workers’ compensation and employee perks. You’re also probably paying for different types of insurance like Temporary Disability Insurance (TDI), taxes, and the administrative costs of handling payroll.

About 70% of your labor costs are made up of all these expenses combined. The size of your business can have a huge impact on what you’re paying, too, especially if you’re a smaller operation.

Labor costs are significantly reduced with an HR partner. A partner has buying power that matches businesses and many employees. They can extend their buying power to you so you can “buy in bulk” and save on healthcare, benefits, and other labor expenses, thus getting more value for your dollar.

Whether your business only has a few employees or upwards of 100, you can offer benefits that are on par with top companies at a reduced price. And you can get better rates on mandatory insurance policies, especially if your HR partner handles claims management. This is a win for the company, employee relations, and your bottom line.

2. Stay Compliant

If you’re a business owner, you know what it’s like to feel the pressure of compliance. There are new rules and regulations to follow as you grow. An experienced HR partner and HR professionals relieve some of that pressure. Utilizing an HR outsourcing provider helps your business fully comply with federal, state, and local labor laws and reduces your liability.

Laws and regulations are a reality of having a business. They guide the way you hire and terminate people, administer payroll and benefits, how you file taxes, the type of health insurance you purchase, and even the contents of your employee training. There is a multitude of regulations. Think about FICA, FMLA, ADA, OSHA, and HIPAA. That’s just touching the surface, and it’s a lot for your company or a struggling human resources department to keep up with. Laws and regulations constantly change, too, and outsourcing HR services allows you to stay up to speed and avoid unintentional violations.

Using HR outsourcing providers removes the guesswork about compliance. You can share legal responsibilities with your HR partner, meaning you won’t need to rely solely on your or your staff’s judgment. You’ll have compliance and HR experts to guide you. An HR partner has your back, allowing you to navigate the many varied and complicated regulations in today’s business landscape. Outsourcing HR functions means avoiding the potentially catastrophic costs of employee-related lawsuits and other liabilities.

3. Relieve the Administrative Burden

If you’re drowning in paperwork, you likely don’t have enough time for the critical parts of your job. There are probably several HR activities that are wasting your time, and administrative busywork often seems to be a top HR function. Human resource outsourcing and new HR technology ease some of that burden.

Unfortunately, HR administration has a cost that goes beyond any financial spending. It’s a major time sink. Outsourcing frees you and your staff from many of the administrative tasks, paperwork, and time-consuming HR processes in general. With them, you’ll get back to the more important aspects of your job.

A huge amount of time goes to all the day-to-day back-office tasks like securing employee benefits administration, payroll services, and managing HR operations. While these transactional HR tasks are important for keeping the business running and your employees well cared for, they leave little time for the strategic work of HR.

That changes when you have a reliable HR partner. You can put your focus on strategic activities, which are the intentional, meaningful work of planning for the future, building strong teams, and developing and investing in your company culture. The results of spending quality time on strategic HR are more engaged employees, higher employee satisfaction, more capable managers, and better employee morale. By focusing less on admin, you can develop the qualities that attract and retain the best talent.

4. Increase Employee Satisfaction

Mention of this is scattered throughout the article, but increasing employee satisfaction is a major perk to outsourcing HR. Your employees are the beating heart of your business. They keep things running, perform essential job duties, and generally keep the doors open.

High employee morale and better employee relations mean lower turnover and increased performance – two things that do wonders for business. High turnover (often the result of low job satisfaction) and onboarding a new hire can cost up to two times the original employee’s salary. Suffice to say, that gets expensive quickly, and your bottom line favors keeping a great team together.

What does that have to do with HR outsourcing, though? A more responsive HR is a crucial component of employee satisfaction. If your business is bogged down by an overworked and overloaded team trying to handle HR duties, employees won’t receive good response times or perhaps desired outcomes.

In addition to response times, outsourcing human resources gives employees access to a broader range of benefits, as mentioned above. This is especially true for employees of small businesses, who may otherwise miss out on many of the fringe benefits offered by larger companies. In some cases, those benefits are enough to draw them away and send them to another job instead. Even if they love their job, paying higher health insurance premiums and missing out on benefits like solid retirement plans may be enough to look for employment elsewhere.

Outsourced HR solves those problems. Your employees will have more reasons to stay in their positions. They’ll have reliable access to employee services, competitive employee benefits, and more. Employee turnover will, in turn, decrease, and you’ll enjoy a positive domino effect as a result.

Reap the Rewards of Outsourcing Your HR

Outsourcing HR to a trusted partner means you can hand off many of your most complicated and time-consuming HR tasks to the experts. An HR partner doesn’t just handle your paperwork. They also offer guidance and advice on strategic HR when you want it. Instead of worrying about which team member can or should take on these tasks, you’ll know that an HR partner has the capacity, skills, and tools necessary to handle it.

Growing your business doesn’t just happen at the sales level. How you manage, nurture, and build your team and keep your workplace running smoothly also matters. Being intentional and strategic in your business means being able to offload and consolidate many of your most complicated and time-consuming HR tasks to a partner. When you do this, you save costs, keep your business compliant, and free up time. You and your staff will be able to give your best and get your business going in the right direction.

Few decisions you make in business allow you to handle so many issues at once. Yet, human resource outsourcing covers everything from employee concerns to payroll administration.

Download Our eGuide: Managing HR — In-House or Outsourced?

Download this guide to learn whether in-house support or sharing the workload with an HR partner is the right fit for you.

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Most business leaders would agree that if something helps you save money, retain an excellent team of employees, and avoid potential lawsuits, it’s a win for the company. That’s precisely what these types of HR solutions offer. By outsourcing HR, you’re setting your business up for long-term success.

Back-office administrative tasks like payroll, workers’ compensation, and compliance are well-suited for outsourcing, though it covers other areas as well. Primarily, outsourcing allows your in-house team to pay attention to the people-focused and strategic work of HR. They’ll address developing your company culture or managing employee performance, for example. Ultimately, outsourcing HR gives you and your staff more time to spend on high-value work that benefits your employees and business as a whole.

Ready to outsource your HR to a trusted, local HR partner? Contact us today or download our guide on whether to outsource your HR or keep it in-house.