HR outsourcing is the contractual agreement between an employer and a third-party provider, where the employer transfers the management and responsibilities of certain HR functions, such as payroll, benefits administration, and compliance. From small businesses that outsource the entire HR function, to medium-sized organizations that may need specialized support, many employers choose to partner with Professional Employer Organizations (PEO) and Human Resource Outsourcing (HRO) providers.
With human capital management playing an increasingly important role in business, there’s never been a better time to consider how you can leverage the power of HR outsourcing.
Here are 10 benefits of partnering with an HR services provider:
- Accessing HR expertise
- Maximizing compliance
- Minimizing risks
- Reducing HR costs
- Increasing efficiency
- Attracting and retaining top talent
- Improving HR technology
- Improved employee engagement
- Leveraging flexibility
- Focusing on revenue generating activities
1. Accessing HR expertise
The days of HR being purely transactional are long gone. HR has grown more complex, and such, is playing a far more important role. Today, the people function is responsible for the end-to-end employee lifecycle, including:
- Employment relations
- Compensation and benefits
- Performance management
- Payroll and tax administration
- Learning and development
- HR technology
- HR operations
Each of the above areas requires skill and knowledge to be managed in an effective and efficient way. Luckily, a solution exists that provides access to these experts: HR outsourcing.
PEOs and HROs typically employ subject matter experts that specialize in the above domains. Nevertheless, make sure you evaluate your services provider before selecting a partner. You will want to look for a Certified PEO with an industry-leading Net Promoter Score (NPS) and a demonstrated track record of fiscal stability and accreditation from ESAC or the IRS. These best-in-class providers can offer you a broad selection of experts to suit your needs.
2. Maximizing compliance
Non-compliance can be catastrophic for businesses, resulting in fines and reputational damage that is hard to fix, which is why HR compliance issues need to be proactively managed. However, frequent changes and increasingly complex legislation can make it challenging for employers to keep up.
From employment relations experts to employment lawyers, working with a HR outsourcing provider can give you peace of mind knowing your HR strategy is compliant.
3. Minimizing risks
Apart from compliance, other HR issues can be equally important. For example, if an employer accidentally discriminates against a member of staff, this can tarnish their employer brand, leaving them unable to hire and retain the talent they need. It can also be costly and result in legal issues.
Many HR aspects including managing grievances, disciplinaries, and dismissals can be highly sensitive and complex. It makes smart business sense to have some support for these high-risk activities and HR outsourcing can be the solution. Experienced PEO and HRO partners have extensive experience in navigating complicated HR issues and can help businesses minimize these risks and become an employer of choice.
4. Reducing HR costs
HR costs can be a heavy burden for small- and medium-sized businesses. Offering competitive employee benefits can be expensive, learning and development solutions increase the cost further, and hiring the right talent is effort intensive. Apart from these, without an effective risk management strategy, compliance issues can come with hefty fines.
HR outsourcing providers, such as ExtensisHR, can manage the above in a cost-efficient way. HROs and PEOs have access to world-class employee benefits at a fraction of the cost due to their large group bargaining power. Many partners can also provide your workforce with sophisticated learning and development programs as part of their services, reducing the costs associated with purchasing, deploying, and maintaining expensive learning tools.
HROs and PEOs can support clients with a recruitment strategy and execution, absorbing some of the effort, time, and cost related to talent acquisition. Lastly, the expertise an organization can get from HR outsourcing minimizes the risk of compliance fines, allowing you to focus your budget where it really matters.
5. Increasing efficiency
Efficiency is key. Apart from building a strong team, organizations must think about processes and systems. The people function is no different and many businesses suffer from HR-related inefficiencies.
Do you have the time to develop and continuously improve business processes for everything and anything HR-related? What about selecting next-gen HR technology and maintaining it as required? If the answer is no, you may want to explore working with a PEO or HRO partner.
HR outsourcing providers offer a myriad of HR-related business processes and systems as part of their service. If you select a high-quality PEO or HRO, you can rest assured that they operate efficiently using these systems, and that they will continue to do so.
6. Attracting and retaining talent
Recruiting is cited as one of the top challenges facing employers today, regardless of company size. With the current talent shortage and the importance of cultivating candidates, smaller employers are at a disadvantage when competing for the best talent.
This is often due to a lack of employer branding and below industry-standard employee benefit offerings. The latter can also negatively impact employee turnover, preventing growth and costing businesses significantly when trying to hire a replacement.
A seamless, tailored, and sophisticated HR function can help you become an employer of choice. Your HR outsourcing partner can help you achieve this through their expert resources, network, technology, and skills.
We suggest evaluating providers based on their track record. To do this, ask for objective data, verified reviews, and case study testimonials before deciding.
7. Improving HR tech
HR tech is vital to helping businesses, managers, and employees stay productive and meet core HR needs. From automation to AI and everything in between, technology can make or break the HR function. Additionally, with HR broadening in scope and technology continuously advancing, it’s set to be a key issue in the leadership’s agenda.
To complicate things further, HRIS technology typically sits between HR and IT, requiring cross-functional work. In many cases, HR technology is a resource-intensive sub-function, requiring a large budget to implement and maintain systems that require constant changes. Stakes are also high when it comes to results, as effective HR technology can increase the speed of transactions and cut costs, while mistakes can lead to underused costly systems.
HR outsourcing allows businesses to cross HR tech off their list, as PEO and HRO partners can manage it on their behalf. Depending on the provider, this can include everything from the deployment of technology to its maintenance and day-to-day operation.
8. Improved employee engagement
Larger organizations often invest significant resources to improve employee engagement, but smaller employers typically aren’t as fortunate. Exploring a PEO or HRO solution can provide SMB employers with these important business tools.
The National Association of Professional Employer Organizations (NAPEO) states employees of PEO clients report significantly higher scores on key measures related to employee satisfaction and confidence in company management, including intention to stay with their current employer longer, belief that their employer is taking the right steps to be competitive, and confidence in their employer’s approach to growing the company.
Access to higher-quality benefits, formal learning and development resources, user-friendly HR technology, and HR expertise all help smaller employers address engagement concerns and build a great company culture. Additionally, PEO and HRO partners can provide supplementary resources (such as guides and best-practice materials) to help businesses improve workplace culture and support engagement initiatives.
9. Leveraging flexibility
Large employers can tailor and customize their HR offerings to fit the needs, wants, and culture of their organization. Meanwhile, time and cost constraints mean many smaller employers are stuck with a one-size-fits-all approach to HR. PEO and HRO partners provide smaller businesses with a wide range of personalized HR services based on each organization’s industry niche, market, and employees.
HR outsourcing will enable you to access the resources you need on-demand, giving you the ability to make changes as and when you need them. The best way to remain agile is to work with a partner who can also offer the same flexibility.
10. Focusing on strategic work
HR may have developed into a more strategic function, but executive resources need to remain focused on revenue-generating activities. Working with a PEO or HRO gives business leaders the freedom to cross HR off your to-do list. From strategy to execution, your partner can help administer world-class benefits, reduce the complexity of being an employer, minimize employment risk, hire and retain top talent, and more, allowing your senior leadership to focus on business growth and profit.