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Is Outsourcing Human Resources Right for Your Company?

As the talent shortage continues, coupled with an economic downturn, increased responsibilities are falling into the laps of the human resources department as companies struggle to attract and retain their employees.

Building a culture that addresses the employee’s holistic needs is no longer a nice to have but the only way companies will succeed. According to a recent study by Gartner, two-thirds of companies expected their HR budgets to increase this year as they planned more strategic work targeting growth and culture. These budget increases may be putting a more significant financial strain on companies. The greatest asset of any organization is its people but figuring out how to have a cost-effective HR department delivering top-notch services and programs is challenging for many companies. Outsourcing may be the answer.

Why Outsource HR?

  1. Cost

    Most companies explore outsourcing to save costs related to human resources support. According to the Harvard Business Review, outsourced HR departments can save up to 30% versus their in-house counterparts. For some companies, the cost of bringing human resources in-house may be prohibitive due to size or revenue. Outsourcing offers an alternative allowing companies to have quality HR services without the expense.

  2. Decreased Risk Exposure

    Between federal, state and local laws, legal compliance is often challenging for companies operating without a qualified professional who knows about employment law. This becomes even more difficult if the company operates in multiple states. With an outsourced resource, the primary responsibility will be to keep the company in compliance with all employment laws and minimize risk.

  3. Access to Experts

    For many smaller companies, having an expert in all areas of HR, such as compensation, recruiting, training and strategy, is unreasonable. However, companies can access experts in specific practice areas when outsourcing the function. For example, if a company has a few jobs to post, they can get a trained recruiter to assist them at a fraction of the cost of having an in-house resource. Additionally, if they’re looking for someone to sit at the c-suite table, an experienced generalist can assist them.

  4. Multi-level Support

    Finding someone able and willing to do both the job's tactical and strategic work may be challenging for a small company. An employee qualified to work strategically with the C-suite is likely not the right person to be processing payroll or implementing leaves of absence. Outsourcing allows the organization to have people specializing in both the strategic and the tactical.

  5. Extra Set of Hands

    Considering everything HR manages daily, moving an HR function from reactive to proactive is no easy task. An extra set of hands to work on hard-to-finish projects, such as updating the employee handbook or overhauling the performance management program, can help make the function more proactive.

Finding and keeping qualified HR talent has also been a challenge of late. As companies deal with turnover in their HR departments, outsourcing can be a great solution to bridge the gap. Utilizing internal and external resources can insulate an organization from turnover disruption.

If you need support with a specific area, learn more about the considerations for outsourcing payroll and leave management.