Does HR outsourcing save money?
Yes, outsourcing your HR functions is one of the best ways to maintain legal compliance while saving money. Instead of paying salaries for an in-house HR department, you can limit your team to one HR manager and outsource any functions they need assistance with. Many HRO companies can bundle your HR functions to save you even more money. Additionally, outsourcing functions like risk and compliance management can help your company stay on top of current regulations, potentially saving you thousands in legal fees.
When should you outsource HR?
Unless you have an entire in-house HR department, you will likely need to outsource at least some of your HR responsibilities as soon as you start your business. A company’s HR needs are greater than one professional can manage alone, and having no HR at all puts you at risk of serious legal ramifications. The specific functions you outsource – and when you should do so – will completely depend on your needs. For example, if you are hiring your first employees, you may want to outsource your employee benefits administration. You should outsource HR functions as soon as you need them, especially if you don’t have an in-house person to do the job.
What are the disadvantages of HR outsourcing?
Although it has many advantages, HR outsourcing can have a few drawbacks as well. For example, an external company managing your human resources can cause a disconnect with your staff. An external organization will not be an expert on your company culture, and it likely won’t focus on team building and personal development as much as an in-house HR expert could.
Outsourced HR is also less flexible than in-house HR staff. An external HR company or software provider is less likely to make special arrangements when a loyal employee has a unique request, for instance. An HRO may also take longer than an in-house HR department would to settle employee disputes or hire new recruits.
Outsourcing any business process always comes with a security risk. Most HRO companies use web-based PEO software, leaving your business’s information – and that of your employees – potentially vulnerable to security threats. Always check an HRO’s security measures before hiring it, especially if your business is in a highly regulated industry.
What business needs are met by outsourcing HR services?
HR outsourcing services can meet all your human resources needs. Whether you want to recruit and train new employees, administer employee benefits, track time and attendance, process payroll and tax filings, or do all of the above with one platform, an HR outsourcing company can help. An HRO can ensure you meet legal requirements as well. As federal, state, local and industry regulations are constantly changing, it can be hard to stay up to date, so find an HRO company that is experienced in your region and industry to maintain legal compliance.
You could also outsource tedious administrative HR tasks, which gives your in-house representatives more time to focus on recruiting the right employees and fostering team growth and development.
What HR functions should not be outsourced?
Many HR outsourcing companies can handle nearly all human resources functions you need. However, there are a few HR functions that should be handled internally. For example, you will want HR functions relating to establishing and cultivating company culture and morale to be handled by an internal team member, since they will better understand your people and culture than an external organization would.
Supporting employees through personal and professional conflicts should also be handled internally. For example, if an employee needs to violate your time off policy because of a very specific family matter, an internal member may be able to help accommodate their needs. Additionally, while an HR outsourcing service might be able to help you with corrective actions for employee misconduct, a conflict between employees is often best resolved by an internal team member who knows the intricacies of your team members’ working relationships.