5 Benefits of Outsourcing HR Administration and Tips for Getting Started
Is your HR department constantly overwhelmed? It may be time to outsource some work. Here are the top five benefits of human resources outsourcing and steps for how to get started.
Human resources involves so many different specialties that it's nearly impossible for a small department to handle everything. If you and your HR department are having trouble keeping up, handing some of these responsibilities to a third party could be the solution.
Here are the benefits of outsourcing HR administration and the steps you can take to move these tasks off your plate.
What are the top benefits of outsourcing?
By sending out some of your administrative HR work, you're moving the time-consuming, complex and frustrating tasks to a firm that specializes in those fields. You can save money and free up time to focus on other more strategic work while improving the range of workplace benefits for your employees. Consider these potential benefits:
1. Lower costs
Outsourcing certain aspects of HR can significantly lower your expenses. Managing employee benefits as well as pay, labor, tax, privacy and other compliance issues are increasingly complex. Especially as your organization expands, many of these tasks require expertise that can be costly to keep in-house.
Having a partner to handle your HR administration eliminates the need to hire and train people for these responsibilities. Instead, you gain access to automated, accurate processes and professional advisors who already specialize in these areas.
2. More options for employee benefits
If you sign up for benefits on your own, your options may be limited due to the size of your organization as benefit providers often require a minimum number of employees for certain plans. The cost per employee can be too high for some small businesses where there aren't enough people to feasibly spread out the administrative expenses.
Outsourcing may enable you to offer more sophisticated benefits to your employees than you could on your own. The administrative work involved in setting up a 401(k), for example, might not make financial sense if you only have seven employees. But outsourcing could allow you to access the retirement plans available to your HR partner.
3. Professional expertise
HR outsourcing organizations have experts dedicated to specialized topics, like compliance issues. Whether you have questions on federal regulations, evaluating talent or planning benefits, you can reach out to an expert whose only job is to advise on these topics. This means you can get much more precise information than if you had one HR generalist trying to learn every subject on their own.
As new legislation continues changing the workplace landscape — from the SECURE Act 2.0 to pay transparency — getting specialized advice as you manage your business is more important than ever.
4. More time
The main advantage of your in-house HR personnel is that they understand your company's unique environment and needs. But this experience risks goes to waste if your staff is spending all their time on rote tasks like filling out paperwork for benefits or researching compliance rules. Running everything in-house may not be the best use of your time.
Outsourcing can free up you and your team to focus on work that's closer and more meaningful to your fellow coworkers, like developing, motivating and engaging employees and building out your organization's culture.
5. Liability protection
Human resources outsourcing may also give you additional liability protection. A third party's compliance experts can help you protect your organization from unnecessary risks.
Signing up with a professional employer organization (PEO) in particular can provide an extra layer of protection since the PEO becomes a co-employer of your staff. They assume certain employer responsibilities for the service they manage, including payroll processing, which can give you a barrier against lawsuits and fines.
What to consider when outsourcing HR administration
Once you've decided to outsource aspects of your HR, you'll want to put thought into how it can serve you and your organization and how you're going to implement it. These steps can get you started:
1. Assess your needs
Think where your organization could use the most support. Some popular options for outsourcing include payroll, employee benefits, compliance and hiring. List the specific tasks you'd like to unload or improve, such as health insurance enrollment or onboarding and training.
2. Compare the services
Many different levels of support are possible for your HR outsourcing. They range from basic administration software and support to help desks that provide you with general advice to PEOs, which can completely take over management of your payroll, benefits and compliance. Consider how much help you want versus your budget.
3. Select a provider
You have a wide range of options for your HR outsourcing provider. It's a good idea to meet with a few of your top choices to compare their cost, reputation, support availability and technology. You'll also want to make sure they're a good fit with you personality-wise as you'll be working together closely.
4. Plan the transition
Once you've signed an agreement with your HR outsourcing firm, you'll need to transfer over the necessary details about your company's systems and existing processes. Include details about your company culture and employee environment along with the technical information so your new partner can become familiar with how your organization stands out from the rest.
5. Coordinate the switchover
When it's time to launch, communicate with your team and all employees about the upcoming transition and what these changes mean for them. This is especially important if you outsource functions that directly affect your coworkers, like payroll or benefits. You'll want to make sure they know how to get the answers they need and how to navigate any new platforms or apps.
Get our guidebook, The Business Case for Outsourcing HR, to learn more about how outsourcing HR can help boost your ROI.
