Today, lots of top companies outsource their human resources management. Even companies who have an entire staff of HR professionals on the payroll likely outsource at least one their business’ HR functions, such as payroll processing, employee onboarding or learning management. The trouble is, they don’t like to call it outsourcing.
Instead, they say they’re working with an outside administrative services provider, engaging a third-party administrator, entering into a service contract – but definitely not outsourcing.
So why do so many business owners, executives, managers and HR professionals balk at the word “outsourcing”?
For the most part, it’s because the word conjures up deep fears of being replaced, downsizing, etc. When people hear “HR outsourcing,” they just assume it means that their company is eliminating all of its internal human resources positions in order to save money.
As an HR outsourcing company, we encounter this resistance quite often, as you might expect. We’ve heard every excuse, rationale and reason why a company wouldn’t want to outsource human resources, multiple times over. And while every business is different, and perhaps not every business would benefit from outsourcing its HR administration, we think it’s time to set the record straight about some of the most common objections people have about outsourced HR.
- My company is too small to benefit from partnering with an HR outsourcing provider.
Small and growing businesses need help solving their HR problems just as much as larger or established companies. And if your business is so small, can you really afford to hire the staff you’ll need to efficiently manage all the responsibilities of being an employer, like payroll, employee benefits, regulatory compliance or workplace safety?
- My company is too big to benefit from partnering with an HR outsourcing provider.
If your business is already a large and established company, you’re probably always looking for ways to improve processes and minimize costs. Partnering with an HR outsourcing firm will enable you to reallocate the precious resources you were spending on tedious administrative tasks to focus instead on strategic functions that are directly tied to your bottom line. Besides, the more employees you have, the more at risk your business becomes for potential compliance issues, unemployment claims and even lawsuits.
- The way we’ve been taking care of HR functions ourselves (in-house) is fine.
For the most part, people don’t like change. Change is hard, and it can be messy. But the idea that staying with the status quo is better than switching to a more efficient, more cost-effective alternative goes against every principle of business.Think about it: If you’re not a legal expert and you need legal advice, you retain an attorney. If you’re not able to ship all your products yourself, you partner with a distributing company. If you’re not an HR expert, why wouldn’t you partner with someone who is?
- If I outsource my human resources, I won’t have any control of my business.
Many business owners and executives get caught up in the idea that keeping HR functions in-house is better because they’re afraid that handing some of the reigns over to someone else means they’ll lose control of their business. But remember, your HR outsourcing provider works for you, not the other way around. Businesses that outsource their HR administration have just as much control of their business as businesses who don’t outsource their HR functions – they just don’t have to be bogged down by the stress and daily tasks that other businesses have to deal with.
- HR outsourcing is too expensive.
This is perhaps one of the most frequent objections HR outsourcing companies encounter, and it absolutely makes sense. But what you may not know is that the estimated cost of managing all HR and administrative functions in-house is $2,000 per employee, per year for mid-size businesses. (“The Hidden Reality of Payroll and HR Administration Costs” PwC, 2011). Depending on the number of employees your business has, these costs can rack up quickly, and soon be overwhelming.
Companies who outsource their human resources, on the other hand, typically experience significant cost savings in both the long and short term. In fact, the cost of outsourcing HR is usually about the same as the costs a business would incur by hiring a full-time HR professional.
[Should your company outsource its human resources? Find out by asking yourself these questions.]
Once you’ve decided that outsourcing human resources is the way to go, you’ll need to decide what kind of HR partner your business needs. Fortunately, there are several options for companies seeking an outsourced human resources solution:
- HR Consulting
For companies who decide they need limited or specific assistance, the best choice may be to engage an HR consultant or consulting firm. Similar to other business consultants, HR consultants help companies identify any problem areas or weaknesses they may have in regards to their human capital management, and then work with the company to develop a plan to address the identified problems.
- HR Outsourcing
Companies who decide they need more expertise or ongoing service may choose to outsource all or some of their HR functions to a human resources outsourcing (HRO) firm. As opposed to an HR consulting firm, an HRO company actually takes over the tasks associated with human resources, including but not limited to: payroll processing, benefits administration, risk management, regulatory compliance, performance management, employee relations, etc.
- Professional Employer Organization
Companies looking for a true HR partner should consider bringing in a professional employer organization (PEO). In a PEO arrangement, companies enter into a co-employment relationship with a PEO provider, which allows the PEO to act as the “Employer of Record” for the companies’ employees. As the employer of record, the PEO is able to perform employment-related tasks for the employees on the company’s behalf and assume much of the administrative responsibilities and liabilities associated with carrying employees. Whether companies are looking for an all-encompassing solution to their HR needs or just a supplement to their current people and processes, PEOs are able to offer products and services that address all of their specific needs while also minimizing costs, reducing risk and increasing productivity.
Businesses who outsource their human resources to a PEO enjoy a number of considerable benefits, including reduced risk, minimized costs and increased productivity. See for yourself:
“Professional Employer Organizations: Keeping Turnover Low & Survival High” McBassi & Company, 2014
“PEO: Taking Outsourcing a Step Beyond Pays Off for Small & Mid-Sized Companies” Aberdeen Group, 2011
“The Hidden Reality of Payroll and HR Administration Costs” PwC, 2011
If “outsourcing” still leaves a bad taste in your mouth, try these words: minimized costs, reduced risk and increased productivity. Those are the things you get when you outsource your HR. And really, isn’t that what every business owner wants?
Learn how G&A Partners, one of the nation’s leading HR outsourcing providers and PEOs, can help you grow your business, take better care your employees and enjoy a higher quality of life by contacting us by phone at 1-866-634-6713 to speak with an expert or visiting https://www.gnapartners.com/contact-us/ to schedule a free business consultation.