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How to Reap the Benefits of HR Outsourcing

Starting a business is an exciting endeavor, but it’s also one that brings with it a seemingly endless list of responsibilities and challenges. And as your business expands, so too do the demands on your time and resources. For many companies, this is a time when decisions are made to either add to internal staff or outsource functions.

A common outsourcing choice for small and mid-sized business owners is human resources outsourcing (HRO), which offloads some or all of your HR functions to a third-party vendor. This outsourcing option provides you with a cost-effective way to streamline HR processes – freeing you up to focus on your core business, while ensuring your employees receive the dedicated HR support they need.

In this article, we’ll dive into:

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HR outsourcing could benefit you if...

Wondering if outsourcing is the right move for your business? Consider the following scenarios. If you answer “Yes” to one or more, it might be time to look into outsourcing some or most of your administrative functions (such as HR, payroll, employee benefits, recruiting, and training) to an HR outsourcing provider or a professional employer organization (PEO).

#1: You’re Losing Top Talent to Major Corporations

Finding quality job candidates – and keeping your top talent – is difficult for many small and mid-sized businesses, especially when you’re competing with larger corporations that can offer more robust employee incentives and better benefits packages. Increasingly, job seekers and employees are prioritizing benefits packages when deciding whether to stay or pursue a new opportunity. And factors such as professional development opportunities, career advancement, and employee engagement can significantly impact whether an employee stays or goes.

Outsourcing HR with a PEO such as G&A Partners gives you access to better healthcare plans and other Fortune 500-level benefits. This helps you to attract talent and provide more options to fit your employees’ needs and budgets. A PEO can also help you develop strategies to engage and encourage your employees and nurture your company culture.

#2: Your Employees Want Benefits You Don’t Think You Can Afford

Employees today are seeking better work/life balance, and many are looking to their employers to provide resources to improve overall well-being. As a small- or medium-sized business owner, you might feel stuck between a rock and a hard place. You want to give your employees the best and most comprehensive benefits package possible, but that often comes with a sizeable price tag.

When you partner with a PEO, you can access health insurance plans at lower rates along with ancillary benefits that typically include dental, vision, life insurance, telehealth, and mental-health offerings. By leveraging the buying power of an extensive client base, a reputable PEO can keep employer insurance premium costs down so you can offer your employees the protection they need.

#3: You’re Spending Valuable Time on Payroll

If you’re tracking time and attendance on spreadsheets, devoting five plus hours per week to payroll, or struggling to make sense of regulatory compliance requirements that impact payroll – you’re not alone. These are just a few of the challenges small and mid-sized business owners face when they are processing payroll in addition to running their business.

One of the benefits of HR outsourcing is that you can offload payroll-related tasks – including benefits deductions, payroll tax filings, reporting, and more – to your outsourcing partner, who will ensure timely, error-free paychecks. You’ll also gain access to integrated HR technology that streamlines the payroll process, reducing the amount of time your employees spend on scheduling, clocking in, and requesting time off.

#4: Your Workplace Safety Concerns Have Multiplied

It’s challenging to keep up with changing regulations and recommendations while maintaining a safe work environment. A seasoned PEO such as G&A can work with you to develop your workplace safety plan, evaluate which protocols should make their way into your company’s policies and procedures, and help customize a robust training program that addresses employee safety from all angles.

#5: You Worry your Diversity, Equity, Inclusion, and Belonging (DEIB) Efforts Aren’t Sufficient

Ensuring all employees feel valued and welcome is essential to developing a strong company culture. With an HR outsourcing provider, you’ll have strategic guidance to help you create an effective DEIB plan. An HRO can also review your company’s policies and procedures to identify potentially discriminatory practices and help design a tailored diversity training program for all employees.

#6: You’ve Adopted a Hybrid or Remote Workplace Model

The hybrid and remote workplace models continue to be popular amongst employees who value flexibility in the workplace for better work/life balance. These models can also help you attract or retain top talent in a competitive job market. But offering a hybrid or remote workplace comes with the need for policies and procedures that fit your business model – ensuring employee engagement remains high, and you’re meeting workplace requirements in different states.

Knowledgeable and experienced HR experts at an HR outsourcing provider can help you navigate these challenges and establish best practices, ensuring your hybrid and remote employees have the tools they need to succeed.

#7: You Want to Prepare for the Unexpected

If a disaster impacted your business, would you be prepared to process payroll on time, communicate with your employees and customers, and continue (or restore) business operations? At G&A Partners, our HR experts have decades of experience and can anticipate challenges you might not expect in the event of an emergency. They can also help you develop a business continuity plan and keep you informed of federal, state, and local regulations that apply to emergency response in the workplace.

#8: You Often Need Someone to Turn to for Trustworthy HR Advice

You’ve worked hard to achieve success in your industry, but that doesn’t leave you much time to become an HR, payroll, benefits, or risk expert. If the perceived cost of outsourcing your HR services is preventing you from exploring the option, it may be more affordable than you think.

In fact, according to the Society for Human Resource Management (SHRM), businesses outsourcing some or all HR services to a PEO can reduce their administrative costs by approximately $450 per employee. But the personalized service you receive from a dedicated team of HR experts, who are available to answer questions from you and your employees, provide solutions, and connect you with the resources you need to protect your employees and business, is priceless.

What are some risks associated with outsourcing HR functions?

When considering how to manage your HR needs, it’s important to weigh the potential risks against the benefits of outsourcing HR functions, such as:

  • Data security and confidentiality: Depending on which HR functions you outsource, your provider may be collecting and storing sensitive personal information from your employees, such as Social Security numbers, bank account details, medical records, performance reviews, and more. However, reputable HROs will have policies and procedures in place – as well as the latest technology – to ensure your data is protected and access is restricted to only individuals who require it.
    • How to minimize the risk: When comparing HRO providers, ask them how they will protect your data, whether they have robust security measures, and who will have access to your data. Check on the company’s reputation and whether they’ve been associated with prior HR outsourcing scams.
  • Loss of control: Outsourcing any business function to a third party may feel as if you’re losing some control over your business. This is a common misconception about outsourcing. When you outsource with a PEO, for example, you retain full control over your business, from day-to-day operations to managing your employees and more. In fact, when you partner with a reputable HR company such as G&A, a team of HR experts will be available not only for daily HR administration but also to guide you on strategic initiatives that can elevate your business.
    • How to minimize the risk: Research potential HRO providers so you have a clear picture of the relationship the provider develops with its clients. Vet the provider through references. Ask them how they handle various HR scenarios, such as how they’ll work with you if they discover a compliance issue or an employee alerts them to a payroll issue.

      Your company also plays an important role in your relationship with an HR outsourcing provider. Designate a liaison within your company – either yourself or another employee – to meet regularly with your assigned HR specialist. Use those meetings to discuss any ongoing HR-related issues, questions you may have, or future business plans that may require your provider’s guidance.
  • Change in culture: You’ve worked hard to develop a company culture you’re proud of, so it’s understandable that you may be concerned the culture will change if you introduce an HR outsourcing provider to the company.
    • How to minimize the risk: Maintaining your culture comes down to hiring the right HR partner. Find a provider that is aligned with your company values, understands the importance of company culture, and will truly get to know your company. At G&A, we believe our purpose is to help build thriving businesses, and our dedicated specialists approach each client interaction with this purpose in mind.
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How does outsourcing increase the effectiveness of HR?

Human resources has evolved over the years to extend far beyond hiring and paying employees, and processing paperwork. The list of an HR team’s responsibilities is long – and always growing.

Below are just a few of those HR functions, as defined by University of Massachusetts Global, and how each helps your business succeed.

HR Function

How it helps your business

Recruiting, hiring, and retaining talent

Hiring the right people to ensure a good fit within the role and company culture, which can help minimize costly turnover.

Employee engagement

Creates a workplace that employees want to be a part – where they are motivated to perform their best each day.

Performance management

Provides the tools and resources your team needs to improve their performance and help your company hit its goals.

Compensation and benefits

Compensating your team with competitive pay and benefits helps them feel valued and less likely to pursue other jobs.

Development and training

Providing proper training helps employees feel empowered in their roles and develop new skills.

Risk management

Minimizing risk helps reduce costs associated with work-related illnesses and injuries, and it creates an environment where your employees feel safe.

Audits and legal compliance

Regularly evaluating federal and state workplace-related requirements helps ensure your company is compliant, so you can avoid costly penalties or lawsuits.

That’s a lengthy list for any business, but it’s particularly so for small and mid-sized businesses that may not have the resources to hire internal HR staff.

When you outsource HR, you shift administrative tasks to HR experts who utilize their extensive knowledge to efficiently and properly manage your human resources, allowing your staff more time to focus on strategic HR functions. The benefit of outsourcing HR – whether it be some or all of those HR functions – is that it can improve the effectiveness of your overall human resources strategy and, in return, maximize your employees’ performance.

How much does outsourced HR cost?

Operating an entire HR department isn’t feasible for many small and mid-sized businesses, but is outsourcing HR a cost-effective solution? Consider this: For approximately the cost of one, full-time employee, you can partner with a PEO and gain significant HR outsourcing benefits such as access to HR experts, comprehensive HR support and services, state-of-the-art technology, and competitive and affordable employee benefits.

Let’s break it down another way: Based on National Association of Professional Employer Organizations research, companies that work with a PEO experience a 27.2% return on investment. For example, for every $1,000 you spend for services from a PEO, you could save $1,272. That’s a cost savings of $272 for every $1,000 spent.

Of course, the final cost to outsource HR will vary for every company based on several factors, such as your size, location, and services. Typically, though, HR outsourcing providers charge either as a percentage of total payroll (typically between 3-8 percent) or a flat per-employee-per-year (PEPY) fee. For one-time projects, HROs often charge a flat fee.

When is outsourcing a good option?

Outsourcing your HR can be a game-changing decision for small and mid-sized businesses. But how do you know when it’s a good option for your business? Because there are multiple HR outsourcing benefits, the reasons businesses choose to outsource vary.

Here are some of the most common reasons companies choose to outsource their HR:

  • HR administration is overwhelming their staff.
  • They are seeking more affordable and comprehensive benefits options than what they can access on the open market.
  • Their company is experiencing fast-paced growth and they are dedicating significantly more time to HR.
  • It’s difficult to attract and retain top talent in a competitive labor market.
  • They lack the expertise or personnel on staff to dedicate to HR, or they can’t afford to hire staff specifically for human resources.
  • They’re already outsourcing HR functions to different vendors but are ready to explore a consolidated, streamlined solution with one HR provider.
  • Keeping up with changing workplace laws and regulations is time consuming and they’re uncertain if their business is compliant with the requirements.
  • They need expertise to help develop a safe and inclusive workplace for their employees.
  • They’re growing and acquiring companies but need assistance onboarding employees as the business grows.

How do you outsource human resources?

You’ve made the decision that the time is right to take advantage of the benefits of outsourcing human resources, but where do you start?

The process of outsourcing HR involves a two-step approach: (1) discovery and research, and (2) onboarding. The first step focuses on finding the right provider for your needs, while the second step involves transitioning your HR functions to the chosen provider.

Here’s a brief overview of the process:

  • Determine your HR needs so you know which type of HR outsourcing provider is best
  • Research potential HR outsourcing providers, the technology they provide, and the level of service included
  • Request a quote and assess whether their values align with your company’s values
  • Sign the contract
  • Gather data for the provider and make benefits decisions for your company
  • Engage in training and onboarding through the provider
  • Complete open enrollment if benefits are changing
  • Process the first payroll

To build a successful relationship with your HR partner, be sure you clarify the roles and responsibilities for your business and your provider. Designate a liaison to meet with your provider regularly and educate your employees on how they can contact your provider and what specifically they can help with.

Why G&A?

G&A Partners offers access to HR experts with years of experience helping businesses develop their employees, improve their workplace cultures, implement new HR processes and procedures, and more. Schedule a consultation with one of our trusted business advisors to learn more.