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What HR Functions Should Not Be Outsourced?

Outsourcing human resources responsibilities has become a popular strategy for companies looking to streamline operations so they can focus on growing their business. And while outsourcing can be very beneficial, there are some HR functions that should be handed by your internal team. Understanding which tasks are best kept in-house ensures that your company maintains control over critical aspects of employee management and company culture.

Let’s take a closer look at HR outsourcing and how you can effectively leverage this strategy for your business.

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What types of HR functions are most typically outsourced?

Many businesses choose to outsource HR tasks that are placing a heavy administrative burden on their team and/or require specialized expertise. HR functions that can be outsourced to improve efficiency and help ensure compliance include:

  • Payroll service administration where an HR support team manages payroll processing, tax filing, and other related tasks.
  • Recruiting services for candidate sourcing, job postings, and new employee onboarding.
  • Benefits procurement and administration to give your employees access to high-quality, affordable benefits.
  • Staying compliant with the latest employment laws can be a time-consuming and confusing process. With a professional employer organization (PEO), like G&A Partners, you have access to deep regulatory expertise to help you stay on top of labor laws, tax regulations, workplace safety standards, and more.

Outsourcing these types of functions allow you to focus on your core business activities—like driving revenue generation—while still making sure your HR processes are managed efficiently and effectively.

What HR functions should not be outsourced?

Personnel matters—such as conflict resolution, performance reviews, and decisions about promotions or terminations—should be managed by your internal team. While outsourcing HR functions can greatly improve efficiency, keeping certain sensitive tasks in-house helps to ensure they are managed by those who best understand your employees and your company culture. And while HR experts at a PEO can provide valuable advice (if requested) in these matters, the final decisions should remain with you.

Developing and maintaining your company culture is another function to keep in-house. Your culture isn’t just a set of policies—it’s the lifeblood of your organization. You and your team created and champion your company’s values and mission, and you are best positioned to cultivate and sustain that culture.

Another important note: while a PEO can offer guidance on compliance with workplace regulations and laws, the final decisions and implementation must come from your leadership.

Carefully deciding which HR functions to outsource and which to keep in-house allows you to retain control over the aspects that directly impact your day-to-day operations and employee experiences. By doing so, you can better nurture your company’s unique environment and maintain a motivated, cohesive team.

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Why outsource HR services?

By outsourcing HR services, you can access expert knowledge, offer enhanced employee benefits, scale your HR operations when and where needed, and even realize cost savings.

Let’s take a closer look at each of these benefits of HR outsourcing:

  • Access to Expertise: HR outsourcing providers bring a wealth of knowledge and experience to the table. From payroll and benefits administration expertise, to ensuring your business remains compliant with ever-changing employment laws, experts at a PEO, like G&A Partners, can help you avoid costly fines and lawsuits, while also helping you to improve overall HR efficiencies.
  • Enhanced Employee Benefits: Outsourcing can give you access to better and more affordable employee benefits. PEOs, for instance, leverage their buying power to negotiate Fortune 500-level benefits packages, at a price you and your employees can afford. This, in turn, helps you to attract and retain top talent. A PEO will also handle the complexities of benefits administration, freeing you up to focus on strategic initiatives.
  • Improved Efficiency: HR outsourcing allows you to streamline processes and reduce administrative burdens. Tasks such as payroll processing, benefits administration, and recruiting can be managed more efficiently by an external provider. This not only saves time but also reduces errors and enhances overall productivity.
  • Scalability: As your business grows, your HR needs grow right along with it. An HR outsourcing provider can scale their services to match your growth, ensuring you have the necessary support without the need to hire additional in-house staff. This flexibility allows you to adapt quickly to changing business conditions.
  • Cost Savings: The average cost of handling HR and administrative functions in-house is approximately $2,500 per employee per year, according to the Gartner HR Budget and Efficiency Benchmark Report. In contrast, companies that outsource their HR functions often see a return on investment of 27.2%, saving $272 for every $1,000 spent on HR services.

Is it worth it to outsource HR?

Outsourcing human resources with a partner like G&A offers numerous advantages, including higher company survival, growth, and profitability rates, along with lower employee turnover. These benefits make HR outsourcing a valuable strategy, especially for small businesses who are looking to grow their business.

In fact, NAPEO research found that small businesses that outsource their HR functions have:

  • Higher survival rates and are 50% less likely to go out of business.
  • 7-9% faster growth rates than other businesses who keep HR functions in-house.
  • Are 16% more likely to report profitability increases.
  • Achieve lower employee turnover by 10-14%.

Why G&A?

G&A Partners has been a leader in the HR outsourcing industry for more than 25 years. We have experience across industries, providing unrivaled HR expertise, innovative technology, and reliable service that helps business leaders grow their business.