There are many reasons businesses choose to outsource their human resources department. The process is quickly becoming a popular trend throughout many sectors because it saves businesses money and improves their regulation compliance.
According to Forbes, roughly 50 percent of large corporations outsource all or some of their human resources needs, and more small- to mid-size corporations are looking to outsource today as well. While each type of organization may benefit in a different way, they both can save money, improve efficiency, monitor compliance issues and increase employee satisfaction.
Save money
No matter the company's size, human resources departments require extensive funding. Many small businesses are not able to invest in a complete HR department. In fact, 26 percent of companies surveyed by the Society of Human Resource Management said that outsourcing HR was a fiscal decision they made to save money. Outsourcing offers many businesses, particularly those smaller enterprises, access to quality services they wouldn't be able to afford otherwise.
Failing to comply with employee relations and benefits guidelines can also result in steep fines for small businesses. For instance, failing to comply with recent or updated Affordable Health Care Act regulations could have expensive consequences. The same goes for filing taxes with the Internal Revenue Service. If government tax forms are filled out incorrectly, turned in after the deadline or several employees are not covered by the ACA, companies will be charged accordingly.
Empower leadership
Although Human Resources does play an integral part in the business operations of a company and can affect a company's bottom line, Job Science reported that most business owners invest in an outside HR provider in order to spend more time focusing on growing their companies. This is especially true for small enterprises working hard to make a name for themselves. These smaller companies often have to assign the business owner to tasks typically reserved for human resources professionals. By piling those duties on the business owner, he or she is left with little to no time to grow the corporation and do what he or she does best. Some bosses do an excellent job of recruiting new hires, but cannot decode the requirements presented by the ACA or new state regulations that they were unaware of that impact their business. Relying on an outsourced HR group frees up leaders to focus on operations and innovation.
Collaborate and consolidate
Some experts have advised against outsourcing HR because it alienates the company from itself. While this may be true for some businesses, this primarily applies to corporations that have chosen to outsource their HR needs to a variety of different vendors which may not offer in-house guidance. For example, if a company has one vendor handing their benefits management and another vendor handling their employee recruitment goals, it's more difficult to establish consistency, trust and high quality performance. Investing in a one-stop-shop human resources provider which consolidates all areas of HR management allows companies to maintain a strong bond with the provider and can establish consistency across all HR functions. Everything from benefits to compensation, data collection to legal issues and recruitment to talent management can fall under the same umbrella. Companies working together with providers that provide comprehensive HR services are much more successful than those who ignore the process completely.
Most importantly, when businesses outsource their HR functions to several different provider groups, employees frequently miss out on some critical communications, development and training. These are key areas where companies should not fall short and where HR can contribute by improving, enhancing and/or developing successful programs. Employees are critical to a company's success and not having an HR department that can devote the time necessary to address these needs may not be wise.
Before a business connects with a human resources provider, it should closely examine its own strengths and weaknesses and determine how a human resources strategy can help them achieve their goals. Business leaders should invest in a service that offers consulting throughout the process, which can eventually lead the company to more success.