Although Human Resources has traditionally been a department that has held up the fort in everything related to recruiting, hiring and firing from within the company, this has recently been changing. There are increasing cases of companies turning to outsourced HR rather than the conventional in-house department. Besides the obvious cost-related reasons behind making this transition, the shift of functions and responsibilities of this role over time has also had a big influence. Some have decided to go 100% remote, but other other trade out certain tasks, based on your company’s needs and size there are a few things to analyze before making the best call.
When deciding to make the change there are a few reasons to make the switch. First off, HR is usually not a core competence of the company and therefore should not take up so much of the organization’s resources. By outsourcing HR, the company can focus on what’s important to their core and hand these responsibilities over to experts. The obvious one is it saves money, but more than this, it allows you to have on your team experts from around the world as an outsourced asset. Normally, most companies wouldn’t have enough budget to invest in an expert like this for a permanent position. Yet one more reason is that if you hire HR experts in each area needed, you are sure to not regret it when facing so many of the challenges HR faces today, from sexual harassment to wrongful termination cases. Same goes for recruitment, where most will do the best possible job at find just the right talent for a company, but frankly there are experts out there who have it down to a science. Finally, most HR experts who provide this outsourcing service are completely up-to-date to the latest tools and tech that can be used to improve HR performance.
Now, this change is not for everyone, despite the many benefits it seemingly has. You do have to analyze a few factors about your company in particular before making the change. The size of your company is vital in making this decision, but despite this there is no exact rule as to how big your organization has to be to outsource HR. Usually, the most common indication is when administrative processes of the HR department are interfering in the core functions of the company, and thus slowing down productivity. In most cases this can be observed when the company has the range of 10 to 15 employees a week, even though each one is different. Moreover, the number of employees is not the only criteria, it’s also critical the composition of that workforce, types of contracts and benefits the employees have. The more employees that have full benefits like insurance, the easier an outsourcing HR company will take interest in working for your organization.
The pricing will also range greatly depending on the quantity of employees, running between $500 and $1,500 per employee. Although some may charge going from 2 percent to 11 percent of wages. So, when venturing into an outsourcing of you HR department be sure to do all the math and take into account the full cost of all of the HR functions as a whole.
Another consideration is the amount of control you want to continue having over your HR functions. In most cases, an outsourcing HR company will make suggestions, take decisions and simply inform the organization, since they are relying on their knowledge and experience. Some companies may not want this, in big decisions or even simple ones such as a logo on a check. Be sure to go over all of these conditions with your HR service provider, to assure you have the perfect amount of control you want over HR tasks. This is also goes hand in hand with choosing a good HR service provider, by assuring that the company has all of the services your organization needs. If you are hiring externally, mainly due to the level of expertise, be sure that they are experts in the areas you need.
As a matter a fact, the services that most companies choose to outsource are payroll, benefits and recruiting. Although they can also outsource functions like: employee assistance/counseling, healthcare benefits administration, pension and retirement benefits administration, temporary staffing or employee relocation. So identifying which of these or other services you require, will be at the essence of choosing the right service provider. The reasons to outsource HR seems to be endless, but this doesn’t mean that you shouldn’t have any considerations or won’t run into any inconveniences. Lack of flexibility, having a disconnection with the staff, security and risks of leaks, and finally dependency or loss of control are just a few to consider. So, take your time and analyze if it’s the right move for you and your company.