There comes a time in the journey of every successful business owner or executive when they realize their company can no longer manage all the needs of their growing business. When a business reaches this point, its leadership has two choices: continue to take on additional staff, or outsource some of its business processes to outside companies that specialize in those functions. Over the years, “outsourcing” has picked up a bit of a negative connotation. But outsourcing doesn’t mean cutting jobs or sending them overseas; outsourcing is simply obtaining goods or services from an external source, instead of internally. Outsourcing allows businesses to avoid the cost of additional overhead, while still enjoying the benefits of high quality service.
Today virtually every organization, from Fortune 100 companies to local small businesses and everything in between, outsources at least some aspect of its business. The most popular business processes companies choose to outsource? Human Resources.
Why do businesses outsource HR?
In the past, human resources was mainly seen as an administrative function of the business, and its sole purpose was to ensure employees got hired and paid. Now, however, as business owners have realized the value of strategic human resources, they’ve come to expect more from their HR departments and professionals. And if they can’t find a cost-efficient way to manage those functions internally, they’re more willing than ever to look outside their organization for additional HR support and expertise. There are a number of human resource functions that companies can engage an HR outsourcing company to provide: recruitment, payroll, employee benefits, labor law compliance, development of employee policies and procedures, workplace safety - the list goes on and on. While every company might give a slightly different answer if asked why they chose to outsource some or all of their HR functions, most of these explanations boil down to four main reasons:
1. To help boost their bottom line.
The potential for cost savings is often the most compelling benefit of outsourcing HR. Immediate savings often stem from reallocating personnel and resources, consolidating systems and software, and the ability of the HR outsourcing provider to procure health insurance and other employee benefit plans at much lower rates than small and medium-sized businesses could secure on their own.
2. To realize greater operating efficiencies
Outsourcing human resources functions gives businesses access to a team of HR experts, proven processes and sophisticated systems, all of which help streamline human resources management and help companies manage their workforces more efficiently.
3. Access to expert HR guidance on complying with labor laws and regulations.
Business owners are expected to comply with dozens (and sometimes hundreds) of complex federal, state and local laws, and failing to maintain compliance with just one of these can expose the business to thousands of dollars in penalties and litigation costs. HR outsourcing companies provide the added layer of security and protection businesses need.
4. Freeing up time to focus on your core business.
Human resources management is an essential component of any business’ success, but HR isn’t typically a company’s core business. Instead, companies are involved in manufacturing goods, marketing products or delivering services. Human resource outsourcing companies alleviate the burdens and complexities that surround workers and their issues, like payroll, employee benefits and workplace safety, allowing business owners to focus their time, talent and energy on their core business.