For years, HR outsourcing (HRO) has begrudgingly worn a label of dedication to small businesses. Yes, there are incredible merits for small businesses within this stereotype, however the advantages of an outsourced Human Resources department show benefits for organizations of all sizes.
Recent statistics have pulled back the curtains to reveal increased reliance on HROs for business-related tasks. A global Deloitte study found that more than 35 percent of respondents already measure the value of their HRO, with another 32% planning increases in Human Resources over the next year.
And while some attribute Human Resource outsourcing to small business ventures, the industry is exploding. Outsourcing firms are expected to generate $53.9 billion in business by 2020.
The figures are clear, but for business owners thinking of making the shift, the advantages must offer total compliance satisfaction in order for the investment to pay dividends. If leaders can trust an outsourcing firm to manage daily tasks, long-term strategic goals can take center stage to focus on the business’s long term growth and needs.
So why are more organizations outsourcing the functions of HR, and is it truly achieving the goals it sets to satisfy?
HROs Reduce Company Risk
Over the past decade, workplace case complexity has increased almost across the board. Especially for startups and small businesses, the resources exhausted throughout workplace investigations quickly become overwhelming. HR professionals, likewise, are not experts in all fields of law and sometimes untrained to handle complex caseloads.
A HRO mitigates these risks by remaining up-to-date on all local, state, and federal regulations the organization must comply with. Likewise, they have the benefit of conducting unbiased, thorough, and timely investigations that reach clear conclusions and move the organization beyond the situation.
Although HR is not directly a profit center for businesses, it does minimize risk, create better efficiencies, and save money from being lost or spent unnecessarily. So even though HR might not be bringing in revenue, it can directly help with keeping more profit for the company.
Because minor oversights can cause costly delay, or worse, litigation, it is important for organizations to trust their workplace investigations with HR professionals who are experts in the field of risk mitigation and fair procedures.
HROs Meet Compliance Standards
A must for organizations of all sizes, compliance standards have the nasty habit of constant updates and overhauls, delays and reversals. It is imperative that businesses keep up-to-date with all standards expected within their industry and state–which can become overwhelming for an HR team already overloaded with important tasks.
But compliance means more than regulatory satisfaction. HR compliance is an umbrella term that may include things like cultural obligations, the ACA, licenses, collective bargaining, separation, and a slew of other considerations.
And organizations aren’t just worried about keeping up, they’re also tasked with recognizing any variances between their own policies and applicable laws.
Typically, the HRO chosen immediately focuses on compliance standards and potential issues, reducing risk and assuring satisfaction. Their goal is to provide a strategy that replaces any potentially damaging policies and reviews your policy regularly in line with updates to law.
Without this burden, organizations are freed from surrendering in-house time and resources to keeping up with regularly changing laws and reviewing their policies.
HROs Prove Financially Beneficial
Especially for smaller businesses (it’s a hard-to-shake label), a HRO is simply more cost-effective than hiring a full-time, in-house HR professional.
For companies of all sizes, there are smaller benefits that HR outsourcing brings with it. More office space without an HR team allows the organization to grow in workforce without concern for office overpopulation. In fact, a recent Deloitte study found that of those surveyed, a healthy 47 percent chose to outsource based on its solution to capacity issues.
Efficiency and productivity are influenced by office design, and outsourcing HR satisfies the conditions for a more efficient, productive workspace.
HROs Provide More Affordable Group Rates
Healthcare affordability is a top concern for employees. Not only that, but those who receive affordable health care coverage through their employer are more likely to find satisfaction in the job. Prudential Financial Inc found that 46% of employers were either outsourcing or looking to outsource the requirements of the ACA.
Because HROs work with many companies, they can take advantage of reduced bulk pricing. For small and large businesses, this provides quality coverage for employees at lower costs.
The advantages of an HRO for group rates extends beyond the coverage employees receive. Because of the ever-changing ACA requirements, with sweeping changes on the way, administrative costs are cut sifting through constant updates.
For organizations with an HR team, outsourcing health care oversight to an HRO minimizes the burden on HR while preventing easily-made mistakes.
HROs Strengthen Recruiting Methods
As companies turn to more strategic, aggressive recruiting methods, outsourcing this HR function has become more widely popular. Organizations are “becoming increasingly inventive to attract and retain valuable candidates”, Byrne Mulrooney told SHRM earlier in 2016.
Because many HR teams are unequipped to attract top talent in a way larger organizations can, the task is being outsourced to companies specializing in the field, like Mulrooney’s. When combined with bolstered benefits, appeal to organizations outsourcing these functions is elevated on a budget.
Choosing one or more HR function to outsource is smart organizational planning. Freeing up resources and time to focus on the growth of the company allows leaders to plan for long-term growth and goals. As the industry continues to grow, it will undoubtedly change the roles of internal HR teams, aligning them with more strategic functions over day-to-day tasks.