There are many reasons why your business may choose to outsource HR. Perhaps you don’t have enough time to complete all of the tedious administrative tasks you have to tackle, or you need assistance staying compliant with labor laws and regulations. Maybe you want to increase your employee retention rate or gain access to better health benefits for your employees. Human resources outsourcing (HRO) is a strategic approach for businesses looking to delegate HR duties either partially or entirely, offering a cost-effective alternative to hiring an entire HR department.
Whatever your needs, outsourcing HR services could be the right solution for your business.
Outsourcing HR is a strategic decision that involves partnering with a third party to manage HR services for your company. This arrangement allows businesses like yours to concentrate on core operations while offloading administrative tasks and accessing specialized HR expertise and resources.
By outsourcing your HR functions, you can streamline processes, reduce costs, boost efficiency, and ensure compliance with HR regulations and employment laws.
How Do I Outsource HR?
As a small or medium-sized business, managing the numerous HR tasks on your plate can be overwhelming. While you might want to take advantage of the benefits HR outsourcing services offer, you may not know where to start.
Here are six steps to help you effectively outsource human resources management to an HR outsourcing team. By leveraging HR support, businesses can receive customized assistance with HR tasks, ensuring they meet regulatory requirements and employee needs efficiently.
1. Determine Which HR Functions to Outsource
Human resources encompass many responsibilities. Depending on your company’s size, the skills of your existing staff, and their ability to meet your company’s needs, you may require varying levels of assistance.
To start, consider these commonly outsourced HR functions:
- Payroll processing
- Employee benefits
- Benefits administration
- Human Resources Information and Management System (HRIS)
- Other HR technologies (applicant tracking, paperless onboarding, online benefits enrollment, etc.)
- HR compliance, risk management, legal matters, and employment law navigation
- Employee training and development
- Performance management
- HR policy development and implementation
Next, assess how your team currently handles these HR functions by asking the following questions:
- Is my team effectively managing each of these HR processes?
- How complex and specialized is the knowledge required for each function?
- Would outsourcing improve efficiency?
- Am I confident in our ability to maintain legal compliance standards?
- How does the cost of outsourcing compare to in-house management?
- Are my employees satisfied, or is there room for improvement?
- How strategically important is the function being considered for outsourcing?
Answering these questions will clarify what you want to outsource and help set your company up for success with an outsourced provider. Outsourcing HR services can be a strategic move to manage costs effectively, especially when comparing the cost of in-house HR management with potential savings from outsourcing.
2. Identify Potential HR Outsourcing Providers, Including Professional Employer Organizations
By now, you should have a good understanding of which HR tasks your business should outsource. However, there are still some important considerations before moving forward.
When choosing an HR outsourcing partner, consider the following factors:
- Experience and expertise in HR outsourcing
- Reputation and track record
- Range of services offered
- Flexibility to meet your specific needs
- Compatibility with your company culture and values
- Technology and infrastructure capabilities
There are three main types of HR outsourcing service providers: Professional Employer Organizations (PEOs), Administrative Services Organizations (ASOs), and Business Process Outsourcing (BPO). Review our full HR outsourcing guide to learn more about each type so you can choose the right HR partner.
3. Evaluate Potential HR Outsourcing Providers
It’s important to evaluate not only what PEOs, ASOs, and BPOs offer but also to research specific companies within those categories. Choosing the right HR outsourcing company is crucial to avoid negative impacts on your business.
To evaluate potential HR outsourcing companies, consider asking the following questions:
- How will collaboration and communication be managed when outsourcing HR functions?
- How will the outsourcing provider ensure data security and compliance?
- What is the company’s turnover rate?
- What technology does the PEO, ASO, or BPO offer to managers and employees?
- How can the provider immediately address your HR concerns?
- Are their employee benefits packages competitive and adaptable?
Asking these questions will give you a better understanding of the HR outsourcing firm’s values, mission, vision, and culture to ensure alignment with your business.
4. Compare HR Outsourcing Service-Level Agreements
When choosing an HR outsourcing partner, the final aspect to consider is the service level agreement (SLA) offered by different HR outsourcing companies. The SLA outlines the scope of services, performance expectations, and responsibilities of both parties involved. By carefully comparing SLAs, you can ensure that you choose a provider that aligns with your business goals and meets your specific needs.
Here are some factors to review and compare:
- Scope of services and deliverables
- Performance expectations
- Responsiveness and support
- Flexibility and scalability
- Contract terms and termination (e.g., duration, renewal options, and cost)
- Termination and transition protocols
- Security and ownership
- Client references and online reviews
Take the time to compare multiple providers, review their proposals, and ask questions to make an informed decision that best supports your business needs.
5. Implement the HR Outsourcing Solution
To successfully implement an HR outsourcing solution, follow these suggested steps with your new HR partner:
- Begin with a thorough knowledge transfer
- Clearly define roles and responsibilities between your company and the outsourcing provider
- Establish effective communication channels for both parties
- Integrate systems and technologies as needed
- Ensure employees are trained on new processes and procedures
By following these steps, your business can successfully implement an HR outsourcing solution.
What is the implementation process with Stratus HR?
Some PEO companies, like Stratus HR, offer an Implementation Specialist to manage the process. Simply provide the necessary data for setup, and the Implementation Specialist will handle the rest. This includes sending out necessary communications, importing employee data, facilitating system and payroll training, and overseeing initial payrolls to ensure smooth operations.
Once implementation is complete, you’ll be introduced to the Service Team. Your certified HR expert will conduct the HR roadmap, and your Business Development Consultant will hold a client care meeting after several payrolls to ensure you’ve had a positive experience.
6. Evaluate the HR Outsourcing Solution
Evaluating the effectiveness of your HR outsourcing provider is essential. Key performance indicators (KPIs) that will help you gauge success include:
- Cost savings achieved
- Accuracy and timeliness of payroll processing
- Time gained from improved efficiencies
- Employee satisfaction and engagement levels
- Compliance with HR regulations and policies
- Reduction in HR-related administrative tasks
Regularly evaluating your HR outsourcing partner’s performance will help you ensure that you’ve made the right decision and selected the best outsourcing firm for your business.
How Long Does It Take to Implement an HR Outsourcing Solution?
The timeline for implementing an HR outsourcing solution varies based on factors such as the complexity and number of HR functions being outsourced, the size of your workforce, and the readiness of your data and systems. Generally, the more information and data you provide upfront, the faster the implementation process.
Smaller businesses with all necessary information and data readily available can typically start with HR outsourcing more quickly than larger companies that may require additional time to gather the required details.
Can I Outsource HR Functions if My Company is Small or Midsize?
Absolutely. Outsourcing HR administration is particularly advantageous for small and midsize businesses. It provides access to specialized HR expertise, reduces costs, enhances HR efficiency, and ensures compliance with HR regulations, much like larger organizations. Outsourcing HR services can be a cost-effective strategy, offering potential savings and tailored solutions that align with your business’s specific needs compared to the average cost of in-house HR management.
When selecting an HR outsourcing provider, it’s essential to choose one that understands the unique needs and challenges of businesses your size. Look for a provider that specializes in or has experience working with small and midsize businesses. The right outsourcing partner will offer customized solutions that fit your specific requirements and provide scalable services as your business grows.
Get Started with HR Outsourcing Today!
Outsourcing HR functions is a strategic decision that offers numerous benefits to businesses of all sizes. By following the steps outlined, you can effectively outsource your HR functions and enjoy cost savings, increased efficiency, specialized expertise, and improved compliance.
To begin outsourcing your HR functions and experience the benefits firsthand, reach out for a consultation.