Business professionals know all the ins and outs of running a company, but they’re often only experts on HR tasks if they’ve worked in the field. HR supports the employees of an organization and manages many important tasks like hiring, onboarding, development, compensation, employee engagement, and compliance. However, it can be difficult to keep track of all of these moving pieces without years of experience in HR. 

That’s why some organizations outsource their HR needs to an expert firm. An HR firm can then handle all the complexities of running the HR department while the organization can focus on business operations.

Understanding HR Outsourcing

HR outsourcing involves hiring a third-party to handle HR-related tasks. An HR department is an important part of any organization since it’s dedicated to the most important resource a company has: its people. Having experts focused on taking care of your employees, hiring new people, and managing complex intricacies like benefits and compensation keeps your organization on track. However, HR workloads are increasing year after year, and there’s no end of this growth in sight. That leaves many organizations without the time, staff, or resources to manage all of the intricacies of running their HR department. 

When this happens, these organizations can turn to HR experts who are dedicated to filling in HR gaps and can take on some or most of the load. The agency hires a consulting agency for specific HR-related services, and the two determine how the arrangement will work.

Signs It’s Time to Outsource HR

How do you know when your organization could benefit from sending out your HR workload? These are some signs it might be time to outsource HR needs: 

• Heavy administrative workload. If you have a large amount of tasks that can only be done by an HR expert, you could benefit from outsourcing your needs. Consultants could take on some of the HR-specific tasks and ease the strain on the rest of your team. 
• No self-service for employees. Self-service capabilities allow employees to manage a lot of their own needs, like open enrollment and checking their pay and personal information. If your organization hasn’t had the time or personnel to set this up yet, you might consider outsourcing HR. 
• Limited mobility in HR systems. Your team likely uses multiple tools to manage HR needs, but most of them are probably generic and not attuned to your unique business needs. Outsourcing HR can help you dedicate the time making adjustments and making tools more scalable. 
• HR becoming a cost center. If HR is costing your company too much money, it could be time to make the department more efficient with outsourcing. Whether you use consultants to find ways to improve processes or to pick up some of the workload to reduce expenses, it’s possible to utilize HR outsourcing to reduce the cost. 
• Compliance challenges. One of the main roles HR performs is keeping your company compliant with federal and state regulations. Your company could be hit with fines, but an HR outsourcing company can help you understand the laws and determine strategies for your organization to be compliant. 

Key Benefits of Outsourcing HR

When you outsource a little or a lot of your HR needs to a third party, these are some of the benefits your organization can see. 

1. Cost Savings

While it does cost money to hire an external consultant, it can save you money in the long run. Outsourcing HR can significantly reduce costs associated with hiring, training, and maintaining an in-house HR team. Instead of paying for full-time salaries, benefits, and office space, you pay for the services you need and only as much as you need. In addition, hiring experts can help you avoid penalties that come with compliance errors, and that can save you costs. 

2. Time Efficiency

By outsourcing administrative tasks like payroll, benefits management, and onboarding, your organization can save countless hours. Freeing up this time lets your internal teams focus on strategic priorities and reduces the time burden on managers who might otherwise handle HR functions in addition to their primary roles. Outsourcing HR can also help you make your department more efficient overall, which can save you more time and make your HR team more productive. 

3. Compliance Assurance

HR outsourcing providers are experts in employment laws and regulations, and they can handle the complexity of staying on top of constantly evolving regulations. The third party consultants can monitor changing labor laws, tax requirements, and workplace safety standards and handle adjustments when necessary. This minimizes the risk of costly fines and legal issues.

4. Access to Specialized Expertise

When you hire an HR consultant firm, you’re gaining access to seasoned professionals with deep knowledge in areas like recruitment, benefits administration, and employee relations. That kind of expertise could change the way your department operates. Or access to this kind of expertise could be a better use of your organization funds if you’re a smaller business without in-house specialists. You can pay less than hiring someone full-time and have access to someone with years of experience. 

5. Improved Focus on Core Activities

By delegating HR responsibilities to a trusted third party, your leadership and staff can concentrate on growing the business and achieving strategic objectives. Focusing on core activities can often translate to higher productivity in the HR department and more creative ideas for the future. 

6. Risk Management

HR outsourcing partners help reduce the natural risks that are a part of running an HR department. These experts can handle complicated issues like compliance, workplace disputes, and sensitive employee data. They provide the tools and processes needed to address potential risks before they become significant issues.

7. Scalability

As your business grows, HR outsourcing allows you to scale up or down with ease. Providers can adjust services to match your changing needs, whether it’s supporting rapid hiring during expansion or reducing costs during downsizing.

8. Enhanced Employee Experience

Outsourcing HR can help improve employee satisfaction by simplifying and improving processes like payroll, benefits management, and onboarding. Having everything working effectively can create a more positive workplace environment and demonstrate your commitment to supporting your employees’ well-being.

Types of HR Functions That Can Be Outsourced

What can you send to a third party when you’re outsourcing HR? These are just some of the services a consultant could manage for you: 

• Payroll and tax processing. Either year-round or during tax season, an HR firm could help you manage the intricacies of taxes and processing employee pay. That includes managing base salary studies, creating compensation plans, or W-2s. 
• Recruitment and hiring. Hiring can take a large amount of your team’s time, but you can free that up by having a third party handle writing job descriptions, posting jobs, interviewing, calling references, and making an offer. 
• Employee benefits administration. Keeping track of what benefits you’re offering and helping employees utilize them can be time consuming. Outsourcing those needs can help reduce the administrative load. 
• Performance management. A firm can handle writing performance reviews, creating performance improvement plans, and even take care of gathering data on performance. 
• Training and development. Employees value working somewhere that prioritizes their growth. However, it can be hard to manage that on top of all the rest of your HR workload, which is why outsourcing those needs can be beneficial. 
• Employee relations. An outsourcing firm can handle meditations or leave of absences. 

Roles Played by an Outsourced HR Firm

You can hire an outsourcing firm to handle a wide range of tasks and at many different levels, whatever your organization needs. These are some examples of the roles consultants could perform: 

• HR consultant
• HR manager
• Recruitment specialist
• Payroll specialist
• Compliance officer

Overcoming Challenges in Outsourcing HR

While HR outsourcing comes with so many benefits, there are some challenges that come with hiring a third party. These are four of the most common obstacles and how to mitigate them: 

• Maintaining communication. When you’re not working with internal team members, it could be difficult to stay in touch with the HR specialists. The key is to establish a communication plan from the beginning and to work with a trustworthy firm that’s known for good communication. 
• Retaining control over HR decisions. Depending on how much you outsource, you could feel like you’re losing control over HR administrative decisions. To avoid this, you’ll want to set up what kind of relationship you’ll have with your consultants. You can set up protocols that they’ll check in with your management team before making a big decision. 
• Ensuring data security and privacy. HR handles private employee data, and you could have some concerns about the other organization’s security protocols. Here, you’ll want to choose a reputable consulting firm that takes privacy seriously. 
• Integration with internal teams. Sometimes it can be difficult to fully integrate third party consultants with an in-house HR team. Consider explaining the benefits of outsourcing HR to your internal teams, so they understand why your organization is making this choice. 

Implementing HR Outsourcing with CPS HR

If you’re looking to outsource your HR needs, CPS HR can help. Our firm has years of experience and offers a wide variety of services. We will work with your team to determine the best course of action and what strategies could help set your company up for success.

Contact CPS HR to get started!