Outsourcing HR is the perfect solution for companies that still need HR support without requiring a full-time team member. And even for medium-sized companies with the ability to hire internally, trusting HR to a third-party team may be the most time-saving and cost-efficient solution. Here are five of the key benefits of outsourcing your HR team.
1. Increase Profitability and Reduce Costs
Outsourcing HR eliminates the need for a full-time HR team, which immediately cuts costs for salaries, training, and development. Additionally, organizations who outsource to a co-employment provider have access to reduced health insurance premiums and lower workers compensation rates. Internal HR teams occasionally acquire penalties related to non-compliance with employment regulations, while external HR support will have the expertise to avoid those penalties altogether.
2. Maximize Productivity and Save Time
For businesses of any size, managing HR tasks is time-consuming. Internal HR staff is typically still managed by company executives, meaning that several individuals devote their time to overseeing HR tasks. With the peace of mind that your HR tasks are being handled externally, employees and executives can focus their time on managing, organizing, and marketing your business.
3. Reduce Liability and Risks
HR is a department that’s especially prone to risk and liability issues. There are countless regulations to consider, and as we mentioned above, non-compliance can trigger hefty fines. Mistakes happen, but if you make a compliance mistake while managing your own HR you could face 6 to 7-figure repercussions. For employees with narrow HR specialties or only a few years of experience, it’s more common that minor errors can slip through, causing significant consequences.
Outsourcing HR reduces those risks for a few reasons. First, external HR services, or co-employment providers, typically offer a depth and breadth of expertise that you won’t find in one or two employees, which cuts down on potential mistakes. Second, partnering with an external HR team means that you no longer shoulder 100% of the liability if you incur a fine; instead, the co-employer will share the liability outlined in your client service agreement. The bottom line? If you’re cited for non-compliance, you’ll only pay a fraction of the cost.
4. Lower Employee Turnover Rates
Along with the other benefits associated with a more holistic experience, outsourcing HR typically means you’ll be able to provide better benefits and solutions to attract and retain talent. According to NAPEO Businesses who partner with a co-employment provider experience 12-14% lower employee turnover.
Your HR partner will be more aligned with the most attractive benefits to employees and can access better benefit terms and pricing than you’d accomplish alone.
5. Improve Employee Relations and Culture
Lastly, outsourcing HR often improves employee relations and culture. Outsourcing equips you with an HR hotline to call when you need to know how to handle a situation. You’ll also receive tools such as performance reviews and evaluations to help guide you when giving employee feedback.
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