Human resources (HR) is essential for any and all businesses and outsourcing HR is a great way for small businesses to get the support they need without the added costs of developing an in-house team. From employee relations to payroll and benefits, HR plays an important role in the growth and success of your company. We’ve got everything you need to know about HR outsourcing and all the ways your business will benefit from it.

What Are Strategic HR Outsourcing Services?

HR outsourcing is when a business contracts with a third-party HR service provider to manage some, or all, of your HR functions. While there are many solutions HR outsourcing services provide, they can be grouped into three categories: functional, selective, and comprehensive.

Functional involves outsourcing specific HR functions, such as payroll, benefits administration, recruiting, and/or training and development. Selective involves outsourcing specific HR functions for a specific group of employees. For example, if you choose to outsource payroll processing for employees in a specific region, that would fall under the selective category. Finally, comprehensive involves outsourcing the entire HR function to a third-party.

Overview of Six HR Outsourcing Services

While there are three categories for HR outsourcing, each category involves similar solutions, just to a different extent. These solutions typically include payroll management, benefits administration, recruiting and onboarding, training and development, performance management, and risk mitigation and compliance.

1) Payroll Management

Outsourcing payroll management helps alleviate many of the burdens that come with payroll, including tax deductions and accurate, timely processing. Your third-party HR provider will ensure on-time processing and deposits, accurate tax and other deductions, as well as compliance with employment and labor regulations. Outsourcing payroll management also provides assistance with vacation, paid time off, and sick leave tracking.

2) Benefits Administration

Perhaps one of the most time-consuming HR task is benefits administration. HR outsourcing companies can take the benefits administration process off your plate by managing benefits enrollment, eligibility verification, claims processing, and compliance with your specific plans. Utilizing an HR service provider like a professional employer organization (PEO) also provides better buying power for health plans and supplemental insurance as PEOs have access to health plans and providers that are generally reserved for larger corporations.

3) Recruiting and Onboarding

Outsourcing your recruiting and onboarding creates a more streamlined hiring process from job posting to screening candidates to a smooth onboarding experience. HR can work with department leaders to develop job descriptions for open positions, collect and filter through resumes, screen candidates, assist with reference checks and background screening, and then ensuring new hires have all documentation they need before, during, and after onboarding. Many HR service providers utilize HRIS platforms that make the recruiting and onboarding process much more streamlined and data much more organized in a central location.

4) Training and Development

HR outsourcing services also include employee training and development. Whether this involves job-related training for new hires, training for advancement opportunities, or specific state-mandated training, your HR team helps to facilitate and track all of it. HR outsourcing companies can provide a variety of training opportunities tailored to what your business and employees need.

5) Performance Management

Performance management is an important aspect of employee relations. HR outsourcing partners will help with implementing and managing formal performance reviews, manage on-going performance feedback—from both management and employees—managing employee records, and ensure company and employee goals are aligned. Utilizing a third-party HR team for performance management also helps to ensure objectivity in performance reviews. 

6) Risk Mitigation and Compliance

One of the most valuable benefit of outsourcing HR services is risk mitigation and compliance. Your outsourced HR team are experienced professionals who understand labor regulations, both state and federal, as well as the best employment practices and employee relations. Utilizing an HR outsourcing partner—like a PEO—decreases the likelihood of employment-related risk such as employment claims and ensures greater compliance with policies from third-party regulators such as the Equal Employment Opportunity Commission (EEOC) and Department of Labor (DOL). HR will also ensure compliance with employment practices set by the Fair Labor Standards Act (FLSA) and others. 

Choosing the Best HR Outsourcing Solution for Your Business

When deciding which HR service provider to work with, it’s important to select the right fit. To help with your decision-making, here are some key factors to consider during your selection process.

1. Reputation and experience: You’ll want to make sure you check the company’s reputation through online reviews and testimonials and industry recognition and awards. It’s also a good idea to check how much experience they have with the industry you operate in and the type of business you run.
2. Expertise and service offerings: Make sure the company you select has the expertise and capabilities to manage the specific HR tasks you’ll need.
3. Cost and value: As with any service, it’s important to weigh the cost against the value you’ll receive. While outsourcing HR provides a cost-effective solution, still compare price models, service agreements, and contract terms to ensure the company is offering competitive prices while also providing the most value to your business.
4. Technology capabilities: Your HR provider’s use of technology is also important to consider. They most likely will rely on some type of HR software to help manage all the HR functions you need them to efficiently. Be sure to evaluate their HR software, data security policies, and analytics capabilities.
5. Cultural fit: HR outsourcing services involve managing employee relations and handling sensitive information. It’s essential that the company you select understands and aligns with your company’s culture, mission, and values. The right cultural fit will ensure smooth communication, collaboration, and understanding and meeting your business’s needs.

HR Outsourcing Software That Can Make Your Life Easier

HR technology is an integral part of successful HR management. Your HR provider will most likely utilize and offer one, or some, of these types of software.

1. HRIS: Short for human resource information system, an HRIS is a comprehensive software that manages multiple HR functions in one place. An HRIS can manage payroll processing, benefits administration, onboarding, time and attendance, and employee data management.
2. Payroll software: Payroll softwares automate calculating and processing employee payrolls, including salaries (and hourly rates), taxes, and benefits deductions. You receive accurate and timely processing, compliance with tax laws, and comprehensive payroll reports with each payroll.
3. ATS: Short for applicant tracking system, an ATS manages and streamlines the recruiting and hiring process. Through the ATS you can post job openings, review and manage applications, set up interviews, and perform background checks.
4. Performance management software: There are many different platforms dedicated to employee performance management. Through this type of software, you can conduct performance reviews, track performance, and store performance-related data. Performance management software helps employees and managers align with and contribute to the organization’s strategic objectives.
5. EES portals: Short for employee self-service portal, EES are web-based platforms that allow employees to access and update their information such as tax deductions, personal info like phone number and address, view pay stubs, and request time off.

How HR Outsourcing Can Fuel Business Growth

Because HR is involved with so many facets of your business—employee relations, benefits, risk and compliance—it’s directly tied to the success and growth of your business. Outsourcing HR is a great way to help fuel your business growth and set your company on the right track to scale and experience success. Here are some ways HR outsourcing accomplishes this.

1. Cost savings: Outsourcing HR services saves your company on the costs associated with hiring and developing an in-house HR department. HR providers can leverage economies of scale and expertise to deliver great service at a fraction of the cost of an in-house team.
2. Focus on core business: By outsourcing HR you can keep your focus on the core operations of your business. Keep your time dedicated to strategic and growth initiatives while your HR provider manages all the day-to-day HR tasks that you don’t have time for. This allows business to allocate resources to their core competencies and increasing productivity and efficiency.
3. Access to expertise and technology: HR outsourcing services include specialized HR professionals and innovative technology solutions you wouldn’t have access to in-house. Businesses can improve outcomes and performance with the access to best practices, industry knowledge, and technology they get with outsourcing HR.
4. Flexibility and scalability: With HR providers you have the ability to scale up or down with HR services as needs change, without having to hire, train, and manage an in-house HR team.
5. Risk mitigation: HR providers ensure compliance with all labor regulations, practices, and industry standards. This helps mitigate risk from legal liabilities, payroll errors, and other compliance issues.
6. Better quality HR service: Because HR providers are specialized in delivering HR services, you will receive better quality services. They have the expertise, knowledge, and resources to provide highly accurate, efficient, and timely services.

Outsource HR and Scale Your Business

Now that you know the benefits of outsourcing HR services, the next step is to determine if it’s the right move for your business and which provider is best for your business. Partnering with an HR outsourcing provider like a PEO is a great way to experience all the benefits we discussed in one tailored, scalable solution. VensureHR is a leading PEO provider specializing in human resources, payroll and benefit administration, and risk mitigation. Contact us to learn more about how our solutions can fuel your business growth.