The pandemic fundamentally changed the way we do business. It took a catastrophic event to force us to take a hard look at how and where we conduct business. Roles and responsibilities shifted overnight as businesses struggled to stay in business. Now that the dust is settling, most companies need to make up for lost revenue during the pandemic. Business owners and leaders are examining ways to decrease expenses, improve efficiency and optimize productivity. HR outsourcing is one way to accomplish all these objectives and, in many respects, because of the pandemic, companies now have the infrastructure in place to easily transition to outsourcing their in-house HR.
According to a Paychex study, that polled 300 randomly-selected U.S. business owners with two to 500 employees online from May 1-4, 2020, one of the top tasks business owners reported they would do differently following the pandemic is “delegating more to free up time to better plan and outsource more functions.” Almost 25% of respondents said a permanent change they’ll be making post-pandemic is using applications, such as those for managing payroll and benefits, to reduce overhead and complexity.
How HR Outsourcing Can Help
Outsourcing HR has always been a smart HR solution for small to mid-sized businesses enabling them to obtain specialized HR expertise while freeing up management and C-suite executives to focus on more strategic efforts. For companies still operating with an in-house HR staff, now may be the perfect time to transition to an HR outsourcing model. Advances in technology, the normalization of remote work and the need for efficiency, all fueled by the pandemic, has laid the groundwork to make the move. Additionally, many HR outsourcing benefits could lead to new and improved post-COVID operations.
HR Outsourcing Reduces Expenses
One obvious way HR outsourcing reduces expenses is by eliminating the need for an HR department and all the costs associated with the HR staff. Recruiting, onboarding, training, benefits and salaries associated with an HR staff don’t exist when HR is outsourced resulting in substantial savings.
The Society for Human Resource Management found that it costs an average of $4,129 to hire an employee and more than $1,200 to train him or her. Further, the average human resources manager earns more than $75,000 per year, plus benefits. Depending on the size of the HR department, a company could save hundreds of thousands of dollars by eliminating its HR staff and outsourcing its HR.
Savings are also realized through the need for less office space and equipment created by the absence of an HR department. With most companies opting for a hybrid return-to-work model, economists are forecasting a significant reduction in the amount of office space rented going forward. In a recent study conducted by Fortune of 500 chief executive officers, 51% said that in the future they will need “a little less office space than we had in 2019,” while 22% said they will need “a lot less office space than we had in 2019.” Only 7% envisioned needing more office space. With plans already in place to reduce office space, the time may be right for further reducing the space by outsourcing HR.
One of the greatest benefits of HR outsourcing is having specialized HR expertise in all HR areas including legal compliance with federal, state and local employment laws. Employment laws are always changing, and it is burdensome to stay on top of the changes and, unfortunately, costly when not done properly. It makes no difference whether an organization was unaware of an employment law and was, therefore, not compliant. Penalties are stiff and, depending upon the nature of non-compliance, can lead to a DOL audit often resulting in even more penalties.
With compliance management outsourced to a knowledgeable and seasoned team of HR experts, companies don’t have to worry about being subjected to fines and penalties for non-compliance. An added bonus just as important is the peace of mind that goes along with outsourcing this HR function.
The pandemic necessitated many layoffs and terminations. Fortunately, with the economy rebounding, companies are moving full steam ahead recruiting to fortify their ranks with good talent. Competition is fierce for the best talent, and outsourcing the recruiting function gives companies access to in-demand talent pools and saves money compared with using an in-house recruiter or the more traditional staffing agency. Reputable HR outsourcing firms have access to talent pools all over the world and are not confined by geography or other limiting parameters. Outsourcing recruiting saves time and money, two critical resources.
HR Outsourcing Improves Efficiency
As already mentioned, outsourcing the recruiting function can save a company money. It is also a much more efficient way to find top candidates. Consider the steps involved in recruiting. First, a job posting must be written and posted to various job boards.
As resumes come in, someone has to review them and make the first cut. Once suitable candidates are found, scheduling first, second and sometimes third round interviews becomes the next time drainer. If the recruiting function is outsourced, the process of filling a vacancy is as easy as a phone call or email, significantly streamlining the process and avoiding administrative hassles.
Benefits administration is another HR area for which outsourcing can play a large role. In-house benefits administrators deal with a host of time-draining activities every day. When an employee has a benefits-related question or issue, he or she turns to the benefits administrator.
Benefits administrators process all changes to employees’ insurance enrollments, from initially enrolling them, to adding/deleting dependents, to cancelling their coverage and handling COBRA notifications upon their termination. Coordination between benefits administrators and payroll is another important function that requires precise organizational skills or an employee’s insurance and retirement deductions could be incorrect. Not to mention the time of year all benefits administrators dread, open enrollment. When benefits administration is outsourced, it frees up a huge chunk of time and processes are much more efficient and streamlined.
HR Outsources Increases Productivity
By outsourcing HR, business owners and leaders can focus on growing the business and generating revenue and not on HR administration that doesn’t contribute to revenue.
One study shows that of the 50 or more hours each week worked by business owners, about 30% of that time is spent on administrative and other tasks. While certainly very important, handling HR tasks is not the best use of management’s or business owner’s time. When an HR outsourcing firm is handling performance appraisal management, employee relations issues, corporate HR communications, recruiting, onboarding, employee wellness initiatives and other HR functions, managers can spend time doing what they were hired to do – marketing, sales or product development, leading to increased productivity and revenue.
Get Smart and Outsource Your HR
For business owners contemplating outsourcing their HR, now is the perfect time to make the change. HR staff may already be low due to pandemic layoffs and terminations. Employees are now used to remote work and interacting via Zoom, email and text making communicating with outsourced HR contacts easy. Businesses need to focus on rebuilding staff and need access to in-demand talent pools now.
Generating revenue has never been more important as companies make up for lost time and business over the past year-and-a-half. It is critical for business owners and management to zero in on what they do best whether it’s business development, marketing, sales or production. Employees coming out of a catastrophic pandemic affecting their personal and professional lives, need to know their HR issues and matters will be handled efficiently and expeditiously. The HR outsourcing model accomplishes all these objectives, and there is no better HR outsourcing firm in the D.C. metro area than Smart HR. Get smart and call today.