Outsourcing your HR Department: Why it could be a win, win strategy.

by Derek Ross

Maybe you have outsourced a portion of your business (i.e., contracted with a third party to have them administer a program or department that was formerly internally administered). Have you ever considered doing the same with your Human Resources administration?

It may not have made sense in the past considering the Human Resources Department (or Personnel Department as it used to be called) mostly concerned itself with employee record keeping, recruitment, training and wage administration. For many companies, the HR department hardly ever had any say in the company’s strategies or objectives. Nor did the HR leaders sit at the table with other leaders. It was purely an administrative and staff function. But times have changed.

Human Resources is no longer referred to as an administrative function but has grown into a strategic partner with responsibilities for:

  • Recruitment – HR has a direct impact on your organization’s profitability by increasing staff engagement and ensuring compliance in all recruiting and hiring procedures.
  • Safety – HR has a responsibility to employees, managers and the organization’s leadership to ensure that everyone in the workplace is aware of all health and safety programs. Your HR department should organize policies and procedures that ensure the safety of everyone in the workplace.
  • Compliance – Many complicated and detailed regulations govern the employment relationship such as the Fair Labor Standards Act (FLSA), the Civil Rights Act (Title VII), the Family and Medical Leave Act (FMLA), the Americans with Disabilities Act (ADA), workers’ compensation laws, immigration laws, anti-retaliation laws, etc., etc. Your HR department is responsible for administering their functions in such a way as to ensure that the organization is compliant with all federal, state and local laws that apply. Your HR department is key to managing risks and making sure the company avoids costly fines and lawsuits that result from non-compliance.
  • Compensation and Benefits – Whether it’s determining who is exempt and who is non-exempt, addressing travel pay, commission plans, or sorting out benefits questions, your HR  professional must understand this highly regulated area. From the Employee Retirement Income Security Act (ERISA), which has to do with reporting, disclosure, and fiduciary requirements, to the Affordable Care Act (PPACA), this arena must be carefully navigated by someone who knows the regulations and can help company leaders as they consider compensation and benefits options for employees.
  • Employee Relations – HR consults and facilitates employee relations issues and resolution strategies for workplace issues. In this role, HR should assist in the communication between employees and supervisors, corrective action and planning, disciplinary actions, and explanation and clarification of policies and procedures. They play a key role in bringing the employees together, engaging them, and educating them on an efficient work flow. HR works with employees to strengthen their bond as co-employees and teammates. As we have mentioned in previous blogs, research proves that if the employees are satisfied with their jobs, they tend to remain happy and avoid conflicts with each other. When employee relations are a priority, individuals develop a feeling of trust and loyalty towards their organization and don’t waste their time and energy in unproductive tasks.

So why do companies outsource their HR Department?

The main reason is to cut costs. It can be quite expensive to have a team of specialized Human Resources Professionals managing and administering all those HR functions in house. The cost for an HR Manager or HR Director alone typically starts in the $70,000-$90,000 range — and that does not count benefits or the salaries for the rest of the staff needed to manage all aspects of HR. Companies are finding that when they outsource at least some part of the HR functions, they drastically lower annual overhead and, in many cases, have avoided expensive payouts that could have resulted from high risk situations.

Convenience is another key benefit. When you outsource HR, you should have access to a whole staff of professionals with great resources, all readily available when you need them. Their quick action and extensive resources will help you control legal risks and streamline the HR function. In many cases, outsourcing HR also allows companies to offer employees services that could otherwise not be provided due to limits on the in-house staff’s time and resources.

Some organizations are understandably reluctant to outsource all of the human resources functions. Giving up that control can be scary. Many of our clients prefer to have our HR team partner with their in-house HR teams. We are able to reduce their overall workload and to provide specific expertise which increases employee productivity, allows our client’s leaders to focus on other core business needs, and ultimately improves the client’s bottom line.

When choosing to outsource any part of your business, you will want to ensure that your vendor can be trusted, has a solid track record, and that they will partner with you, customizing their services to meet your needs. Your HR consulting company needs to be accessible, allowing you to have real-time assistance so that you can limit your liability in the midst of a critical situation, and prevent urgent issues from becoming crises.

So, whether you’re examining the direction of your human resources department or not, consider outsourcing all or part of your HR tasks and responsibilities to reduce costs, limit risks, and improve productivity.

If you have any questions about East Coast Risk Management and the services we offer, please visit our website (www.eastcoastriskmanagement.com) or call (724) 864-8745.

Disclaimer: The information provided on this web site is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this web site does not create an attorney-client relationship between East Coast Risk Management or our employment attorney and the user or browser.

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