For many years in business, the human resources department in a company consisted of one or two people who handled onboarding paperwork and payroll. As advances arose and human resources grew more complex, HR departments had to keep up, expanding to recruitment, learning and development, and beyond. Now, some companies, especially smaller, younger ones, are outsourcing HR functions and payroll management. Here’s a look at why:
For Advanced Technology
Finding the best software to run all of your HR functions in an office can be pricey, especially if you want the best features. Without quality tech, your office cannot be sure that your company is getting the best talent, providing the right benefits, or staying in compliance, among other issues. You’re essentially flying blind. If you do want the best HR software, depending on the size of your team, you could pay hundreds or thousands of dollars each month.
Instead, you could outsource your HR functions, gain access to the most advanced technology in the human resources field, and trust a reputable company to run it for you. The features available to you will include onboarding systems, learning and development programs, and, perhaps most importantly, HR analytics and reporting. HR analytics ensures you’re hiring the right people and making smart decisions based on solid data.
For Specialized Expertise
Speaking of that company running the advanced technology for you, specialized expertise is one of the most important reasons to outsource for HR. Rather than pay for software and hire someone who can work on it, you can trust an entire company filled with people who can operate the HR software you need. It can be problematic to have a single person or even just two people, who can take care of your HR needs.
Your in-house HR people can become gatekeepers of information, and when they get sick, or go on vacation, everything falls apart because no one else knows how to work in HR. When you outsource, you never have to worry about this. Instead, you’ll contract with a company committed to always having someone available to work on your HR needs. Even better, these people are typically highly trained experts in their field, ready for anything.
To Stay in Compliance
One of the aspects of HR that many businesses don’t think about is compliance. Until you get audited, or you get an audit scare, you might not even realize you need to be compliant with any regulations. But you do. Today, many laws exist to protect your employees, and even if you unknowingly break those laws, you could be subject to large fines and even get your business shut down.
When you outsource to a reputable HR and payroll department, you can rest assured that a huge part of their job is to keep you in compliance. They’ll ensure your employees are getting their lunch breaks, their proper wages, including overtime, and the right types of family and medical leave when necessary. In addition, your HR support can help you introduce diversity, equity, and inclusion into your business and avoid breaking discrimination laws.
To Allocate Internal Resources in Other Ways
If you’re a small company, you might not be prepared to allocate any resources toward your own HR department. A huge part of outsourcing is contracting with experts and saving money on internal overhead. By not having your own HR department you can keep a smaller set of offices, or no offices at all. You also have fewer people on the payroll, fewer people to offer benefits to, and, realistically, fewer potential internal HR concerns, like conflict.
When you outsource HR, as you increase revenues and grow, your HR company can scale with you, and you can reinvest profits in other resources at your company. Instead of an HR department, you can invest in product design, service quality, and marketing. Each of these departments can have a positive impact on still greater growth and expansion. And you can trust your HR company to run things smoothly without you having to worry about it.
To Save Money
Finally, and perhaps most obviously, businesses outsource HR and payroll management to save money. Though it’s already been briefly mentioned here, it’s worth hyperfocusing on just how much money you can save by not running your own HR department. It’s expensive to have employees, and that’s not just because you have to pay them wages. To be a competitive employer today, you also want to offer benefits, including healthcare and paid time off.
Plus, it is expensive to lose an employee, or two, and have to go through the hiring and training process all over again. And still, you’ll have to offer a physical space for your HR people, or at least pay remote workers for their equipment and technology. And Forbes recently reported that many companies have too many people in their HR department. When you outsource, none of the people you work with are your employees. You’ll pay a monthly fee based on your needs, and you can always scale up or down.
In the end, businesses outsource their HR and payroll management for many valid reasons. In a time when you can pay specialists to perform essential functions that you don’t necessarily need to have performed in-house, why not outsource? This option frees you, and your funds, up to focus on more customer-facing issues like top quality customer service and effective marketing and sales.
