We’ve all had to rise to the challenge of unprecedented health and economic challenges due to the COVID-19 pandemic. The question now is how can we take the lessons of this period and channel the innovations born out of necessity into new ways of working or a plan for reinvention?
According to a recent study by Mercer, the No. 1 recommendation to accelerate how businesses can move forward in 2021 is by outsourcing non-core activities. The study reported that business leaders and managers "consider taking advantage of third-party arrangements to free up resources to focus on core expertise areas. For example, look for expert services in risk management, investment management, and pandemic management."
Research by Oasis* identified that human resource (HR) outsourcing is on the rise for many businesses in the year ahead. Nearly one-third (29 percent) of the survey participants said, “We are more likely to outsource HR functions as a result of COVID-19.” A further 42 percent said they are “very or somewhat likely” to outsource HR administration in the next 12 months — nearly twice as many as those who responded in 2019 and more than twice as many as those who responded in 2018. The most in-demand tasks to outsource included payroll, 401(k), and benefits administration.
Focusing on the future, redesigning benefits, and evolving the employee value proposition for a more inclusive culture all require a significant time investment. How can you work smarter in the next 12 months? Outsource key HR functions such as payroll, benefits and employee training, as well as providing guidance for maintaining compliance with federal and state labor employment laws.
What is HR Outsourcing?
HR outsourcing is generally a contractual agreement between an employer and an external third-party provider where the employer shifts certain administrative HR functions to an external provider. HR outsourcing services typically include payroll processing, employee benefits enrollment and administration, support to help maintain legislative and regulatory compliance, and risk management. These types of HR outsourcing companies include Professional Employer Organizations (PEO).
According to the National Association of Professional Employer Organizations (NAPEO), PEOs in the United States provide services to nearly 175,000 businesses employing approximately 3.7 million people. There are 907 PEOs in the United States, with industry revenue estimated at $270 billion.
When is the right time to outsource HR tasks? In our experience, the ideal threshold is when the business reaches at least 10 or more employees or when functions like payroll, compliance, and benefits administration distract you from the work you need to do to grow your business.
Functions Supported by HR Outsourcing
PEOs can provide support for various HR tasks and responsibilities, including HR strategy, workers' compensation claims management, payroll processing, and employee benefits administration.
Outsourcing HR administration can help you to stay focused on your business and your customers. You will be able to fill gaps in expertise by gaining access to customized HR support. Benefits can include:
- Expert guidance. Lean on seasoned HR professionals who can offer support and recommendations to help establish your HR operations, develop a customized employee handbook specific to your business, and provide personalized HR guidance to help you mitigate risk, manage employee relations, and avoid costly compliance mistakes.
- Support to help comply with ever-changing laws and regulations. Access guidance related to federal and state employment laws and receive alerts as changes and updates occur.
- Personalized policies and procedures to guide employees in knowing what’s expected of them each day. HR professionals can help you to communicate with employees by developing an employee handbook designed to let your employees know about specific company policies, procedures, and benefits and training opportunities on offer.
Outsourcing HR can help to streamline payroll processing and the time-consuming and specialized administrative activities that go along with it. Leveraging HR expertise can help you ensure employees are paid on time and accurately. This will help you to:
- Maintain compliance with tax laws and mandated regulations. Stay in compliance, automatically file payroll taxes, and process payroll efficiently and seamlessly.
- Reduce time spent on administration. Improve payroll accuracy and efficiently complete payroll administration for taxes, credits, and workers’ compensation with HR outsourcing. Less time spent on payroll means more time spent on what’s most important for your business and your customers.
- Access customized reporting at your fingertips. Generating the employee data, deposit options, expense management, timekeeping, and labor management reports you need to run your business effectively is just a click away.
HR outsourcing can help you attract and retain the very best employees by giving you access to competitive employee benefits. This can include health insurance, access to a 401(k) retirement plan and financial savings plan options, supported with seamless employee benefits administration.
Outsourcing employee benefits can help you to:
- Recruit and retain quality talent. Third-party providers often have strong buying power that you can take advantage of by offering employees more variety and more affordable benefit options.
- Competing for talent against much larger firms. Get help to offer benefits that can rival Fortune 500 companies and still meet your financial and business objectives. Many third-party providers enable you to offer health, dental, vision and life insurance; a 401(k) plan, Flexible Spending Accounts and Health Savings Accounts.
- Seamlessly conducting open enrollment. An outsourced provider will typically manage open enrollment administration, saving you time and resources.
Find, Screen, and Hire Employees
Outsourcing HR may offer you the opportunity to work with a professional recruiter to review your talent acquisition strategy and help source and evaluate candidates proactively. This will help you make the right hiring decisions faster and keep your employees longer.
Outsourcing hiring and onboarding services can include:
- Applicant Tracking. At a glance, stay on top of applicants and their status in the recruitment process with your company.
- Development and posting of jobs. Expedite sourcing and selecting the most outstanding candidates available in the market using expert knowledge to write and post targeted position descriptions.
- Successfully onboard new employees. Accelerate their time to contribute by getting them up to speed on your business and your benefit offerings.
Get help needed to help maintain compliance with federal, state, and local employment laws and regulations. HR compliance services and timely updates and information can also help you mitigate risk.
Standard HR compliance services include help to understand the impact of regulation changes on your business. Working with HR experts can help you stay on top of regulatory and legislative changes. Having support for these tasks helps to reduce cost and unnecessary fines and mistakes
Employee Performance Management
Keep your employees on track and help them know what's expected of them. Customized performance management tools and training for position-specific performance objectives can help you align employee performance and development with your business strategy.
This will help you to develop employees with thoughtful intention to ensure resources are used effectively to build employee career plans that are personalized and aligned with your business priorities. You can also receive guidance to implement performance improvement plans, disciplinary action, and restructuring plans. You can also create targeted retention strategies with input from employee opinion and satisfaction surveys.
Culture is a big part of employee engagement, employee well-being, and the driver behind employees wanting to show up each day for work and deliver the best version of themselves. Your company culture makes your business unique from another, and it will be a core component of why employees stay or leave your business. HR outsourcing can help you to be intentional about your culture and create guardrails for decision-making in a way that supports your desired culture.
Factor in that remote work is now an integral part of life due to the pandemic, and it may require different skills to effectively lead people working remotely than the skills needed for in-office management. Professional HR outsourcing guidance can help you clarify expectations, roles, and performance outcomes so that employees align with your business priorities — whether they are working remotely or at your place of business.
Benefits of Outsourcing HR
According to the Oasis* study, the main reason participants said they would outsource HR administration was, "We now see the value in outsourcing" (35 percent). There are many benefits of working with a third-party expert to support both the needs of your business and your employees, including:
- Reduced costs. NAPEO reports that small businesses that work with an HR outsourcing provider can expect to receive annual savings of $1,775 per employee for HR-related costs.
- Free up time and resources. The same study cited above identified that HR outsourcing can help businesses have lower health costs, reduced HR expenses, fewer workers' compensation claims, reduced turnover, higher revenue growth, and generally fewer concerns about hiring, retaining, and motivating employees.
- Gain access to expert guidance. Gain specialized HR knowledge and customized HR advice for your business by working with experts in HR, payroll, risk management, workers’ compensation, employee policies, and so much more.
Is Outsourcing HR Right for Your Business?
Savvy leaders outsource HR administrative tasks to free up time to better focus on enriching the customer experience, driving growth, and managing a great workforce. Oasis’ employee-centric HR solutions provide a personalized experience for thriving and diverse workforces. Is it time to outsource your HR administration tasks to Oasis? You can also access more resources to support your business through the COVID-19 pandemic by visiting our COVID-19 Resource Center.
* This national survey was conducted with 300 business leaders from a broad cross-section of industries who employed between five and 99 employees. From December 2 to 8, 2020, the online interviews were conducted by Bredin, an independent market research company located in Boston, MA.
Professional employer organization (PEO) services provided by Oasis Outsourcing, LLC (Florida employee leasing license GL42) and its affiliates, which are licensed or registered to provide PEO services where required by law.