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Outsourcing Human Resources: What Is It and Why Should You Do It?

By September 21, 2016July 23rd, 2018Human Resources

by Renee Mielnicki, Esquire

outsourcing1More and more companies are moving to outsource their Human Resources needs. If you haven’t done it yet, you have probably either discussed it internally with your staff or you are thinking about it. If you’re not in either of those categories, you should be. I get asked a lot to explain two concepts: “What does it mean to outsource HR,” and “Why should I outsource my HR needs?” Great questions and I have some great answers.

Outsourcing HR can take two forms. It can be a total outsource of every HR function within an organization or certain HR functions can be outsourced while some remain in-house. A lot of smaller companies (usually with less than 150 employees) are moving to a full outsourced HR function. With this model, a third party is performing all administrative HR functions, such as payroll and benefits administration as well as onboarding of new employees. This can be done either on the client’s business site or remotely from another location. Other companies perform some HR functions in house and outsource others. Most companies are not aware that traditional HR generalist functions, such as recruiting, FMLA administration, performance management, manager and employee training, employee handbooks and other policy drafting, can be outsourced and performed by a HR professional that is not on their payroll. Whichever model you choose, whether it’s outsourcing the entire HR function or only portions thereof, the reasons to do so are all the same.

First, it saveoutsourcing2s you money. Human Resources professionals make, on average, at least $50,000 to $80,000 per year in salary, depending on their experience. Once you add benefits, that number will be even higher. If you hire a third party, like East Coast Risk Management (ECRM), to handle your HR needs, it can save you a lot of money compared to what you would spend if you placed a HR professional on your payroll and kept it all in house. Second, it saves you a lot of time by outsourcing these needs. If any of you have ever had any HR responsibilities, you will agree that they are very time consuming. Payroll alone can consume hours of time each pay period. The same is true if you are a growing organization or one with a lot of turn over which will necessitate spending a lot of time recruiting and onboarding employees. This HR function has become increasingly laborious with a workforce becoming dominated by millennials who often don’t show up to interviews or then quit after accepting the job, or shortly thereafter. This then starts the process all over again creating more work in house. By saving time and outsourcing this type of work, you can focus on the core operations of your company and be more successful.

The last and probably one of the biggest reasons to outsource HR is to reduce risk and increase your chances of being compliant with the employment laws that apply to your business. At ECRM we have several very experienced HR professionals, including myself as a licensed attorney. Together, we have over 30 years of experience with HR. The laws and regulations that effect businesses today continue to increase in number and complexity, which makes staying in compliance challenging. It just makes sense to have a team of experts available to help you stay compliant and reduce the risk of lawsuits. Instead of leaning on just one professional that might be good with organizational development but lacking in recruiting skills, employee relations or policy drafting, having a strong team of HR professionals will add bench strength to your HR program and allow you to cover more areas of expertise while still paying less.

East Coast Risk Management handles fully outsourced HR for multiple companies in the private as well as public sector. In addition, we handle the outsourcing of certain HR functions for approximately 200 clients in almost every type of industry and in multiple states. If I haven’t convinced you yet that you should outsource all or part of your HR needs to us, then please contact us at 724-864-8745 for more information.

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 do not create an attorney-client relationship between East Coast Risk Management or our employment law attorney and the user or browser.