HR Outsourcing Strategies

The Milestone Team September 27, 2021
HR Outsourcing Strategies

Outsourcing human resource functions has become a popular business solution for many small and mid-sized companies. If this is a solution you are considering, you may be wondering what it is exactly, what the advantages and disadvantages are, and if it is right for you. Let’s take a look at these questions and explore some HR outsourcing best practices to see if this solution will work for your business. 

What is outsourcing?

Human Resources outsourcing is the process of moving your HR functions to an external service provider for them to handle and execute any necessary actions, as well as giving advice and helping to formulate HR strategies. Like any type of outsourcing, HR outsourcing can be a very useful tool for businesses of all sizes. You can also choose the level of outsourcing that you utilize, from covering a single function like recruitment to covering all the HR functions.

HR outsourcing advantages and disadvantages

There are many advantages of outsourcing your HR functions, and there are a few potential disadvantages to be aware of. 

Advantages of outsourcing HR

  • Reduced overhead and cost – Outsourcing HR functions can save your business money due to the reduced expenses. You won’t have to pay the salary for a dedicated HR employee or department or any of the overhead associated with internal employees. In addition, HR outsourcing can save you money by helping you retain your current employees. In fact, one survey showed that it costs as much as 33% of a worker’s annual salary to replace an employee.

If you currently have no HR solutions in place, outsourcing your HR function can save you time and effort in instituting these practices as well as being a cost effective solution to this problem. 

  • Access to expertise – Small and medium sized businesses are run by incredibly talented and driven people who may not necessarily have training and knowledge about human resources. Outsourcing your HR functions can allow your business to flourish by tapping you into the information needed to develop your employees while staying in compliance with the latest laws. 
  • Ability to focus on core competencies – Instead of trying to educate yourself and run an HR department singlehandedly (or pushing it off onto an employee with other tasks to handle), outsourcing your HR can allow you to gain back your time and focus on what you do best. Running your business is something that only you can do, and you shouldn’t have to spend your executive time on figuring out the most recent changes to payroll tax laws. Outsourcing your HR can free up your time. 
  • Provide employees with better benefits and perks – It’s important to keep your employees happy and engaged, but unfortunately, the benefits and perks that can help are often out of your reach as a small or mid-sized company. Utilizing an HR outsourcing service can often give you access to resources that weren’t available to you and your employees will be able to have better benefits and perks. 

Disadvantages of outsourcing HR

  • Loss of control – One worry with outsourcing is that you may lose control over this vital function and not be in touch with your employees or the HR processes. This is not an issue with the right partner. A good HR provider will be a trusted partner who will communicate and help you feel more control of your HR processes rather than the opposite. 
  • Hidden fees and strict contracts – Like any business arrangement, it can be worrisome that unexpected fees might pop up or that circumstances may change and you’ll be locked into a contract that no longer works for you. Finding a HR outsourcing provider who is transparent and reliable will help you avoid these disadvantages. Your contract should clearly spell out the length, the terms and conditions, and any fees that will be charged so you don’t get any surprises.

 

What are HR outsourcing strategies?

While you’re thinking about using HR outsourcing, it’s important to ask the question “what are the different outsourcing strategies?” There are a few different types of HR outsourcing, and you need to find the one that’s right for you. Here are the options: 

 

Business Process Outsourcing

The idea behind business process outsourcing (BPO) is for the business to give one function, like benefits administration, to a third-party service provider. This can remove the administrative burden and help with specialized tasks that your in-house HR team doesn’t feel comfortable handling or that needs special expertise. 

Single Source Outsourcing

With this type of outsourcing, your company utilizes one solution to meet all your HR needs. This can simplify the outsourcing process since the duties aren’t being split between an external and internal department and can cover the entire employee lifecycle from welcoming new hires to facilitating an employee’s exit. Outsourcing HR services for small business can work very well for companies that don’t currently have a dedicated HR employee and don’t have time to handle these functions internally. 

Professional Employer Organization

A professional employer organization (PEO) is an outsourcing solution in which your business enters into a co-employer relationship with the outsourcing agency. You as the employer still maintain control over all the work performed by your employees while the PEO takes on co-responsibility for benefits, taxes, and payroll. 

HR Outsourcing Best Practices Examples

No matter what hr outsourcing model you choose, there are some best practices that you should follow when outsourcing HR functions

Carefully vet your HR outsourcing provider

You shouldn’t jump into a contract with the first HR outsourcing service that you find. It’s important to do your research and find a trusted provider with years of experience, a proven track record, and people who you actually want to work with. Personality fit is an important factor to consider, since this is someone you will be working closely with over the years to come.

Facilitate active communication

From the start, it is important to engage your HR services provider with active communication. While outsourcing your HR can seem like a “set it and forget it” type of solution, this isn’t necessarily the best way for you to get everything you want out of this service. Having open lines of communication between you and your outsourcing partner is best for everyone and will help avoid any misunderstandings or feelings like you’ve lost control of your employees.

Review and assess your HR outsourcing periodically

As your business grows and changes, it’s important to look at your HR outsourcing to help ensure that the services are still aligned with your business goals and meeting your expectations. HR outsourcing is a wonderful tool that is easily scalable, but in order to make sure it’s growing with you, you need to assess and review what is being done.  

Outsource your HR functions with Milestone

If you’re looking for a trusted, reliable outsourcing partner, look no further than Milestone. Our years of experience and flexible, no-hassle HR outsourcing packages can help you access the HR services you need. You will have a single point of contact at Milestone who you can rely on to help you navigate all the HR functions with ease. Every business, no matter how big or small, deserves access to compassionate, detail-oriented HR professionals and top-tier expertise. Learn more about Milestone today and let us help you build a people-first business.

Related Content

Seven Functions of HR
Article

What Are the Seven Functions of HR?

Businesses can have strategic goals supported by a flawless business plan, but their execution will fall short every time without ...

HR Outsourcing Strategies
Article

HR Outsourcing Strategies

Outsourcing human resource functions has become a popular business solution for many small and mid-sized companies. If this is a ...

HR Outsourcing Companies for Small Business
Article

HR Outsourcing Companies for Small Business

Why do companies outsource HR? Most small businesses have limited resources and may be overwhelmed or ill-equipped to handle core ...

Stay in the know