HR Outsourcing Services
83% of employers believe recruiting and retaining top talent is a growing challenge. As we recover from the pandemic, competitive recruitment is likely to become even more difficult for employers. That’s where HR outsourcing comes in. If you’ve considered outsourcing one or more of your HR functions, now is a great time to reap the benefits that outsourced HR services can provide you. Learn more about the different options available to companies of all sizes below.
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HR Outsourcing Services
If you’re one of the more than 30 million small businesses in the United States, you’ve probably thought a lot about your human resources. Maybe you’ve even searched online for “HR services for a small business near me.” If this sounds like you, we probably don’t have to convince you how important HR really is. But let’s look at the numbers.
- 83% of employers believe recruiting and retaining top talent is a growing challenge.
- Over 50% of employers believe that health and benefits will become increasingly important to employee retention over the next five years.
- As early as 2004, over 75% of executives at large companies reported outsourcing at least some of their HR functions.
Human resources is a vital part of attracting and retaining stellar employees. HR outsourcing can help take the burden off of business owners who want to put their focus elsewhere, like sales or customer satisfaction.
This article will explore the types of HR functions that can be outsourced as well as the different types of HR outsourcing services that are available to business owners. You’ll also find a list of strategies that will help you find the right HR service provider for your company’s needs.
What is HR outsourcing services?
Put simply, HR outsourcing services refers to a contractual agreement between a company and an external firm wherein the external firm will provide agreed upon human resources services for the company. This external firm, also called an HR service provider, employs HR experts who are adept at working with small businesses to provide the best HR services possible.
HR outsourcing services are typically sought after by small- to mid-sized companies who need additional support. There are myriad reasons why a company may choose to outsource one or several of their HR needs, including:
- More Time: As a small business owner, you simply might not have time to maintain all the functions of HR yourself. Seeking assistance from an HR service provider can provide you more time to focus on the core elements of your business.
- Better Compliance: There are several local, state, and federal government regulations that companies must meet. If you’re not an HR expert, it can be a challenge to try to wade through it all. Outsourcing HR ensures you’re paired with an expert who knows all the boxes to tick to keep your business legal.
- Competitive Benefits: As a small business owner, you may not have access to the kinds of good benefits that are often afforded by large companies with hundreds of employees. Some types of HR outsourcing can pair you with better benefits for you and your employees—making your recruitment strategies more competitive.
- Expert Support: We all need guidance from time to time. When you outsource with professional HR firms, they can provide guidance and support for each one of your employees when they need it most.
- Innovative Perspective: As a leader, staying on the cutting edge of best practices can help you develop and maintain proven policies that can increase employee morale and company culture.
What are the Outsourced HR Services?
So what service can be outsourced? The truth is, most HR services can be outsourced. The real question is, which HR services do you want to outsource? The following are common human resource outsourcing example services. Use this list to determine which—if any—functions you want to continue to handle in house and which you’d like to outsource. This can help you narrow down and choose an HR service provider that’s right for you.
Recruitment and Selection
Finding, recruiting, and selecting top talent is of utmost importance to business. For small businesses that can only afford a handful of employees, it’s arguably more important to find the best person for the job. HR service providers often provide recruiting services including creating a job description, recruiting candidates, and screening them. They also generally have access to applicant tracking systems (ATS) that can help make quick work of sorting through resumes. Depending upon the kind of support you need, they may also be able to provide small businesses with assistance in interviewing and selecting the right person. However, many companies keep the final decision-making process internal.
Compensation and Benefits
From negotiating salaries to providing benefits like insurance, paid time off, and retirement savings plans, compensation and benefits management is an important element of HR. An HR services provider can help ensure that your compensation packages are fair and equitable for all of your employees. Additionally, some HR service providers have relationships with insurance companies and other benefits providers and may be able to negotiate better insurance premiums or deals for businesses.
Managing your employees and their performance and development is one of the best ways to ensure your team remains successful. HR service providers can assist business owners with one-on-one reviews, peer reviews, and other methods of regular feedback. Typically, outsourced service providers collaborate with internal managers to ensure the right team members are providing feedback. HR service providers can also recommend HR systems that provide additional daily or weekly support for feedback and performance management.
Learning and Development
Employees want the opportunity to grow and develop their skills. The most competitive companies provide ways for their team to improve. Whether it’s providing access to certificates, certifications, leadership development or other kinds of training, HR service providers can connect employees with all kinds of learning opportunities that grow their loyalty to the business.
Information Management and Documentation
There’s a lot of information in HR, including employee information, benefits, paid time off, payroll, employee development plans, and more. HR service providers are experts at securely storing and keeping track of everything while also ensuring you maintain in compliance with any regulations you need to meet.
It’s an unfortunate fact of life that employees leave. Sometimes executives leave, too. Succession planning ensures that your company has a plan for when one of your talented employees leaves or retires. This might include internal talent pipelines, potential external candidates, or planned recruiting efforts for high-profile positions.
HR Data and Analytics
In the past decade, data and analytics has become increasingly important in HR. Using data, HR service providers can help make predictions and informed suggestions about compensation packages, employee turnover, policy changes, and more.
Compliance isn’t a function unto itself, but it touches every HR service on this list. Payroll has numerous regulations. General employment law varies federally and from state to state. It’s important that companies have an active policy in place to protect their business and their employees. An HR outsourcing firm will include up to date compliance and best practices into everything they create.
Employee relations is key to helping employees successfully navigate their jobs and to helping managers successfully manage their employees. From developing and interpreting policies to strategizing how best to have difficult conversations, it’s a lot of work. Outsourced HR partners can provide an expert, third- party perspective on employee relations.
Engagement and Culture
HR teams have a lot on their plate. Not only do they handle job descriptions and hiring, they are tasked with improving employee productivity and retention. Outsourced HR can help you evaluate ways to invest in employees so they are tied to the mission and value of the company. Onboarding is a great example of this. Not only is it critical to engagement and culture, but it’s your new employee’s first foray into your company. It’s the first step towards an inclusive organization. Outsourced HR companies can help you develop an onboarding program that achieves these goals.
Types of HR Services Providers
Now that you have an idea of what HR services can be outsourced, let’s look into the types of HR service providers there are.
Professional Employer Organization Outsourcing (PEO)
PEOs provide a unique service to small businesses. In this relationship, the third-party PEO enters into a co-employment agreement with a company. Essentially, the HR service provider becomes the employer of record and pages wages and taxes in addition to handling all of the government recording. In return, the company that is contracting with them reimburses the PEO for their expenses and pays an additional administrative fee. The company is also in charge of all day-to-day activities of their employees.
Administrative Services Organization Outsourcing (ASO)
ASOs are similar to PEOs in that they provide a full suite of HR services to businesses. However, in this relationship, the company retains their employer of record status—which can be an important distinction for small business owners looking to maintain full control over their company. Essentially, ASO HR service providers act as a trusted partner and manage all HR aspects of a company. They just don’t become a co-employer.
Human Resources Organization (HRO)
HROs are typically used by larger companies that can handle some of the HR work themselves. They generally provide a few areas of specialized support for businesses to choose from. Common areas for HROs to focus include recruitment and hiring or employment law. These HR service providers are best suited for companies that understand the intricacies of HR, but need targeted assistance with one or two areas.
Human Resources Outsourcing Strategies
PEOs, ASOs, and HROs provide their services to business owners by using various different techniques. Let’s explore the common strategic HR initiatives you might encounter on your search for an outsourced provider.
Software as a Service HR Outsourcing (SaaS)
While Saas isn’t an HR strategy on its own, software can be a powerful tool to automate and complete basic HR functions. With SaaS, software is typically hosted and managed by an HR service provider, although companies should have the ability to access and update the information as well. Common examples of SaaS include applicant tracking systems (ATS), performance management software, and payroll and benefits management. HR outsourcing companies will often implement Saas tools to automate workflows and remain in compliance.
Business Process HR Outsourcing (BPO)
In this strategy, a business or company outsources a single HR function to a service provider. This is a step up from SaaS HR outsourcing because the third-party provider provides personalized support and service management, often in addition to a software solution. BPOs are a great option for companies that need assistance with one, complex process—such as benefits administration.
Single Source HR Outsourcing
PEOs and ASOs are common examples of single source HR outsourcing. In this strategy, companies outsource their full suite of services to a single HR service provider. With single source outsourcing, companies receive support for the entire employee lifecycle, including acquisition, time and labor, payroll and benefits, performance management, employee separation or termination, and more. However, the company still retains as much control as desired for big picture items like hiring or termination.
Tips on Finding an HR Service Provider
If you’re searching for HR outsourcing companies for a small business, you’re probably wondering the best way to find and vet various providers in order to find the best match for your company. We’ve compiled a list of tips to find an HR as a service provider company that you can build a winning partnership with.
Understand your budget—and stick to it.
HR consulting services for a small business can have varied prices, depending upon the kinds of services they offer, where they are located, how many employees you have, and more. Some companies charge a monthly flat fee per employee (called per employee per month or PEPM)—typically around $50-$200. Other companies charge an annual amount based on employees’ salaries—usually in the 2%-10% range. Some HR service providers may also charge based on the services they provide or on a project-based scale.
Look for companies whose services match your needs.
Know what you need. If you don’t need a full suite of services because you or someone on your team has HR expertise, don’t pay for a full suite. On the other hand, if you have no HR experience, working with a PEO or ASO might be a great option to make sure you and your employees are covered.
Narrow your results by knowing what kind of relationship you want.
Particularly for business owners trying to decide between a PEO or an ASO, you must understand the kind of relationship you want. If you’re not ready to enter into a co-employment relationship, a PEO won’t be a good fit for you. The right HR provider should be your partner…whatever that looks like in your mind.
Inquire about the kind of customer support they offer.
Do you need someone who is available by phone? Email? In person for quarterly meetings? Make sure to find a service provider that matches your needs. Time zones are another thing to consider. If you need someone who is available during your business hours, you should look for a company that’s located in a similar time zone. While an overseas firm might be more cost effective, you might struggle with communication.
Explore the kinds of tools and benefits you’ll gain access to.
The ability to access state-of-the-art performance management tools, applicant tracking systems, or better insurance premiums could be the icing on the cake of a wonderful potential partnership. Inquire about these perks before signing anything.
Know what their contract and terms of agreement look like.
Can you scale up (or down) the services you’re being provided? Will you be tied into a long term contract? Just like any deal, know what you’re agreeing to, what kinds of fees you’ll be charged, and other fine details that can make or break a relationship.
Milestone: HR Support Services for Small Business
Stop searching for “human resources services near me” and meet Milestone. We’re not your typical provider of outsourced HR services. We pride ourselves on offering a partnership-driven and refreshingly forward approach to the back office. At Milestone, we partner with small- and mid-sized companies to help them make smart decisions to build the most successful business they can. Our business model is simple: you gain access to talented HR experts at a fraction of the cost, because we believe all businesses, no matter what size they are, deserve access to top-tier professional support. If you’re ready to see what HR the Milestone way looks like, contact us today.