Top Five Benefits of Outsourcing HR Functions to a Small Business

In most companies, the human resources department is one of the most important departments. In fact, it is often considered as the company’s “secretary.” In simpler terms, the human resources department is a team that is charged with overseeing the employee life-cycle (i.e. recruiting, hiring, interviewing, onboarding, and firing employees). In larger companies, this department may also include training managers, professional counselors, and payroll administrators.

The primary function of the human resources department is to oversee all benefits programs. This includes employee retirement plans, 401ks, employee incentive plans, health and life insurance, pension, and disability compensation plans. Many benefits plans have been in place since employee benefits became an officially defined benefit. Benefits are administered through an individual or company’s human resources department. Benefits have become an increasingly effective way to attract and retain high-quality employees.

Most large companies have HR departments. However, there are many small and medium-sized companies that do not have human resources departments. In these cases, companies rely on a series of internal personnel to perform most or all of the tasks associated with recruiting, hiring, coaching, and evaluating employees. Internal personnel performs the following tasks: recruit staff, interview staff, assess performance, grade performance, and provide performance appraisal. There are several benefits to outsourcing some or all of these internal personnel tasks:

o Outsourcing is an effective way to free up internal HR staff for other staffing needs. When the human resources department is no longer needed to manage employee benefits, it can become available for the management team to hire and train new employees, hire and retain onboarding staff, and evaluate performance. Additionally, outside HR personnel can provide valuable expertise when it comes to recruiting, interviewing, evaluating, hiring, and training new employees.

o It can help to reduce HR Department costs. When the human resources department is not performing the duties that are needed to fulfill the company’s recruiting, hiring, and retaining needs, it costs money. This includes paying wages, providing benefits, collecting employee information, processing disability, and health insurance claims, collecting tax returns, and more. Instead of having to hire an additional full-time recruiter, for example, your company can outsource the tasks associated with that recruiter. This saves money in recruiting, for one, and it also allows you to focus your time and attention on the tasks that are truly important to your success. Furthermore, if the tasks that you outsource are not what your current needs require, you can perform those tasks and have an additional employee at the ready.

o It helps to make sure that all employees receive a high level of personalization. Human resource management is all about making sure that employees feel like they are a part of a large, important organization. When a department does not recognize the individuality of each employee, however, it can have a negative effect on performance. On the flip side, departments that provide employees with personalization are known to foster greater performance and productivity. Personalization may include arranging office cubicles to look like cubicles designed by individual employees, allowing co-workers to bond more easily, making sure that each employee is aware of their place within the company and what the goal of that particular employee is as a member of the team.

o It can help to train employees. One of the most common arguments against outsourcing HR functions to a third-party business is that it does not make sense to train employees when you can simply outsource it to a company that specializes in this area. While it is true that some HR functions do require training, there are many HR functions that do not. Moreover, there are many third-party companies that offer training on a variety of topics including how to handle the recruitment and hiring process, how to create policies that define the kind of skills you expect your employees to possess, and much more. By outsourcing HR functions to a small business, you are giving those employees skills and knowledge that they can then pass along to others in the company. This not only helps to make employees more productive but also helps to reduce training costs and makes the process smoother for all parties.

o It allows for the growth of the business. Small businesses have a difficult time recruiting and keeping new employees. When a human resources department handles recruitment and employee hiring, the business is able to grow simply by adding new members. There are very few areas of the business that an HR department could replace, so outsourcing allows a business to expand without having to add employees who may not be right for the job.

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