Outsourcing the Human Resources Function

What functions does HR outsourcing provide?

Human resource outsourcing provides numerous benefits to employers, including increased productivity, cost saving, improved employee satisfaction, and employee turnover. We’ve outlined some of the key advantages of outsourcing human resources.

Benefits of Human Resource Outsourcing

• Increased Productivity: When you outsource HR, you free up internal employees to work on projects that require specialized skills and training. You can also reduce costs by avoiding hiring full-time positions. Instead, you can use freelancers or contract workers to handle tasks such as payroll processing, recruitment, performance management, etc.

• Cost Saving: Another benefit of outsourcing HR is that it helps you cut down on expenses. For example, you don’t need to pay salaries to people working in HR departments. By outsourcing HR, you can hire freelance professionals to perform those duties. In addition, you can avoid paying for office space, furniture, computers, software licenses, etc.

• Improved Employee Satisfaction: A third advantage of HR outsourcing is that it improves employee satisfaction. Employees often feel valued when they know that their job responsibilities are being handled by someone else. They also enjoy knowing that their employer trusts them enough to delegate certain tasks to another person.

• Better Customer Service: Finally, outsourcing HR gives you access to high quality talent. If you’re looking for a specific skill set, there’s no better place to find it than among experts in that field.

1. Payroll processing

Payroll administration is an important component of every company’s human resources department. This includes calculating employee paychecks, paying employees, withholding taxes, and filing tax returns. Companies often outsource payroll processing because it requires complex calculations and data entry and there are several payroll experts to choose from when outsourcing. However, outsourcing payroll processing and payroll tax filing to a third party can lead to inaccurate information being entered into the system so it’s important to pre-assess your new team and make sure they’re competent and experienced.

There are several different methods of calculating payroll deductions, including manual calculation or online calculators. Depending on the method used, there may be additional fees associated with each deduction. For example, some employers charge an extra fee for each check written. Others require a monthly subscription fee. Some companies offer both options.

Outsourcing payroll processing to a third-party service provider will save you valuable time and money. A professional service provider will take care of everything involved in payroll processing, including calculating payroll deductions, entering data into the system, and submitting payroll reports. They will also handle payment processing, file taxes, and provide support for your employees.

2. Employee benefits administration

Benefits administration is one of the most complex areas of human resources management. Employees are entitled to certain benefits like medical insurance, dental care, life insurance, disability coverage, retirement plans, etc. These benefits must be administered properly and timely so employees do not suffer financial hardship due to lack of coverage. This process requires coordination between multiple departments within an organization. For example, benefits administrators work closely with payroll department to ensure that each employee receives correct paychecks. They also coordinate with legal counsel to make sure that every policy is in compliance with applicable laws. These administrative costs can really add up.

Outsourcing benefits administration is common among large companies because it allows employers to focus on core competencies while giving them access to a pool of qualified professionals. Hiring full-time benefits administrators is expensive and difficult. Many organizations outsource this function to third-party vendors. In addition, many benefits administration firms specialize in one area such as group health insurance, dental coverage, vision care, long-term care, etc. Therefore, there is no shortage of providers.

The key question you must ask yourself is whether outsourcing benefits administration makes sense for your company. You want to find a provider that offers high quality service at affordable rates. If you don’t know where to start, here are some questions to ask:

What does my current plan look like? How much does it cost me per month? What happens if I change jobs? Does my current vendor offer flexible payment options? Do they provide 24/7 customer support? Is there a contract involved?

Do I need to use a broker? A broker is someone who helps you shop around for a benefit administrator. Brokers usually charge a fee for their services. Some brokers are just salespeople looking to sell you a package deal. Others are legitimate consultants whose sole purpose is to help you compare different vendors. Make sure you choose a reputable broker. Ask friends and colleagues about their experiences with brokers.

How experienced is the vendor? Look for a company that has been providing benefits administration services for several years. Ideally, they should have experience working with small businesses as well as Fortune 500 companies.

Is the vendor licensed? Licensing requirements vary depending on the type of benefits administration you require. However, almost all states require licensing for companies offering group health insurance. Check with your state regulatory agency to determine what licenses are required. Outsourcing benefits administration to a competent third-party can be a huge win for your entire team.

3. Employment law compliance

The IRS says it wants employers to know about certain employment laws. In April 2018, the agency sent out a list of what it calls “employment tax compliance reminders.” Among the items on the list:

• You’re required to pay payroll taxes, including income taxes, Social Security, and Medicare, along with unemployment insurance and workers’ compensation premiums.

• If you employ someone, make sure he or she receives proper compensation and benefits.

• Don’t use illegal tactics to discourage people from joining unions.

• Make sure your workplace isn’t unsafe.

• Be aware of discrimination issues.

• Keep records of employee hours worked and wages paid.

• Know where to find information about federal labor laws.

• And check out the Fair Labor Standards Act, the Employee Retirement Income Security Act, the Family Medical Leave Act, and the Americans With Disabilities Act.

4. Employee relations

Outsourcing employee relations to a dedicated team helps you cut costs and free yourself from the burden of managing employee issues and employment paperwork. You don’t want to hire full-time personnel just to handle employee complaints. Instead, outsource it to an HR outsourcing firm or an online platform like DigiWorks. They’ll take care of everything – including setting up an employee handbook. This way, you’re able to focus on what you do best – running your business.

An HR outsourcing firm can help ensure that your policies are clear and concise. For example, if you offer health insurance benefits, make sure that your handbook clearly states how much coverage each employee receives. If you’re offering paid vacation days, make sure the handbook spells out exactly how many days off you provide.

Your employees will appreciate having a consistently written document that outlines their employment terms. Plus, you’ll avoid the hassle of reworking your policies every time there’s a change in management.

5. Talent acquisition

Hiring managers often don’t have enough time to review hundreds of candidates’ resumes and conduct lengthy interviews. And even if they do, it’s hard to find someone who matches what they’re looking for.

Recruitment outsourcing services are becoming increasingly popular because they allow recruiters to focus on finding great talent while saving money and time.

Here’s how it works. A recruiter submits a job posting to a third party agency. They receive dozens or hundreds of qualified applicants, screen them, and send those who match the requirements to the hiring manager.

The hiring manager receives the resumes and selects the best ones to forward to human resources. HR then sends the selected candidates to the recruiter for follow up.

This process saves both parties time and money. For example, if a recruiter spends $100 per candidate, he or she could save $1,500 over the course of a month. If a company hires 10 employees, that’s savings of $15,000 per month.

A recruiting agency typically charges about 30% of the hourly rate of the person doing the screening. So let’s say a recruiter screens 50 resumes at $50/hour, the agency would charge $7,500 ($150 x 50).

If a company pays $10,000 for a full-time employee, the recruiter would earn $5,000 ($10,000 – $7,500 $2,500).

If you’re looking for a more affordable and sustainable option you might consider making use of a hiring platform like DigiWorks. Virtual assistant companies or platforms like DigiWorks are amazing as they not only match you with pre-vetted and assessed admin assistants that can take care of all your business needs but they will also handle all onboarding and payroll needs as well. Since DigiWorks’ talent are from emerging countries, the rates are much lower than the US minimum wage and you don’t have to deal with the risk of dealing with scammers or incompetent freelancers.