Three Steps to Successfully Outsource HR Services

Posted by Talent Intelligence on Mon, Jul 13, 2015 @ 10:07 AM

Free up your HR department to focus on what it needs to.

Company growth, for an HR department, can be somewhat bittersweet: While the department is undoubtedly happy that the organization is expanding, it frequently means HR work also increases — sometimes at an unbelievably rapid pace.

To handle the influx of new recruitment, training and other demands, HR departments often turn to external service providers for either temporary or ongoing assistance.

7-13-15_blogCommon outsourced HR services, according to Entrepreneur, include:

• Payroll administration

• Employee benefits

• HR management — such as hiring, firing or recruiting new employees

• And risk management services, including office policy creation, dispute resolution and safety inspection services

HR outsourcing isn’t a new phenomenon, but it’s become increasingly popular in the past 15 years. From 1999 to 2004, the market for HR outsourcing nearly doubled, according to the Society for Human Resource Management, due, in part, to cost-cutting measures and an increased focus on HR tasks that support business strategy and human capital.

In 2004, more than half of HR professionals said their organization at least partially outsourced HR functions.

By 2008, a follow-up SHRM survey found that 33 percent of HR professionals felt their organization would increase its amount of outsourced HR services in the next five years. With good reason: The survey also found that nearly half of the organizations that had outsourced HR services experienced a cost savings as a result.

HR outsourcing has grown in the past decade, according to the New York Times, and will likely increase in the future, letting companies focus on their core business — while external service providers keep talent search and retention efforts afloat. 

For some small business owners, outsourcing HR services can free up as much as 40 percent of their day, according to Entrepreneur. Delegating some talent-related and other tasks to a service provider can allow in-house HR professionals at small companies and large corporations to focus on mission critical work.

If your organization is considering implementing an HR outsourcing program, the following tips can help you ensure it’s a success:

Choose outsourced HR services carefully. Some tasks, such as talent pipeline management, are a natural fit for outsourcing, due to the amount of time they require. Succession planning is another initiative HR departments may not have enough time to dedicate to make the program worthwhile. (For two companies’ experience, read our April 2014 succession planning blog post.)

Others, however — such as settling employee disputes and creating reward and recognition, mentoring or other employee satisfaction-centric programs — may be handled best by an individual who is embedded in the organization. 

Pick a quality HR service provider — and transition tasks to them gradually: For an effective outsourcing effort, an HR department needs to partner with a qualified, experienced HR service provider; clearly convey the changes and associated benefits to employees; remain involved and regularly assess how the system is working, according to Business.com

Consider making HR outsourcing an ongoing effort: A study conducted by Fidelity Investments, found that outsourcing contentment levels were high — 93 percent of respondents said they were satisfied with their experience — and satisfaction levels increased the longer the outsourcing relationship existed.

If HR outsourcing alone won’t trim enough expenses at your organization, find out other ways you can reduce spending in our recent Six Ways to Cut HR Costs blog post.

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