You probably have heard that Human Resource (HR) Outsourcing can have many benefits to improve the bottom line. But the real question is, how? 

Functionalities and efficiencies delivered by optimizing HR outsourcing, often known as HRO, can help talent management professionals save time on administrative tasks and focus on more strategic efforts. HR Outsourcing also brings economies of scale to larger organizations, by helping the company improve on staff performance and enhance productivity.

Understanding HR Outsourcing

Generally, there are two types of HR outsourcing providers, namely Professional employer organizations (PEOs) and Administrative Service Organizations (ASOs). PEO often manages employees along with clients and also provides key HR and administrative services, meanwhile ASO provides key HR and administrative services. Research by Deloitte showed that 80% of companies felt satisfied with the cost-centric expectations from HRO. A PEO is usually the best solution for a small business because a PEO shares the risk with you and has the added benefit of handling part or all of the HR tasks. Meanwhile, some businesses consider it more convenient to outsource the administrative portion of ASO, which is fairly appealing like PEO. 

To help you decide which business functions are best to outsource, here are 5 key areas in which HR outsourcing can optimize the outcome:

1 . Employee Assistance Program (EAP)

Improve the workforce wellbeing by offering Employee Assistance Program (EAP) access through an independent HR service. EAP is an area where HR outsourcing services may benefit your company. These programs address more private and intimate or work-related problems that employees may face, such as burnout, peer conflicts, or mental health challenges. EAP from HR outsourcing can get your employees to confide more with no conflict of interest or fear of being judged by the internal management.

Another major concern for HR managers is employee disciplinary issues and concerning employee benefits. For instance, when there is an issue with an employee, the entire team gets distracted and management tends to lose focus. HR outsourcing helps manage employee disciplinary issues to eliminate unproductive employees who drag down productivity and promote attrition within the team.

2 . Employee Benefits and Compensation

HR outsourcing is an excellent way to maintain the complexity of benefits and compensation, like health insurance, social security, and other benefits. Employee incentives and other recognition programs that may be part of your business are also covered by these providers, which may greatly enhance sales, security, and performance.  HR outsourcing services can help automate the benefit offerings with software that facilitates accurate calculation of deduction of state or federal taxes, online complaint filing, PTO requests, and so on. HR outsourcing also helps address pay parity gaps across geographies to determine compensation strategies, providing fair market value with the right feedback for retention.

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3 . Hiring and Training New Employees

The average cost of replacing an employee is around 12 weeks’ productivity, which cannot be quantified on its impact on company bottom lines. Outsourcing helps train new hires and retrain employees in certain ways. They can become your strategic HR partners to help administer recruitment, staff training, as well as allocate resources wisely.

An outsourcing company can help HR managers narrow down on the right talent for the right job role, before making the final decision. The company usually has an infrastructure that facilitates candidates to easily apply for open positions online, thus streamlining the recruitment processes to become seamlessly efficient and hassle-free.

4 . Risk Management and Law Compliance

It is essential for organizations to stay updated on recent government laws and regulations that impact their business. A professional employer organization (PEO) can assume, share, manage, or assist you with many employer-related risks and obligations, saving you time and money. This can include unemployment claims administration, employee compensation and claims resolution, employment practices liability insurance, substance abuse awareness and drug-free programs, and a variety of other activities.

5 . Payroll and Tax Services

Payroll administration is one of the most commonly outsourced services. Look for a PEO to handle all aspects of wage payment, such as payroll processing, withholding and remitting payroll taxes, submitting payroll tax returns, and handling outstanding debts and other payroll deductions. An HR outsourcing partner will offer your company specialized experts to calculate wages, estimate taxation figures, and complete tax responsibilities that are permitted under state laws. Outsourced HR services also have their own compliance standards in place, which ensures that your critical reports are trustworthy and dependable.

Outsourcing HR services may help companies save time and money in a variety of ways. Instead of spending time trying to understand changing rules and paperwork in employment, business owners who are not HR professionals can always outsource this function. Dedicated outsourced human resources professionals will have better knowledge on this matter and help tasks be done more efficiently. This can help your company avoid penalties, business-draining legal costs, and so much more. 

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