As we complete a turbulent 2009 , small employers are looking for ways to reign in costs and prepare for recovery in 2010. One of the hottest trends in the small business environment today is Human Resources Outsourcing. According to Hewitt Associations, a world-wide provider of HR consulting services and research data, the most common reason for engaging an HR Outsourcing firm is to reduce overhead. This is accomplished by accessing the HRO firms’ economies-of-scale in areas such as insurance products, HRIS infrastructure, or payroll systems.
Size Counts.
Economies of scale are the primary method through which an HRO firm can reduce a business’ operational costs. By pooling hundreds, and even thousands of businesses, HRO firms aggregate health benefit plans, retirement plans, workers’ compensation insurance, and legal expertise. Additionally, they can manage routine HR tasks more efficiently as the talent and infrastructure is already in place. When a small business joins the HRO firm, they simple access these existing programs at reduced rates and a minimal time investment. They can jump onto the HRO’s programs and platforms with little start-up time or expense, and can hit the ground running.
Other reasons to outsource human resources include:
- Access to outside expertise
- Improving service quality
- Ability to focus on core expertise
- High cost of remaining up-to-date with rapidly changing environments
- Eliminate high volume of low-value transactional activities
- Reduce Management distractions away from core business
- Leverage existing staff to focus on key competencies
- Reduce transaction costs
The HR Outsourcing R.O.I.
Studies indicate that once HR operations are outsourced, many companies show a strong return on investment. IDC, a global provider of market intelligence, conducted a survey of American executives and reported that almost 85 percent of the respondents saved as much as they spent on outsourcing. Over a quarter reported a savings of twice as much. And the savings, according to nearly 95 percent of the respondents, went toward operational performance and innovation.
