The Human Resources Outsourcing and Professional Employer Organization (PEOs) industry continues to grow as one of the fastest developing outsourcing sectors, just behind IT outsourcing. Following one of the most challenging economic years in recent history, businesses are looking for ways to reduce overhead and improve efficiencies.
Human Resources Outsourcing benefits all levels of the organization:
Reduce Employment-Related Expenses
While there are hundreds of corporate cost-cutting areas to consider, labor costs account for one of the largest operating expenses in a business. Beyond payroll and tax overhead, other expenses are related to health insurance premiums, workers’ compensation insurance, recruiting fees, payroll processing, and legal costs.
Human Resources Outsourcing and PEO firms pool thousands of employees under one roof and offer small and mid-sized business the economies-of-scale typically found within large corporations. Furthermore, by consolidating multiple vendors, companies can streamline operations and reduce overhead.
Companies that engage an HR Outsourcing relationship typically experience financial benefits in the following areas:
- Workers' Compensation insurance premiums
- Health insurance costs
- Employment Practices Liability Insurance
- Legal fees
- HR systems and infrastructure
Minimize Employment Risks
Studies show that there is a direct correlation between difficult economic periods and increases in employment related lawsuits. Coupled with complex HR laws, many employers struggle to comply with the ever-changing employment legislation. HR Outsourcing firms are staffed with experts in a wide range of employment areas. Their role is to assist employers comply with both Federal and State laws, and to support them in the event of an employment lawsuit. Examples of HR compliance support can include:
- Updating human resources forms and documents
- Ensuring compliance with payroll-related regulations
- Training managers on hiring, terminating and disciplining policies
- Auditing employee files and records
- Creating and implementing OSHA compliant safety plans
- Speaking confidentially with employees regarding complaints or grievances
- Auditing human resources practices and policies
Improved HR Efficiencies
In addition to hard cost savings, HR Outsourcing offers employers more efficient HR systems resulting in soft-cost savings. In place of current management, the HRO firm takes over some of the cumbersome administrative functions relating to employment. These activities, while necessary and often times critical, do nothing to add value to the company’s bottom-line. These functions can include:
- Unemployment claims administration
- COBRA management
- Responding to employee inquiries
- Employee health and benefits administration
- Payroll administration
- Tax filing and payments
- Streamlining HR processes for the entire employee life-cycle
Now relieved of these non-productive activities, management can re-focus their resources on revenue-generating activities.
It is critical for management stay abreast of the rapidly changing employment legislation in human resources, benefits, and tax laws. Furthermore, improved motivational and supervisory techniques go far in increasing employee productivity and dedication to the company. HR Outsourcing firms offer a wide range of management and employee training courses to keep your staff on track. Whether it is mandatory harassment training and safety compliance, or how to deal with difficult employees, a solid management training program is a must for every organization.
Health Insurance Benefits
As our economy improves, employers are looking for ways to incentivize and motivate their staff. HRO firms provide small employers the unique opportunity to offer their staff a robust and comprehensive array of employee benefits that are typically available to only the largest corporations. These robust offerings include a wide range of major medical plans and voluntary benefit offerings.
Insurance benefits include:
- A comprehensive range of medical insurance plans, including:
- Multiple health insurance options, including HMO, PPO and HSA plans
- Dental insurance
- Vision insurance
- Life insurance
- Disability and alternative insurance
- 401 (k) Retirement Plan
- Pre-tax Cafeteria 125 Plans
- Flexible Spending Accounts (FSA)
- Employee Assistance Programs
- Credit Union and financial services
Beyond insurance benefits, employers recognize the unique needs of their employees in a changing marketplace. More businesses are embracing the idea of allowing employees greater flexibility in their employment relationship. From flex-time to telecommuting, employers are aware of the value in allowing employees to spend at least some of their working hours out of the office. There are many beneficial outcomes in creating a flexible work environment:
Improves employee satisfaction. Employees are tired of the rat race, eager to take control of their lives, and want to find a balance between work and life. A growing number of employees would choose telecommuting over a pay raise.
Reduces attrition. Losing a valued employee can cost an employer in the tens of thousands. The annual cost of employee turnover in the United States is a staggering $5 trillion .
Decreases unscheduled absences. A large percentage of employees who call in sick may not really be. They may do so because of family issues, personal needs, and stress. Unscheduled absences could cost employers thousands of dollars per employee/per year.
HRO and PEO firms have the experience and expertise to help clients create well-balanced policies that take both the employee’s and the employer’s needs into consideration. Steps that can be taken include:
- Having clear guidelines for the telecommuting program;
- Clarifying the “ground rules” for the telecommuting relationship;
- Having a formal training program;
- Making your expectations clear; and
- Providing frequent and constructive feedback.
Finally, through their experience working with thousands of employees with varying backgrounds and industries, the HRO firm can provide career path guidance and development to help employees grow in their current positions. Through well written job descriptions and effective performance reviews and evaluations, employees will receive the direction they need to excel at work. Additionally, employees are offered online access to their personal payroll, anniversary and vacation data, all building their confidence and trust for their employer. This ultimately leads to greater job satisfaction, improved performance, and lower turnover.