7 Reasons Why You Should Outsource HR

This article explains how small and medium sized organizations enjoy faster growth and smoother operations by outsourcing HR

By David Bradshaw, SVP Client Services
23rd July, 2022
David is a highly experienced consultant specializing in business strategy, lean operations/automation, and human resources. He holds a Master's degree from the University of Cambridge, UK, and an MBA from Quantic School of Business and Technology.

As a non HR professional in a small to medium sized organization, do you find yourself tied up with repetitive HR tasks like onboarding, managing payroll, hiring, or tracking employee benefits?

If so, you are certainly not alone. Leaders with no dedicated HR support spend up to 50% of their time on non-value-added HR tasks. Why not outsource these repetitive HR functions to a company who specializes in this? Outsourced HR is the best solution for smaller companies who want to achieve a competitive advantage by freeing up their resources so they can focus on the things that matter most. Outsourcing HR services to a third-party vendor can provide many benefits to a small or medium sized organization - here are the top 7 reasons to consider outsourcing your HR.

1 - Cost Efficiency

For small to mid-sized organizations, the cost efficiencies of HR Outsourcing can be dramatic. For starters, smaller organizations often don’t need full time support, and can therefore save on the annual salary (and other employment costs) of a full time employee in-house. Fractional HR managers can take care of human resource tasks without the need for a full-time commitment. They might be able to handle your company’s needs in just a few hours per week, which would be much more cost efficient than hiring an entire team of employees. On top of these efficiencies, organizations can enjoy significant savings on setting up new systems (such as Payroll, Benefits administration, HR Information Systems and Applicant Tracking Systems), as most HR outsourcing companies already have these and include them in the service.

2 - Fast Start

Finding the right employees to run your HR function takes time, and is full of risk. HR is a rapidly progressing profession, and finding someone who has the right experience combined with being the right fit for your organization is tricky - it can take six months or longer. Reputable HR outsourcing companies such as NorthstarPMO understand these nuances and will work hard on your behalf to understand your needs and match you up with the right professional (or team of professionals). Even better, they have teams of qualified, pre-vetted professionals ready to help you, so you don’t lose a bunch of time looking for the right fit.

3 - Reduced Management Burden

If your organization is not ready to hire its own HR team in-house, the job still needs to be done. By default, HR responsibilities will fall to senior leadership, line managers, and administrators in other functions. This places an often-unwelcome burden on your valuable employees who were hired to do other jobs, and can lead to detrimental performance and reduced employee satisfaction. Outsourcing your HR frees up your people to do the job they were hired for.

4 - Getting a better deal on benefits and payroll

Although it is possible to set up and run your own payroll and benefits, I strongly advise my smaller clients against doing so - even through a managed service. Although these organizations do market to smaller clients, they are rarely cost effective solutions, and have a well-deserved reputation for providing terrible support. Having an outsourced HR partner design, set up and support your benefits and payroll can save small organizations tens of thousands of dollars per year - and avoid the headaches of having to deal directly with frustrating and incompetent support departments.

5 - Reduced compliance risk

US organizations find themselves in the position of having to comply with a number of complex employee laws - at federal, state, and even local levels. These laws are always evolving and companies need to stay up-to-date on them in order to avoid legal risks.

Outsourcing your HR department can help you reduce your compliance risk by hiring an HR company that has experience with implementing complex legislation in a way that protects your employees and your business. Your Outsourced HR partner will also alert you to upcoming changes in the law that may affect your business, and will work with you to make sure your business stays compliant.

6 - Improved Employee Relations

Humans are emotionally-driven, and the relationship between your organization and each employee is complex and difficult to manage. To get the best from your employees, your organization needs to nurture this relationship and have the resources to support many different types of people. Without access to HR staff experienced in the art of Employee Relations, organizations often ignore the importance of taking care of their people. The outcomes of poor Employee Relations can be very damaging. It might start with poor morale, manifesting in lackluster performance and/or attendance. If allowed to fester, poor Employee Relations can lead to more devastating consequences, including mass attrition, toxic working environments, and even sabotage. Hiring a professional outsourced HR service can help you avoid these problems by proactively managing Employee Relations and helping resolve issues before they lead to serious harm.

7 - Smoother growth

What are the combined benefits of lower overheads, reduced management burden, managed business risk and a happier, more engaged workforce? Smoother, accelerated business growth. Even if your HR burden is relatively minor today, it is important to remember that the workload scales exponentially with headcount.

If company growth is important to you and you don’t yet have an HR game plan, it is certainly worth talking to potential HR partners sooner rather than later. A modest investment in supporting your team today can have huge positive effects in smoothing and accelerating your growth.