When you start a business, HR issues such as taxes, benefits, safety programs, and payroll may seem distant. In reality, handling all these can be taxing unless you have a sizable HR department. That's why HR outsourcing is gaining popularity.
Since the demand for HR outsourcing is high, so is the supply. However, not all HR outsourcing solutions are created equal. Knowing which questions to ask before outsourcing HR can help you find the right partner for your business.
Why Are Businesses Outsourcing HR?
More and more small and mid-sized businesses are outsourcing HR. The most common reasons for finding a reliable HR partner include:
Outsourcing HR tasks means freeing up time for your HR team and other employees to focus on their core tasks.
Payroll — Payroll is one of the most time-consuming administrative tasks. Outsourcing it saves time and, in some cases, money. If you choose a comprehensive HR outsourcing solution, you can also share payroll liability.
Benefits Administration — Outsourcing benefits administration can give your HR team more time to deal with other tasks. You also don't need to worry about staying up to date with benefit compliance regulations.
Employee Manual—outsourcing employee manual development can save you time and legal fees and ensure full up-to-date compliance with all current regulations. HR service providers often have experienced labor law specialists who can help design and update employee handbooks.
Background Checks — by outsourcing aspects of the hiring process to an HR partner, you can delegate pre-employment screening. This is especially useful for companies that process numerous candidates for each position.
Workers' Comp Administration— outsourcing HR can minimize workers' comp issues and save time on understanding employee classification.
Unemployment Insurance Administration— by outsourcing unemployment insurance administration, you put claims into the hands of professionals. An HR partner usually has a team of experts who deal with claims faster than an understaffed HR department can. They will challenge invalid claims to keep your unemployment insurance rates as low as possible.
Outsourcing HR tasks don't just save time. For many companies, it can also mean significant cost savings, such as:
Access to better benefits — if you work with the most comprehensive HR outsourcing solutions, you can gain access to Fortune 500 benefits regardless of your organization's size. Your employees will become a part of a big pool comprised of numerous companies your outsourcing partner works with, giving you an opportunity to offer enterprise-level benefits at an affordable cost.
Lower Workers' Comp Premiums — in some states, if you choose to work with a comprehensive HR outsourcing provider, you can gain access to top-notch coverage and lower premiums.
Lower unemployment insurance rates— in some states, you can adopt the unemployment insurance rate of your HR outsourcing partner. In many cases, these rates can be lower than yours.
The cost-saving potential differs depending on the partner you choose to work with.
Which Questions Should You Ask Before Outsourcing HR?
Let's take a closer look at 10 essential questions to ask before outsourcing HR.
1. How can you save us time and money? Since time and cost savings are the key reasons for outsourcing, make sure the HR service provider is straightforward about them. Reliable providers readily offer answers to such questions.
2. How are upfront and ongoing fees determined? Different HR outsourcing solutions can have different pricing options. Learn as much as you can about the way these fees are determined in order not to face unpleasant surprises in the future.
3. What kind of experience does your staff have? A reliable HR service provider should have a team of experts with several years of experience. Otherwise, it doesn't make sense to outsource complex and time-consuming tasks.
4. What is your customer retention rate? The customer retention rate demonstrates how happy other companies are with this solution.
5. Which administrative services do you support? Before interviewing a potential HR partner, you need to create a list of services you want to outsource. Make sure the candidate can provide all administrative services you require now or may need in the future.
6.What sets you apart from other HR outsourcing solutions? HR outsourcing partners work hard to outrun the competition by creating unique offers. This question can help you decide between two candidates while gaining access to better deals.
7. Do you have experience with similarly-sized companies? If the HR organization hasn't worked with similarly-sized companies from the same industries before, it may take a while for them to adjust to your needs. In such a case, consider looking at other candidates.
8. How long have you been in business? The longer the company has been in business, the better it knows all nuances of HR services.
9. Can you operate in all the states where my employees work? If your company operates in different states, the HR outsourcing organization should also be able to provide services in different states.
10.How long will implementation take? The longer the implementation takes, the harder it is to avoid downtime. Choose a candidate with a reasonable implementation time.
Which HR Outsourcing Solution is Right for Your Business?
When choosing the best HR outsourcing solution for your company, be ready to ask the right questions. The ideal HR outsourcing partner will be able to answer all the above questions in a satisfactory manner.
The right HR outsourcing partner doesn't just have sufficient experience, reasonable pricing, high customer retention rates, and time-saving options. The company should provide cost-saving opportunities to increase the ROI of outsourcing.
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Tom DiSilva has been providing professional human resource services for over 30 years. As the CEO of Navigate PEO, he actively partners with organizations of all sizes in the Greater New England area and across the country to help their businesses grow. He has expertise in HR and Labor Management, offering guidance and support for key areas of business such as negotiations, operations management, employee coaching, and employee benefits design.