5 Signs You Should Switch HR Outsourcing Solutions

5 Signs You Should Switch HR Outsourcing Solutions

by on 27 Jan, 2022

HR outsourcing is an excellent solution for companies that want access to expert HR assistance without paying the price of hiring new employees. With the right approach, outsourcing HR saves both time and money.

If you are already outsourcing some HR functions but not feeling the benefits, you may need to switch to a different outsourcing solution. Let's take a closer look at the signs that tell you to rethink your current HR collaboration.

Signs You Should Switch 

The most obvious signs that you should switch to another HR outsourcing solution include: 

1. No Cost Savings on Employee Benefits

One of the key reasons many small and medium-sized businesses (SMBs) decide to outsource HR is to take advantage of better and more affordable employee benefits. SMBs rarely have a sufficient budget to cover high-tier employee benefits. This often puts them behind competitors who manage to be more resourceful.

Many HR outsourcing solutions offer benefits administration services. It means that they can help you find the best offer for your money. However, you remain limited by your budget.

A top-notch HR outsourcing partner leverages economies of scale to lower the cost of employee benefits for your company. This way you can get access to Fortune 500 benefits at a reasonable price.

With higher-tier benefits under your belt, it's easier to become an employee of choice for top talent. Meanwhile, it can improve your retention efforts. According to SHRM, employees are more likely to stay with the company if they like the health plan.

If your current HR outsourcing solution doesn't use economies of scale to save you money on employee benefits, you may want to consider other options.

2. Incomplete HR Compliance

If you are working with a payroll processor, you are taking care of all payroll-related needs, including compliance. However, this HR outsourcing solution doesn't take care of many other compliance issues that have to do with such laws and regulations as:

Failure to comply with these and other HR laws could lead to fines, penalties, and employee lawsuits.

If the only function of HR you are outsourcing is payroll, you need the internal team to focus on other aspects of compliance. In case your HR department isn't large or experienced enough to handle compliance matters, you may need to consider switching to a more comprehensive HR outsourcing solution. 

3. No Payroll Tax Remittance

The majority of HR outsourcing solutions compute taxes and process payroll generally. However, it's still up to your company to file employment taxes accurately and on time. Since checking for errors and filing payroll taxes are time-consuming tasks, your HR department is likely to feel overwhelmed by this duty.

The best HR outsourcing solution remits employment taxes for you. Payroll tax specialists make sure you don't have to deal with late filing fees or missed deadlines. 

4. No Workers' Compensation or Unemployment Claims Management

Managing workers comp insurance claims requires high expertise and close attention to detail. Top HR outsourcing solutions know when to challenge a claim and when to accept its validity.

Additionally, they can implement best risk management practices to increase workplace safety and minimize workers' comp insurance claims.

Depending on your state, you may also be able to use the HR partner's lower experience modifier that decreases workers' comp premiums.

Without proper workers comp and unemployment claim management, you may face annual increases in premiums and unemployment insurance taxes.

5. No Employee or Managerial Training

To avoid workers' comp claims and employee lawsuits, it's imperative to provide expert training to managers and staff. Without proper education, they may accidentally discriminate against others or behave inappropriately in the workplace.

An excellent HR outsourcing solution can help provide the required training to your team without the expenses you would incur when trying to hire another third party to do it. 

What are your HR outsourcing options? 

If you decide to outsource your HR functions, your options include: 

Dedicated payroll processor  

A company that handles your payroll administration.

Pros:

  • Ensures compliance with payroll-related laws 

  • Saves time

Cons:

  • Possible errors 

  • No tangible cost savings 

  • Responsibility for mistakes is all yours 

  • Hard to find a reliable payroll processor 

Administrative Services Only (ASO) 

A company that handles administrative tasks, such as payroll, employee handbook updates, regulatory compliance, and benefits administration.

Pros:

  • A wide variety of administrative HR support 

  • Access to experts in many HR areas 

  • Time savings

Cons:

  • No cost savings on employee benefits 

  • Responsibility for mistakes is all yours

  • Hard to find a reliable ASO 

Professional Employer Organization (PEO)  

A company that takes care of all HR-related functions that your in-house team can outsource. That includes everything covered by dedicated payroll processors and ASOs. Additionally, PEOs provide access to higher-tier benefits, lower workers' comp experience modifier (in some states), and shared liability for tax filing.

Pros:

  • Cost savings 

  • Time savings 

  • Reduced liability 

  • Better benefits

  • Access to numerous experts

  • Actionable proactive HR advice

Cons:

  • Hard to find a reliable PEO 

Why choose a PEO? 

If you decide to work with a reliable PEO, none of the above signs will be relevant to your HR environment. This HR outsourcing solution is superior to other options like ASOs and dedicated payroll processors. Meanwhile, the average ROI of working with a PEO is 27.2%.

While other HR outsourcing solutions may seem beneficial, they lack the ability to cut costs, improve your benefits, and turn you into the employer of choice. By working with a PEO, you aren't just streamlining your HR functions, you are improving the company's bottom line.

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How does HR Outsourcing Reduce Costs?

High HR costs are a common problem for businesses of all sizes. The inability to handle these expenses usually leads to reputation issues and sizable penalties. HR.

Disclaimer: this article does not represent expert advice and is provided for informational purposes. Please get in touch if you would like expert HR advice.

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