Human resources outsourcing, or HRO, involves hiring companies to manage personnel functions, such as the administration of health benefits, workers’ compensation insurance, and retirement plans. Smaller companies hire outside human resource management first to administer payroll, pay employment taxes, and manage risks related to HR functions.
Here’s a better look at HR outsourcing services, a $5 billion market, and how they can help companies operate more efficiently.
Advantages of HR Outsourcing Companies
HR outsourcing can help reduce the fixed cost of managing employees. HR firms can be more efficient because the infrastructure and talent are already in place. Small businesses save money and time by hiring HR firms and are better suited to offer a wider range of HR benefits:
- Health insurance plans, including HMOs, preferred provider organizations (PPOs), and health savings accounts (HSAs).
- Dental and vision plans
- 401k, retirement plans, and credit unions
Small businesses are more likely to outsource other human resource functions such as recruitment and payroll administration.
Disadvantages of an HR Outsourcing Firm
While HR outsourcing firms can help companies limit risks and promote growth, they are not without risks of their own. The most significant drawback to outsourcing HR functions is poor internal communications. This is due to the outsourcing company not being onsite and as accessible as possible. What’s more, a third-party firm may not have a good sense of company culture.
Outsourcing HR functions could greatly hurt an organization’s learning curve. Being offsite and disconnected means an HR outsourcing firm is unable to facilitate organizational learning. Employees may start to lose trust in management as other departments may feel they are being outsourced, or that there may be the potential for more outsourcing.
A poorly-run HRO could end up creating disasters by accidentally leaking sensitive and important information, not delivering adequate services, or leaving a client without any HR services at all.
HRO and the U.S. Economy
Human resources outsourcing can help the U.S. economy. First, it can help small businesses with competing against larger organizations, allowing them to take advantage of HR firms instead of building this kind of expertise in-house. An HR firm can focus on their core businesses and maintain their advantage.
Next, it also lowers business costs for all corporations. They can use lower costs to cut their prices for services, which in turn helps consumers. It can also make companies more profitable in the long run.
About The Hilb Group
Deciding what coverage you need and what limits and deductibles make the most sense can be tricky. Founded in 2009, the Hilb Group has been helping clients to make sense of their options and make the smartest choices for their circumstances. Whether you need Warehouse Insurance or any other type of business or personal coverage, we encourage you to contact our friendly, experienced, and capable team today. Call us at (800) 776-3078 for a consultation.