Many businesses are struggling to manage HR tasks while focusing on their core activities. What if they could streamline operations, reduce costs, and ensure compliance effortlessly? Discover why outsourcing HR functions can be the ultimate game-changer for any business.
In today’s fast-paced business environment, companies are constantly seeking ways to streamline operations and maintain a competitive edge. One highly effective strategy that has emerged is the outsourcing of Human Resources (HR) functions. According to microsourcing.com, a report stated that, in 2020, the global HRO market was valued at U.S. $32.8 billion. The same report estimates its value to reach U.S. $45.8 billion by the end of 2027. This is a clear indication of how important these services are going to become soon.
Outsourcing allows businesses to focus on their core competencies while leveraging the expertise of specialized providers to manage essential HR tasks. This comprehensive article will delve into the myriad reasons why outsourcing HR functions can be a game-changer for mid-size businesses in the USA. By entrusting HR responsibilities to external experts, companies can get various benefits, like streamlining operations, enhancing efficiency, and reducing overhead costs. Let’s have a look:
- Cost Savings: Outsourcing HR functions can lead to substantial cost savings. By partnering with an external HR service provider, businesses can eliminate the need for in-house HR staff, thereby reducing salaries, benefits, and overhead costs associated with maintaining a full-fledged HR department. A Deloitte survey found that 78% of respondents stated their HRO provider either met or exceeded objectives related to cost. Studies have shown companies tend to save over 20 percent of regular expenses compared to keeping all human resources functions in-house, says empowerhr.com. Also, HR outsourcing could save the organization up to 70% on employment costs alone.
This is particularly beneficial for mid-size businesses that may not have the resources to support a comprehensive in-house HR team.
Its most prominent example is TechSolve, Inc. Silicon Valley-based TechSolve Inc. is a rapidly expanding technology company that was founded in 2008. The company had more than 1,000 workers, making it difficult to handle HR responsibilities effectively.
The HR difficulties at TechSolve Inc. grew along with the company. The internal HR team was overburdened with tasks ranging from payroll and compliance to employee relations and recruitment. The cost of maintaining a whole HR department, combined with inefficiencies and bottlenecks, drained resources that could have been invested in innovation and growth.
In order to overcome this challenge, after an in-depth market analysis, TechSolve Inc. partnered with an outsourcing agency called HRPro Solutions. As a result, it not only managed to save costs but also witnessed a surge in employee satisfaction rates. The partnership allowed the firm to focus on what they do best: innovate and lead in the tech space, knowing that their HR needs were in expert hands. This benefit is followed by,
- Access to Expertise: As per genesishrsoluions.com, HR outsourcing firms are staffed with professionals who specialize in various aspects of human resources, including compliance, payroll, benefits administration, and more. These experts stay up-to-date with the latest industry trends and regulatory changes, ensuring that a business remains compliant and operates at peak efficiency.
- Enhanced Focus on Core Business Activities: According to a report by prnewswire.com, around 45% of businesses spend almost an entire day a week or more on administrative HR issues. Also, according to Harvard Business Review, 85% of executive leadership teams spend less than one hour per month discussing their unit’s strategy, with 50% spending no time at all.
By outsourcing HR functions, businesses can redirect their focus and resources towards core activities that drive growth and profitability. This strategic shift allows companies to concentrate on areas such as product development, marketing, and customer service, ultimately enhancing their competitive edge. Additionally, outsourcing ensures that these core activities are not disrupted by administrative burdens.
- Improved Compliance: Navigating the complex landscape of employment laws and regulations can be challenging for any business. HR outsourcing firms have the expertise to ensure compliance with federal, state, and local labor laws, reducing the risk of costly legal disputes and penalties.
- Access to Advanced Technology: HR outsourcing providers invest in the latest HR technologies and systems, offering businesses access to cutting-edge tools for managing employee records, payroll processing, benefits administration, and more. According to digitalmindsbpo.com, 75% of common HR functions can be completed by modern technology. This technological advantage can lead to improved efficiency and accuracy in HR operations.
- Enhanced Employee Experience: 47% of human resource departments state employee turnover and retention as their biggest challenge. In order to overcome this challenge, outsourcing comes into play. Outsourcing HR functions can lead to an improved employee experience by ensuring timely and accurate payroll processing, efficient benefits administration, and responsive HR support. This can enhance employee satisfaction and retention rates.86% of the companies recognize HR outsourcing as a way to improve their employees’ experience and morale. An Oxford University study found that happier employees are 13% more productive, allowing the business to achieve objectives sooner. In addition to improving employee satisfaction, outsourcing HR functions also ensures that companies stay updated with the ever-changing labor laws and regulations.
- Strategic HR Support: Due to the COVID-19 pandemic and popular movements like “The Great Resignation,” “The Great Re-evaluation,” and “The Great Reshuffle,” labor laws and regulations are continuously adapting to the needs of the modern workforce. No matter how big a company is, it is imperative that one follow union regulations regarding employee overtime, superannuation, and other matters. The repercussions could be severe if these areas don’t receive appropriate treatment.
Outsourcing human resources might give one the extra help their onshore staff needs to monitor these developments and revise policies and procedures. As needed, this additional assistance can operate under the supervision of your HR directors to maintain a company’s compliance with all applicable local, state, and federal regulations.
- Access to a Global Talent Pool: According to a Deloitte survey, 83% of businesses believe retaining and attracting talent is becoming increasingly difficult. Therefore, outsourcing is the only solution to overcome such difficulties.
For businesses looking to expand their operations globally, HR outsourcing firms provide access to a diverse talent pool and offer expertise in managing international HR operations. This global reach can facilitate seamless expansion into new markets.
Outsourcing HR functions is a strategic decision that can yield numerous benefits for mid-size businesses in the USA, as stated above. By partnering with a reliable HR outsourcing provider, businesses can achieve cost savings, access specialized expertise, enhance compliance, and focus on core activities that drive growth. Moreover, the flexibility, scalability, and technological advantages offered by HR outsourcing firms can significantly enhance operational efficiency and employee satisfaction.
At Menal Partners, the services are designed to be more accessible and hassle-free for mid-size businesses in the USA. Our structured model ensures that you receive the highest quality HR support, tailored to meet your unique needs, allowing you to concentrate on what you do best—growing your business. Partner with us today and experience the transformative power of HR outsourcing.