One of the unsettling realities of business life is that many organizations have no human resources component to manage routine HR management functions.
This is especially true for small to medium-sized businesses. Over the last few years, increasing numbers of small-business owners have found they need help with managing benefits administration and other HR tasks. Many small employers feel that they are not quite large enough to justify having a full-time HR person on staff.
For these businesses, outsourcing their HR management functions is the answer.
Smaller businesses have discovered that outsourcing can meet their need for HR support as well as other functions, such as developing an employee handbook, process their payroll, secure and oversee medical benefits and retirement plans and handle worker's compensation claims.
In addition to easing an entrepreneur's administrative headaches, a big advantage to outsourcing HR is that it significantly reduces an employer's liability. Staying in compliance is a real challenge, especially for smaller companies, but delegating that to a third-party firm can ease the burden.
Larger Businesses Also Benefit From Outsourcing
It has been a long term trend among larger, enterprise-level American companies, and indications are that outsourcing various aspects of HR management, especially payroll management, is on the rise.
Much of this shift is due to another rising trend of increased regulation, complexity and compliance demands being placed on HR professionals. New labor laws and changing payroll requirements threaten to overwhelm many businesses.
Outsourcing is a common approach, but one that still concerns many business owners. Consequently, understanding the basic concepts is important for a business considering the option of outsourcing some or all of their HR functions.
According to an article from the Society for Human Resource Management:
HR outsourcing is a contractual agreement between an employer and an external third-party provider whereby the employer transfers the management of, and responsibility for, certain HR functions to the external provider. The options can be as specific as outsourcing one particular aspect of one HR function—such as applicant tracking for affirmative action purposes—or as broad as outsourcing the entire human resource department.
One recent survey determined that payroll management and tax filing are the functions most often outsourced by accounting and finance departments in the United States and Canada.
According to another survey by Deloitte the top three areas that businesses in the U.S. planned to outsource were:
- (38%) HR Administration
- (36%) Payroll Time and Administration
- (32%) HR Reporting
In addition, at the time of the survey, 34 percent of respondents said that their company already outsourced their HR Information Systems management, with a further 29 percent of respondents saying they were planning to outsource the service in the future.
What Businesses Are Doing With Their HR and Payroll Management
Outsourcing of payroll occurs at nearly half of the U.S. companies participating in the fifth annual benchmarking survey released jointly by staffing services firm Robert Half and the Financial Executives Research Foundation, the research affiliate of Financial Executives International.
In a news release Paul McDonald, a Robert Half senior executive director, stated:
“What’s striking is the continuing high percentage of companies that rely on manual reconciliation of accounts—some with thousands of general ledger accounts. There is a significant opportunity for these firms to streamline the close and use their resources more efficiently.”
One of the problems many companies are facing is a rising trend in overtime hours needed to meet the demands of increased compliance.
In their survey, Robert Half and the Financial Executives Research Foundation, found that among the U.S. firms who responded, accounting and finance managers average 47 hours of work per week, while non-management staff averages 42 hours per week.
And these numbers are expected to increase under their current management models.
Discover the Benefits of Outsourcing Your HR Processes
Considering alternatives such as outsourcing is increasingly becoming a cost-effective and strategic option. Accuchex can help you in managing your HR needs, payroll processes, and staying on top of compliance demands.
At some point in the growth of your company it makes sense to consider other options for maintaining and managing the vast number of tasks and functions that fall under the HR department. While newer software and automation are certainly viable and beneficial options, it can often be far more cost-effective to outsource.
If you are considering outsourcing some or all of your payroll processes, give us a call. Let Accuchex help you in managing your HR needs, payroll processes, and staying on top of compliance demands. Feel free to reach out to us at 877-422-2824.