HR Outsourcing Trends for 2020

In our series on the outlook for 2020, we’ve identified the biggest HR trends, like workplace flexibility and an evolving role for HR organizations; and we’ve discussed some of the biggest issues facing small businesses, like recruitment challenges. But what about HR outsourcing trends specifically? What’s new or important for companies that outsource some or all of their HR?

Doing More With Less

Outsourcing, when handled well, is fundamentally multiplicative: the idea is that for the same amount of money, companies can generate more results when outsourcing than when insourcing. The data seems to support this conclusion. The Hackett Group’s most recent report on HR performance finds that world-class HR organizations spend 26% less and have 32% fewer staff compared to HR groups as a whole. Why? According to the Hackett group:

• They make more effective use of outsourcing and “selectively” outsource areas that will yield the greatest benefit, including compensation, benefits administration, employee relations, and talent acquisition.
• They employ fewer transactional employees and fewer staff who work on employee lifecycle activities; that’s possible thanks to outsourcing those duties. Instead, in-house staff focus their staff on “higher value talent management and strategic planning activities.”

Compounding Benefit

One of the findings in the Hackett Group report is that success tends to compound for effective HR organizations. For example, they use their staff for higher value talent management, as described above. That translates into significantly lower turnover rates which, in turn, “help sustain high workforce productivity while reducing turnover costs.”

Offering More Comprehensive and Consultative Services (Beyond Payroll Alone)

Surprisingly, relatively few organizations rely on payroll-only outsourcing. Instead, the majority opt for more comprehensive services that can include PEO offerings and HR consulting. It’s likely that as transactional HR tasks are handled by a combination of outsourcing and smart technologies like automation, organizations can better leverage HR as a strategic partner.

Outsourcing Can Serve as an Economic Hedge

A report from Brandon Gaille found that in the aftermath of the Great Recession, a majority of employers (57%) actually increased their use of outsourcing. Only 9% ended outsourcing. It appears they did so because outsourcing was cost-effective and helped them to navigate the economic crunch.

CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.