The 3 Core Advantages Gained by Outsourcing Human Resources

CoAdvantage- Outsourcing HR gains three big advantages for businesses: time, money, and competitive advantage. Even better, outsourcing can have an outsized impact for small and midsize businesses (SMBs) in particular; and this is true even if all your team does is offload transactional HR tasks to a third-party. But how exactly does outsourcing deliver these core benefits?

Gaining Time

According to SCORE and the Small Business Administration, HR work consumes 25-35% of a small business owner’s time. Analysts at PwC agree: they found that 73% of businesses wanted to outsource specifically to eliminate the 75% of HR work hours spent on transactional tasks. Outsourcing HR returns hours to business owners and leaders by removing important but time-consuming tasks from their plate and streamlining HR administration overall.

Saving Money

HR outsourcing reduces overall business expenses. In fact, reducing costs is the most common reason cited by businesses for why they outsource HR. And the numbers show that HR outsourcing delivers solid savings. The Hackett Group has found that “world-class” HR organizations (that is, high-performing HR teams when compared to HR in businesses at large) operate at 25% lower cost and with 31% fewer staff – and they’re 91% more likely to have HR business partners. In other words, outsourcing allows organizations to streamline HR functions and reduce related staff expenses.

Achieving Competitive Advantage

By outsourcing, employers can leverage big-company, enterprise-grade HR services (like Large Group Health Plans), even for SMBs. Indeed, nearly half (44%) of companies use outsourcing to gain access to services they could not themselves provide. According to a study from IBM, business process outsourcing also improves change readiness, compliance, and risk management. In other words, outsourcing can increase a company’s ability to adapt to changing conditions, flexibly meet new demands, and effectively mitigate emerging risks.

What HR functions should be outsourced to gain these advantages?

There’s no one-size-fits-all answer to this question; it depends entirely on the organization’s unique circumstances and business objectives. HR service and support, payroll, benefits administration, training, recruitment, talent management, and more are all viable options for outsourcing. Working with a Professional Employer Organization specifically can even accelerate many of the benefits described above; for example, a survey from the National Association of PEOs found that administrative HR costs are about $450 lower per employee for businesses that work with a PEO.

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 CoAdvantage’s ability to create a strategic HR function in your business that drives business growth potential, contact us today.