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When to Consider Outsourcing HR Administration

Learn everything you need to know about outsourcing human resources administration.
Effective human resources administration is table-stakes for keeping your employees happy and engaged. After all, your employees are the heart of your business, and in order to create great customer experiences, you have to ensure that you’re also creating a great employee experience. HR administration is an integral piece to the employee satisfaction puzzle — if you’re dropping the ball when it comes to payroll or benefits, it could affect employee performance and, ultimately, your bottom line.

But human resources is a complex business function with many moving parts, and small businesses (or those who are stretched thin by understaffing) frequently face challenges juggling it all. Employers must stay on top of payroll and tax requirements, as well as both state and federal labor laws and regulations. Small and mid-size businesses who don’t have a dedicated HR department (or who only have a small HR staff) can sometimes find themselves overwhelmed with the sheer amount of work. And all too often, that administrative burden can monopolize your time and energy when you could instead be working on revenue-generating initiatives to grow the business.

That’s why many astute operators are turning to outsourcing services for help with HR tasks. By handing over payroll, benefits administration and even aspects of the hiring process to a dedicated HR service provider, business owners can focus on running their day-to-day business operations, increase employee satisfaction, lower their risk of noncompliance, and save money.

So, when should a business owner consider outsourcing their HR administration? In this article, we’ll go over a few of the indicators that it might be time to seek outside help. Then, we’ll explain some of the available outsourcing options. Read on!

What are some signs that it’s time to outsource HR?

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HR Tasks Have Become Overwhelming

There are many different business processes associated with HR — payroll needs to be accurate and on time, employees need to have the proper training and certifications, and employment regulations need to be followed. Ensuring that all of that runs smoothly can take up an incredible amount of time for an HR team, let alone a single HR manager. And if your business doesn’t have a dedicated, full-time HR professional (perhaps it doesn’t make sense for your size or you had to recently make cuts in that area) then those responsibilities fall to store managers, or even the owner.

When it comes to HR administration, the devil is in the details. If the people responsible for handling these vital tasks also have other vital responsibilities, things can fall through the cracks. That opens the door for problems. Outsourcing HR functions to a team of full-time experts allows you and your managers to turn your undivided attention to the daily ins and outs of your business, without feeling stretched too thin, or worse — like you’re opening yourself up to liability.

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Compliance Issues Are Piling Up

HR professionals need to have a deep understanding of the federal, state, and local laws that might impact your business. And that’s no small feat, given how often hourly workforce laws evolve. Wage compliance lawsuits Unfortunately, compliance issues are only expected to grow more complicated as the hospitality industry tries to recover from the disastrous effects of the COVID-19 pandemic.

A January 2020 report from Seyfarth Shaw LLC stated, “We anticipate that the tide of workplace class action litigation will continue to rise in several key areas such as discrimination and workplace bias, wage & hour, as well as on the health & safety front.”

Companies still reeling from COVID furloughs and layoffs — or those slowly bringing their workforces back — have a lot more to worry about than risk management. Partnering with an HR services provider can help businesses ensure compliance with evolving regulations and protect them from costly penalties or fees.

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Retention is a Top Objective

After a rough year with many false starts and sudden stops, hospitality organizations all over the world have had to make difficult cuts to stay in business. These businesses want to retain the employees they still have on staff and doing so is partially dependent on efficient HR administration. Few things frustrate employees more than inaccurate paychecks — not to mention the hoops they must jump through to get discrepancies resolved. HR service providers can help you ensure that employee paychecks are accurate every time, and in the event of hiccups, they can quickly and accurately resolve them.

Retention is also closely correlated to benefits — retirement plans, health insurance, long- and short-term disability, and more. HR outsourcing companies often offer businesses access to high-quality benefits packages that only much larger organizations would normally afford. Such packages make your business more attractive and competitive with current employees and prospective hires.

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Cutting Costs is a Priority This Year

HR outsourcing can result in cost savings through economies of scale. By offloading some of your HR administrative burden to a partner organization, you’ll get back time that you can devote to your core business functions and revenue-generating opportunities. Since the HR services partner is staffed by experts in the field, you won’t have to hire, train, or provide benefits to another full-time employee. Outsourcing companies can also provide business guidance to enhance your employee training programs and onboarding, helping to make your workforce more engaged and efficient. In fact, research shows that HR outsourcing can result in lower employee turnover and increased employee engagement. And the result for you is ultimately a better bottom line.

What Are Your HR Outsourcing Options?

There are a few different approaches to outsourcing HR functionality. These are the two main options:

  • Professional Employer Organizations (PEO): PEOs offer co-employment arrangements to give smaller businesses an opportunity to reduce administrative burden and achieve savings through economies of scale. When you join with a PEO, they become your employer of record, taking on some liability and handling payroll administration, tax filing, HR support, benefits, and more.
  • Human Resource Outsourcing (HRO): HROs are very similar to PEOs and will take on many of the same tasks. The key difference is that HROs do not include a co-employment arrangement. HROs will typically handle payroll and tax filing, but unlike a PEO, the paperwork is filed under the hospitality business’s federal employer ID number, not a shared one.

When it comes to outsourcing HR Administration, there are lots of options that you can customize to meet your organization’s specific needs.

Here are some of most common functions that an outsourced HR Administration will take off your plate:

  • New hire reporting
  • Family and Medical Leave Act (FMLA) & Fair Labor Standards Act (FLSA)
  • Employee file maintenance: record keeping, change of status, etc.
  • Managing unemployment claims
  • HR policy and procedures development
  • Background checks
  • I-9 verification and tracking assistance
  • Web-based customized federal compliant employee handbook

If any of the indicators we just covered relate your business, then you might benefit from outsourcing HR functions to a services provider like Fourth. Our HR services are designed specifically for service industries, from hospitality to retail. We can help you navigate the daunting complexity of today’s HR challenges so that you can mitigate risk, offload your administrative burden, and focus on employee recruitment and retention.

To learn more about the benefits of outsourcing HR functions to a services provider like Fourth, contact us today!

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