HR Outsourcing (HRO): 4 Things You Might Not Know

Dec 06, 2017
| Michael Altiero
4 Things About HRO You May Not Know

Human resources is more complex today than ever before. This is even more true for small businesses, who often lack the resources necessary to fully run an HR department. As this function has grown more complicated and regulated, companies have looked to alternative solutions to address their HR needs. One of the most popular options has been to move to an HR outsourcing (HRO) strategy.

In case you’re not familiar with HR outsourcing, this definition from HR Zone sums it up:

“Human resource outsourcing (HRO) occurs when a business instructs an external supplier to take responsibility (and risk) for HR functions and perform these tasks for the business.”

Outsourcing HR needs has proven to be an effective strategy for companies, and not just small business (more on that shortly). It allows leaders to worry less about their HR responsibilities, and instead focus all of their time and attention on other areas of the business that can help lead to growth and success.

Even though HR outsourcing is a popular practice today, there are still some things you might not know about it. That’s why we have compiled four things you may be surprised to learn about HRO!

1) HR Outsourcing Isn’t Just for Small Business

One of the most common misconceptions around HR outsourcing is that only small and medium sized businesses (SMBs) choose this strategy. Believe it or not, companies of all sizes utilize outsourcing to assist with their HR needs. According to research from Gartner Inc., 80% of companies now outsource at least one HR activity.

In addition, it is reported that an estimated 50% of large organizations outsource all or parts of their HR functions. Both of these numbers are only growing as more and more regulations impact the HR industry, causing even more uncertainty and complexity.

2) Gain Access to HR Compliance Experts

Over the last few decades, laws and regulations around HR have dramatically changed. This has put tremendous pressure on organizations to stay compliant, or face significant penalties that can hinder even the largest companies.

Most HR outsourcing companies offer their clients access to risk management and compliance experts. Partnering with an HRO company means that clients can work with these experts to ensure all compliance standards are met, as well as plan for future law and regulation changes that may occur. Staying compliant with HR and employment laws is critical, and HR outsourcing can help make this easier.

3) Believe It or Not, Save Money on HR Costs

HR departments can be extremely expensive to maintain. This is why outsourcing is an extremely popular option for smaller businesses who might not have the means to support a full HR department. But what may surprise you is that outsourcing can actually save a company money on HR costs.

Often times, partnering with an HRO company will cost less (especially over time) than running a full HR department. And as smaller businesses grow, the opportunity exists to save even more! This is one of the biggest reasons why HR outsourcing is growing in popularity, especially amongst small businesses.

4) Employees Can Have Improved Benefits Offerings

Being able to offer competitive benefits to both current and prospective employees is a significant challenge for smaller employers. This is proving to be even more true with healthcare and insurance costs rising in the United States. Choosing a HR outsourcing strategy can help small businesses navigate the ever-changing healthcare industry and provide them with access to large group benefits plans.

This has numerous benefits to smaller employers. Competing for talent can be a challenge for small businesses, especially when going up against Fortune-500 organizations. Being able to offer the same level of benefits as these much larger companies can turn recruiting into a powerful tool for smaller businesses. Not to mention that current employees will be happier and more engaged if they are provided with better benefits offerings. Reducing turnover and hiring top talent will help drive business success.

HR Outsourcing Can Provide Numerous Benefits for Small Businesses

Human resources is challenging for today’s businesses. With all the changes in HR and employment law, the uncertainty in the health insurance market, and the growing competition for talent, small business leaders can easily feel overwhelmed when dealing with HR.

This is where HR outsourcing could prove to be valuable, and is starts with having a better understanding of what it is and how it can help. HRO certainly isn’t a fit for all SMBs, but for those that are, growth and success can be achieved with the right outsourcing partnership!

Want to learn more about PEOs? Check out our eBook, How Well Do You Know PEO? This eBook provides an overview of the PEO industry as well as helpful information for brokers and employers!

How Well Do You Know PEO