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Not all businesses have the budget, expertise, or time to manage their human resources (HR) processes in-house. HR services help such businesses outsource either a part of or their entire HR function. They assist businesses in implementing required HR processes but without having to hire and maintain a full-time HR staff or develop in-house capabilities. These services also allow businesses to ensure compliance with labor and employment laws and prepare for federal and state-level audits.
There are several HR service providers on the market, and finding the right one for your business can be time-consuming. In this guide, we’ve included all the information you’ll need to select the right service provider for outsourcing your HR functions.
Here’s what we’ll cover:
- What are HR services?
- Common offerings of HR services
- What type of client are you?
- Benefits of HR services
- Key considerations when selecting HR services
What are HR services?
HR services enable businesses to outsource their HR functions to third-party service providers. Outsourced functions include a range of HR processes such as recruitment, payroll management, benefits administration, training, and compliance management. HR services also include consulting services which help to address HR-related issues and optimize policies.
Common offerings of HR services
In this section, we’ve listed the key offerings of HR services to help you make an informed decision.
|Payroll management||Allows businesses to outsource their employee payroll process. It also helps track time and attendance, calculate net pay and taxes, and remit salaries to employee accounts.|
|Recruitment||Manages job postings, candidate screening, interviews, and offer letters on behalf of businesses.|
|Training and development||Schedules training sessions based on learning and development requirements. Service providers can conduct a variety of in-person and online training sessions including compliance and soft skill development.|
|Benefits administration||Allows businesses to choose from a list of employee benefits such as medical insurance and retirement benefits. Service providers manage the procurement and payment of these plans.|
|Compliance management||Helps ensure compliance with employment regulations such as the Employee Retirement Income Security Act (ERISA) and Fair Labor Standards Act (FLSA).|
|Auditing||Audits HR data to inform about any potential violation of government regulations. It also helps improve HR processes by identifying areas of improvement.|
What type of client are you?
There are two major types of HR service clients, each differing in terms of their HR service requirements.
- Clients that need to outsource the entire HR function: For some businesses, managing all HR processes in-house could lead to ignoring their primary line of business and sometimes higher expenses. Such businesses prefer outsourcing their complete HR function—from hiring to employee offboarding—to an HR service provider who manages it on their behalf. These types of clients tend to have less control over their entire HR function.
- Clients that need to outsource specific HR processes: These businesses usually have in-house HR staff but lack the expertise or resources to perform specific HR functions such as benefits administration or payroll. Such businesses should opt for providers who specialize in their required function and charge clients only for the services offered instead of charging for a complete suite of services. These types of clients tend to have more control over their entire HR function.
Benefits of HR services
There are many advantages of using HR services. In this section, we’ve listed three key advantages that can help you build a strong case to opt for HR services.
- Easier compliance with labor laws: Due to constantly changing employment and labor laws, it can be a challenge to remain compliant. HR service providers track all such changes in state and federal laws to ensure compliance while handling the HR functions of your business.
- Lower HR expenses: Hiring and maintaining in-house HR staff can be expensive. Your business will incur hiring, training, payroll, and related operating expenses. Outsourcing to third-party HR service providers helps reduce these expenses thereby saving money for your business.
- Access to HR expertise: HR service providers have dedicated experience in the HR field. They provide access to HR specialists with expertise across domains such as recruiting, payroll, and compliance. You can also leverage their expertise to design better HR policies for your business.
Key considerations when selecting HR services
When selecting HR services that cater to your needs, these are three key considerations you shouldn’t miss out on.
- Data security: HR service providers have access to sensitive HR data. Any data security lapse on the provider’s end can put your employee data at risk. Data security lapses by third-party HR service providers are one of the major threats to employee data security. Carefully read service contracts to understand the data security practices of vendors you’ve shortlisted. Make sure to also ensure that they comply with the data security requirements of your field of business.
- Total cost of services: HR service providers offer a host of services each available at a different price. When choosing these services, you'll need to be careful about the total costs incurred. Set an expenditure limit and select a provider that offers all the services you need within your budget. You can also speak to our advisors and obtain pricing information for the services you require.
- Offering selection: While there are several benefits of outsourcing HR services, there are some inherent disadvantages too. For instance, the absence of a HR team could have a demoralizing impact on your employees, as HR personnel are usually considered reliable employee allies. Also, for certain HR functions, it could be more cost-effective to handle processes in-house rather than outsourcing them. It’s important that you weigh both the advantages and disadvantages before selecting offerings.