Balancing Act: Weighing the Pros and Cons of Human Resource Outsourcing

Owners of small to medium-sized businesses have plenty on their plate on a daily basis. It’s not always clear how to balance the tasks required of a leader — like planning, strategy, and execution — with the myriad of details involved in important HR functions.

Tasks like payroll processing, onboarding, policy implementation, and data management are critical and cannot afford to be overlooked. However, the larger your company grows, the more difficult it is to find the time to do these jobs well.

When it comes to HR, small mistakes can quickly become majorly expensive.

With this in mind, you may be considering outsourcing human resources. To help you understand whether this is right for your business, we’ve put together a list of pros and cons.

What is Human Resource Outsourcing?

Human resource outsourcing involves working with a Professional Employer Organization (PEO) that offers comprehensive support to small and medium-sized businesses in various HR aspects such as employee training, corrective action planning, hiring, termination, administering employee benefits, fostering the implementation of HR best practices, and more.

Here’s a breakdown of the most common services that a human resource outsourcing company can provide:

• Recruitment and Staffing
• Employee Onboarding and Offboarding
• Payroll 
• Benefits Administration
• HR Consulting
• HR Technology and Data Management

The Pros of Working with an Outsourced Human Resource Company

To help you decide if HR outsourcing is right for you, let’s start with the benefits. 

Access to HR Expertise

Human resource outsourcing companies offer unparalleled expertise in the HR industry by specializing in a specific set of skills. 

What can this expertise get you?

• Staying up-to-date with the latest HR laws and regulations
• Compliance expertise to guide you through difficult situations
• Risk mitigation on issues such as wrongful terminations, discrimination, and workplace accidents

Scalability

As your business grows, your HR needs may change. When you only have a few employees, you may be able to handle HR functions independently with little guidance. But as you scale, outsourcing your human resource tasks allows for flexibility in HR operations.

Focus More on Core Business Operations

As a leader, it’s your job to stay on top of big-picture tasks like which market to expand into, who to hire, what responsibilities to delegate, and holding your senior leadership accountable.

Put simply, there will come a time in your business’s growth when you may not have time to handle time-consuming HR tasks anymore. When this day comes, an HR consulting firm can take on tasks like:

• Benefits Administration
• Recruitment and Onboarding
• Employee Records Management
• Compliance and Regulatory Management
• HR Policies and Handbook Management
• Employee Relations and Conflict Resolutions

The Hidden Benefits of Employee Development

Better employee development means you can unlock the potential of lower-level employees who can become leaders down the line. 

Employee development also means more satisfied employees who stay with the company longer, exhibit greater loyalty and perform better.

The Cons of Working with an Outsourced Human Resource Company

There are clearly tremendous potential benefits involved with outsourcing your human resources. However, it isn’t the right decision for every business.

Here are some potential drawbacks that might come with outsourcing HR.

Loss of Control

Outsourcing HR functions generally results in a lack of direct control over many aspects of your HR operations. This can be stressful and distracting for some business owners.

Transition & Communication Challenges

The transition to outsourced human resources can be challenging, particularly if that company exists in a different time zone.

One-Size-Fits-All Solutions

There is a risk that the HR consultant you choose employs one-size-fits-all solutions to their HR services. Lack of personalized solutions could mean your company is getting second-rate HR, leading to problems that will need to be patched up in the future.

Employee Resistance

HR is a sensitive topic for employees, who are often weary of changes to HR management and policies. Concerns about job security, communication gaps, and how to adjust to new processes can negatively impact morale and productivity.

Making an Informed Decision About Your HR Needs

When considering outsourcing your HR operations, it’s important to first understand why you’re researching the topic to begin with.

Have you had HR challenges you weren’t sure how to overcome? 

Do you think you’re spending too much time on daily HR tasks? 

Are you planning to scale aggressively and looking for a solution that will bridge the gap between your small business and the large one you plan to build?

Finding answers to questions like these will help you understand if outsourcing is right for you. Here are a few more tips for choosing the right human resource consultants:

• Conduct a cost-benefit analysis
• Create a transition plan and timeline
• Plan regular evaluations and adjustments of the outsourcing strategy

Work with a BBSI HR Consultant to Uncover Your Business’s Full Potential 

At BBSI, we feel that all the cons related to outsourcing HR can be resolved by choosing the right partner.

We’re a PEO who specializes in HR consulting. We satisfy our clients by understanding the usual drawbacks an HR firm can pose for a business and making them our strengths.

• We believe in partnership every step of the way, so you never feel like you’re out of the loop.
• We’ll make time to proactively communicate with you through a dedicated business partner who is your main point of contact.
• We start every relationship with a strategy call, so we can get to know you and your business, your goals, your dreams, and how you plan to make them happen.
• We’re experienced and knowledgeable at handling transitions for companies of all sizes. 
• We’ll make the transition as painless as possible.

Ready to get more out of your HR functions by outsourcing to a skilled and experienced partner? Find a BBSI Human Resources Consultant near you.