How to Implement HR Outsourcing

Outsourcing part or all of your HR services can have many advantages, especially if you don’t have your own experts on staff. If you’ve decided that contracting out some of your HR work is right for your business, the next move is figuring out how to make it happen. Follow this guide for mastering the implementation process.

Starting Your Search

Before you can begin comparing candidates, you need to decide exactly what it is you’d like to hand off. The diversity of options available is one of the benefits of outsourcing. These options vary in cost and coverage.

Do you want to hire someone to handle every single part of your HR department? A professional employment organization (PEO) might be a good fit. In this arrangement, your workers technically become employees of the PEO for HR purposes, but they still work for you. That way, the PEO is in charge of all the HR administration, including health insurance and other workplace benefits. You’ll pay for the service, but they’re in charge of dealing with the insurers and managing the plans.

Do you want customized help for a specific goal, like designing your employee best practices and training? In this case, you could look for an HR consultant. They take care of these needs on a project-by-project basis.

Finally, if you’re looking for a more affordable solution to handle an ongoing task like payroll, HR software could be the way to go. Some HR software programs also offer live support for an additional cost.

Vetting the Candidates

A quick web search will show you plenty of options for all types of HR firms. To find the best fit for your organization, consider several factors, including:

  • Reputation. Has the company won any awards or been promoted in third-party articles for their services? Can they give you referrals from other businesses in your industry?
  • Services. Do they offer a wide range of HR services? It may be a good idea to use a firm that covers tasks beyond what you’re looking for right now. This way, you can easily add extra support in the future.
  • Employee benefits. If you work with a PEO, do they offer all the workplace benefits your employees expect, from health insurance to retirement planning? How do the prices compare to setting these benefits up yourself? Your PEO may offer a group discount since they’re covering so many employees between your company and their other clients.
  • Client turnover rate. Ask if the organization can provide this information. If customers are constantly leaving, take caution and ask for context.
  • Price. While price shouldn’t be the only factor — and in some cases cutting corners here could hurt the quality of services you receive — you should still seek out competitive pricing to maximize your budget.
  • Tech and customer support. If you’ll be using any type of HR software or other technical resources, request a demo to see how you and your team like it. You should also see what kind of support the HR firm offers. Is there a customer service line? Can they send someone to visit your organization?
  • Personal connection. While talking to different candidates, ask yourself whether you can picture working with each of them. They’re going to be a key partner going forward, including during stressful times. Will you get along?

Onboarding Your HR Partner

When you partner with an outsourced HR firm, they will tell you what they need to get started. Expect to transfer over all documents related to whatever HR functions you want them to cover: payroll and tax forms, time-tracking documents, benefits information, your company’s existing rules and policies, your employee handbook and so on.

You should also provide input on your company’s culture and goals, especially if you’re contracting out any task that’s more than just crunching numbers. For example, if you’re trying to get help with hiring, you’ll want the organization to know what makes your organization unique so they can effectively develop job postings and find the right candidates. If you don’t give them your perspective, you won’t get the full benefit of their services.

Ultimately, the HR firm has been through this process many times before, and they should be able to tell you exactly what they need for a successful onboarding. It’s just up to you to make sure they get it.

Making the Most of Your Relationship

After you’ve started working with an HR firm or software solution, avoid the urge to completely wash your hands of whatever function they oversee. You should check in with the outsourced team to see how things are going at least quarterly. Ask whether they need anything else from your organization.

As the relationship continues, beware of outsourcing too many tasks. Just because you outsource part of your HR work doesn’t mean you have to loosen your grip on everything. You may still want to handle some work yourself or use your own HR staff for certain tasks. In general, generic tasks that most companies handle the same way — payroll, for instance — are simpler to outsource than tasks that are more unique to your organization, like finding ways to improve employee engagement.

If you’ve outsourced health insurance and other benefits, continue surveying employee satisfaction, just as if you were still running those programs yourself. While the PEO will be administering it, it’s up to you to determine whether or not your employees are happy with the package.

Ultimately, you should see your HR outsourcing firm as a partner. Both of your organizations rely on your mutual success, so it pays to lay the foundation needed to build a strong relationship together.

Stay up to date on the latest health care regulations and trends for your small business: Subscribe to our monthly newsletter.

COVID-19 Resources: Managing Your Business During a Crisis