Organizations have adapted their operations to accommodate recent changes in the way we do business. Because of these changes, leaders and key stakeholders have had to rethink their human resources strategy to address significant HR gaps that have emerged. Depending on your organization’s needs and resources you may choose to hire additional resources, implement extensive training, and/or outsource HR functions where there is a lack of internal expertise or bandwidth. When deciding how to expand HR expertise, it’s important to evaluate the current effectiveness of your organization’s HR strategies. Consider these key components: risk, cost, HR expertise, and technology.
Identify vulnerabilities in your HR program
First, it is helpful to do an audit of your HR program that includes a risk assessment to ensure all the bases are covered. Every organization should address core HR functions related to compliance and essential HR practices. These include:
- Posting and recordkeeping
- Recruiting and employee onboarding
- Wage and hour compliance
- Employee handbooks and company policies
- Employee relations and performance management
- Payroll and benefits compliance
Beyond the basics, it is wise to consider industry-specific components, state and regional requirements, and your organization’s culture and values. To avoid blind spots, bias, or internal resistance, consider getting a third-party assessment. Once uncovered, you can set priorities based on risk and consider options to cover the HR gaps.
Often overlooked, having a single point of vulnerability can be a significant blind spot in an organization. It is important to ensure your HR team has redundancies built-in. Does your team rely on undocumented institutional knowledge in the delivery of HR services? Is the expertise in your organization siloed with individual employees? If one of these HR team members left the organization or was out on extended leave, your business could be exposed to significant risk. Taking preventive measures is particularly important for HR functions related to compliance with employment law. There are several options to protect against these single points of vulnerability. At the base level, ensure your procedures are documented and that your HR team has adequate training. To shore up expertise, you may want to consider hiring additional resources to ensure you have redundancy on your team, especially for areas that consistently take up a lot of your team’s bandwidth. You can also subscribe to an HR database that your team can access to research topics where they lack competency. Along with these options, you may find it advantageous to outsource HR functions where you have gaps, require specialization, or lack the internal resources or funds to support expanding your internal team.
Determine the most cost-effective HR solutions for your business
We have endured one of the most economically challenging periods in recent history. Most savvy organizations are focused on gaining efficiencies as we emerge from the pandemic and its resulting lockdowns. As leaders evaluate their HR program, it is essential to compare the value of maintaining an entirely in-house HR program with outsourcing some HR functions.
Overhead for in-house HR employees includes base compensation, benefits, and payroll taxes. An HR professional’s salary can range significantly depending on experience and expertise with HR functions and employment law compliance. When hiring, costs are controlled by acquiring HR professionals at the experience level that fits the organization’s budget. HR outsourcing services are typically billed at a flat monthly fee or project rate. The costs can vary depending on the organization’s size and services utilized, which allows for scalability and the ability to customize the outsourcing services to the organization’s precise needs.
In the case of small to mid-sized companies, the cost for maintaining an entirely in-house HR department typically exceeds the cost of outsourcing. Let’s break down the numbers by analyzing the average wage of HR professionals based on the most recent US Bureau of Labor Statistics national wage data:
Say, for example, there is a 100-employee company that does HR, payroll, and benefits administration in-house. Most companies this size have an HR Manager and an HR Assistant or Payroll Clerk to cover all the HR, payroll, and benefits responsibilities. Looking at the national average for these two positions, organizations could be paying upwards of $130,000 – $170,000/year plus payroll taxes and various benefits for the in-house HR employees. You could expect a monthly fee of between $67 – $80 per employee to outsource these services ($80,000-$97,000 per year). In this example, an organization could outsource its HR, payroll, and benefits administration for less than half* the cost of maintaining an entirely in-house solution.
Keep in mind; HR outsourcing is not an all-or-nothing option. Many organizations choose to maintain internal HR professionals while supplementing their program with outsourced HR expertise where needed. Utilizing a third-party administrator for benefits, payroll, or leave administration only, for example, supplements your internal resources. Not only does this increase your team’s bandwidth, it enables your team to take advantage of specialized expertise at an affordable price.
Avoid gaps in your HR expertise
As your organization rethinks its HR strategy, consider the quality and breadth of HR support, expertise, and employment law compliance. HR covers a broad range of essential business functions. Your HR department must stay on top of regulatory compliance, implement HR programs and policies, and develop and train your supervisors and employees. It is challenging to retain in-house expertise in all the relevant areas from a single qualified HR professional or a small team. Even when an organization can acquire employees with the right skillset to cover the essential HR foundations, as mentioned above, they may become vulnerable should they experience turnover in the HR team or when an HR professional is out on leave or PTO.
An organization that chooses to outsource some or all of its HR functions is generally supported by an entire team of specialists. This team of HR professionals has adequate specialists to seamlessly curate HR programs, mitigate organizational risk, advise and develop supervisors and employees, and administer benefits and payroll. Depending on the service provider, HR outsourcing often comes with the added benefit of scalability, enabling an organization to easily expand or reduce service levels based on actual organizational needs.
Utilize HR technology
The pandemic crisis and the resulting mandated shutdowns across the country led to many workplaces shifting to a partial or complete teleworking model. Almost overnight, the workforce became comfortable with and gained efficiency from internal and external video meetings and reliance on web and technology platforms. Maintaining at least a partially remote team has become the norm rather than the exception. HR must now deal with an added level of complexity for maintaining multi-regional compliance, employee relations and support infrastructures, healthy employee engagement, and consistent company culture. HR outsourcing service providers have adapted quickly to meet their clients’ changing needs to remain competitive–usually at no additional cost to their customers. Retooling may not be as agile or cost-effective for organizations with in-house HR support only.
In most organizations, access to effective HR support is now happening remotely, regardless of whether HR is in-house or provided by an outsourcing service. In fact, on-site HR presence is less significant in a business landscape that is evolving to embrace technology.
HR Lessons from the pandemic
As your organization settles into the new normal and begins to establish a framework for its future state, consider the lessons learned over the past few years.
- Would your organization have benefited from an HR solution that was able to quickly scale to your needs during the shutdown orders?
- Are you facing an uncertain budget, reallocating funds, and trying to keep costs predictable?
- Was your HR team able to adapt quickly and provide adequate answers and support?
- Were you prepared to cover HR activities or the loss of HR expertise when employees left or were laid off?
- Could you benefit from an agile, technology-driven HR program that has adapted to the business ecosystem?
Let’s face it, the past few years have been tough! Vulnerabilities were exposed, and nearly every organization found itself scrambling to adapt. Now as we work to move forward, it is time to look back on the lessons we’ve learned, address the gaps, and ensure HR programs are synced with our current business practices. Every business is unique. Some organizations may have the resources to bring on additional staff to maintain an entirely internal HR team. For others, a mixed approach may be appropriate where some HR functions are outsourced to help cover specific areas while internal HR team members focus on moving forward, stronger than before. Still, other organizations will thrive with a fully outsourced HR program. Regardless of your organization’s needs, now is the time to rethink HR!
Unsure whether you have all the HR fundamentals covered? Check out our article, HR Basics: A Guide to the Fundamentals of HR Management.