Outsourcing HR operations to an external vendor means contracting out time-consuming tasks that weigh down your internal staff — from recruitment and onboarding to employee relations and vendor management. Yet many organizations are unaware HR outsourcing is even an option. Could it make sense for your business?

An experienced outsourcing provider can help identify specific areas within your HR operations in need of development and support, saving you money, reducing risk, and streamlining critical processes. From routine administrative tasks like filing taxes and managing job postings to more laborious efforts like workers’ compensation claim management — partnering with an HR outsourcing provider can help you and your team focus on the strategic initiatives that matter.

There are various types of HR outsource vendors out there, so consider the following differentiators when you begin your search:

• Software-as-a-service (SaaS): In this scenario, a vendor hosts an HR application and offers that resource to individual companies. The software can be used to simplify and automate certain HR tasks like reviewing candidate resumes or administering payroll reports to workers.
• Business-process outsourcing (BPO): A BPO is a third-party contractor that handles individual HR duties, allowing you to choose which services to outsource and providing a specialized provider for that specific service.
• Single-source outsourcing: A single third-party partner manages all HR functions throughout employees’ tenures. They may also help develop personnel policies and are able to hire, onboard, pay, and manage talent — freeing up their clients to focus on other core business initiatives.
• Professional employer organization (PEO): A PEO pairs with a business as a co-employer, meaning employees work for both organizations. The business typically continues to manage employees and day-to-day work dynamics, while the PEO coordinates HR tasks like payroll and scheduling.
• Shared services: This is a third-party company that helps the internal HR department manage their tasks and also typically provides a software system for staff members to utilize.
• Administrative services organization (ASO): An outside contractor handles key administrative duties, staffed by employees who work directly for that contractor.

Which HR functions can be outsourced?

A better question might be, which HR functions can’t be outsourced? Depending on the needs of your organization, nearly any HR operation can be outsourced, but only if you choose the right partner. Human resources teams, like many others, are often short-staffed and overworked. An HR outsourcing provider can help companies improve time management, control costs, and navigate compliance administration.

• Time-consuming tasks such as recruiting, applicant tracking, onboarding, screening, and testing take up a large chunk of an HR team’s workday. And with each new hire, the process starts anew. Outsourcing these time-consuming tasks can create significant bandwidth within an HR department, especially for those companies facing high turnover rates and a shallow talent pool.
• Costly tasks can also be outsourced — from handling benefits, awards, and recognition to securing temporary staffing and training new hires.
• Compliance administration requires significant expertise to mitigate noncompliance risks. An experienced outsource vendor will navigate the complex world of employee classification, state employment registrations, labor law requirements, safety management, and workers’ comp on your behalf, assuming both responsibility and liability.

Benefits of outsourcing HR

With the Great Resignation still a reality, human resources departments are under more stress than ever. Consider outsourcing HR operations to realize the following benefits:

• Save money. Outsourcing HR reduces operating and personnel-related costs. Working with an outside provider can help minimize administrative errors and increase productivity in parallel, while improving employee satisfaction and retention and lowering the high cost of turnover.
• Increase efficiency. Outsourcing HR helps internal HR professionals manage their workloads more efficiently, shifting the burden of routine administrative tasks, such as writing job descriptions or generating financial reports, thereby enabling your staff to further develop their skills and careers as they focus on the larger issues impacting organizational growth. It also allows them more time to work directly with employees, monitor recruitment activities, and predict future business needs — areas especially important to smaller, growing businesses.
• Access expertise. Outsourcing HR enables access to high-quality HR services supported by HR experts who have extensive knowledge in specialized areas.
• Streamline processes. Outsourcing HR helps automate tasks and provides more streamlined resources for your HR department. For example, an external company may systemize processes like onboarding or payroll, and their specialists can provide immediate, reliable assistance to employees who have questions or need updated training.
• Increase training opportunities. Outsourced HR companies may provide and support training programs for employees, keeping them updated on skills and technology and increasing their knowledge of industry requirements. For example, your contractor may provide specialized training programs for safety or cultural sensitivity, improving your organizational culture and increasing job satisfaction at the same time.

In the current business environment, realizing efficiencies, saving money, bolstering retention, and easing the workload of overwhelmed teams are more critical to success than ever. Is your company ready to consider outsourcing HR operations?

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Hiring contingent workers provides employers a level of flexibility often not achievable when hiring direct full-time employees — and that flexibility benefits both parties. About one quarter of the US workforce consists of contingent workers, with more companies adopting this hiring model every year. Let’s start with the basics.

What is a contingent worker?

Contingent workers fall into a number of categories. Understanding the various names to describe contingent workers and the reason why they are labeled as such is helpful in addressing your organization’s specific needs. The most common names assigned to contingent workers are “independent contractors,” “freelancers,” and “temporary workers.”

• Independent contractors (ICs) most often work with multiple clients who need specialized talent. ICs sometimes run companies of their own, with their own employees. An independent contractor typically provides their own tools and equipment, works on a per-project basis, and is supported by an agreement outlining responsibilities and pricing structure. Independent contractors manage their own self-employment payroll taxes.
• Freelancers also typically work on a per-project basis, and it’s not uncommon for freelancers to be employed by one company while picking up outside projects for other organizations. Freelancers are usually paid as nonemployees and, like independent contractors, are responsible for their own self-employment taxes.
• Temporary workers (temps), usually placed through a staffing agency, are typically hired for specific periods of time to help handle busy seasons or meet other temporary support needs. While some temps hope to be hired permanently at the end of a temporary assignment, others enjoy the flexibility of choosing varying assignments suited to their schedules and needs. Temporary workers are usually paid as employees of the staffing agency that placed them, so they don’t have to handle self-employment taxes — and your organization doesn’t need to issue them tax paperwork.
• Other contingent workers are identified as gig workers (often employed on an informal basis), outsourced workers (who may handle anything from warehouse cleaning to bookkeeping), and consultants (hired specifically to provide professional advice about a business’s specific needs or challenges).

Considering your options

With nearly every industry facing ongoing staffing challenges and shallow talent pools, interest in the contingent workforce has expanded in recent years, with contingent workers supporting everything from delivery services and technology solutions to seasonal staffing and clerical support.

In a recent survey , only 14% of surveyed businesses indicated they do not currently employ any contingent workers. Of those companies that do, 73% claim 1-49% of their workforce is contingent, and the remaining 12% said contingent workers comprise more than half of their entire workforce (54%). Additionally, 60% of surveyed business leaders consider independent contractors to be a critical component of their workforce.

There are several factors to consider when you’re deciding if a contingent workforce makes sense for your organization:

• Project scope and schedule. Contingent workers bring highly specialized skills to the projects they accept. Once the project is complete, your company has the flexibility to continue engaging the worker or simply concluding the engagement without further obligation. The urgency of the project is also an important consideration — if a need arises suddenly, hiring a contingent worker is a much quicker process, requiring less administrative overhead and lead time.
• Demand for services. Many businesses operate under a fluctuating demand for service, and contingent workers can be engaged on an as-needed basis, helping you scale up (or down) quickly and efficiently. Working with an experienced staffing partner who can help you manage quickly evolving organizational needs provides even more flexibility.
• Specialty skills and skills gaps. Does an upcoming project require a niche skill set your internal team doesn’t currently possess? A highly talented and trained contingent workforce can set a project in motion quickly — no extensive training needed.
• Acquiring, hiring, onboarding, and training new talent is expensive, and making bad hiring decisions is extremely costly. Contingent workers eliminate much of the time and cost associated with standard hiring practices, and while their hourly rates may be a bit higher, your organization does not provide the same benefits you do for internal employees, providing a net savings to your business.
• Risk identification and mitigation. When you’re hiring contingent workers, there are financial, legal, and tax considerations, and keeping up with compliance is essential. An experienced staffing provider delivers additional support and protection, helping you identify and manage risks proactively.

Contingent workers — the right choice for you?

Deciding whether or not to add contingent workers to your team boils down to two key factors: the kind of work you need help with and financial impact.  Define your scope of work, analyze internal skill sets and level of training required, identify the amount of managerial resources needed to complete the project, and compare the costs of hiring a full-time employee or bringing on a contingent worker.

As the contingent workforce model is embraced by more and more companies, the value, flexibility, and competitive advantage it brings are increasingly clear. Partnering with an experienced workforce management provider can guide you in identifying exactly where hiring contingently makes sense for your business and support you throughout the entire process — from recruitment and background checks to onboarding and management support.

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