Outsourcing Your Human Resources Department

There is an impressive array of businesses out there today that will handle any and all aspects of a company’s human resources department tasks. The service and consulting businesses that handle outsourced human resource activities range from the very basic to service packages that practically become a subdivision of the business.

Payroll outsourcing is an offsite service that has been available for years. Accounting and some benefits administration have also been jobbed out as a matter of course, particularly with medium sized businesses. Today, however, there are full-service human resources service providers that literally do it all. Many of them include in their service keeping one or more of their employees on site to handle any sort of personnel issue that comes up – benefits questions, paid time off, workman’s compensation and so forth.

A full service human resources management firm will typically posture their role as “partnering” with the client company to increase the business efficiency and accordingly, impact the bottom line. Some companies actually take on the workers as employees, and “lease” them to the client business.

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An HR management firm will develop a compensation and benefits structure for its client business. This service might include benefit comparison and reviews as well as benefits administration. They will develop wage scales and salary structures, performance review and incentive programs. Employee relations will be handled either on-site or from the service company offices. This component will include employee records maintenance, complaints, workman’s compensation, exit interviews, employee orientation and disciplinary procedures.

The outsourced firm will see to regulatory requirements by reviewing all federal and state statutory concerns such as equal opportunity hiring, disability act requirements, family Medicare Leave Act obligations, employment eligibility, briefing management staff and assuring that the there are no conflicts. Additional services include termination analysis and change management. The notion is to provide third party personnel analysis in order to maximize efficiency and, in the case of downsizing, minimize turmoil.

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There are outsourcing firms that specialize in one area of human resource management such as COBRA benefits. Another firm could handle benefits oversight and a third payroll and tax withholding management. Some firms specialize in organizational development and human resources audits. These are company-wide surveys designed to present the optimum business structure and staffing level.

The ultimate in human resources outsourcing is the “Professional Employee Organization” which provides personnel as a contracted service. It is similar to using a temp agency, except for management staff and company-wide personnel. The ‘PEO’ bids on the job based on the number and type of employees the business needs. New hires are made based on the bid costs in the contract. The outsourcing contractor pays all benefits, workman’s compensation taxes, FICA, Medicare and withholding taxes. The employee is paid by the contractor and, in fact, works for the outsource agency. He simply reports to work at the contractor’s site.

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Many employers today are going to consultants and temporary hires in order to avoid the HR costs, benefit and retirement obligations and management requirements involved in maintaining a large workforce. Outsourcing some or all of the company’s traditional human resources responsibilities is an extension of that trend.