Beyond saving time, outsourcing HR can result in cost savings. This cost savings to your company can be so large that you get a positive Return-on-Investment (ROI).
There are many ways that HR outsourcing reduces costs. From less overhead and more affordable benefits to lower turnover rates and increased HR compliance, the average ROI of comprehensive HR outsourcing is 27.2%. However, companies only see this level of ROI with the right HR outsourcing partner that provides them with the services they need when they need them. Charging you for something you don't use will hurt that ROI and possibly even eliminate your cost savings.
Sources of Cost Savings
There are countless ways that HR outsourcing can reduce your spending and result in cost savings for your business. What follows is a brief overview of the most common ways.
Less Overhead
Partnering with a trusted HR outsourcing provider is much less expensive than hiring a new employee. With a new hire, you incur costs to find candidates and conduct interviews. You will also need to train your new employee, besides paying them a competitive salary. They may also be eligible for benefits that will further increase your overhead. You also lose valuable time while you're focused on this process instead of your core business needs.
But when you choose to partner with an HR outsourcing company, you don't have any of those costs. Yet, you still benefit from all the results an in-house HR representative would provide, and then some. With an HR outsourcing company, you gain access to trained experts who can help guide you through some of the most complex and legally rigorous HR situations. You also don't have to worry about an employee being out sick because your HR outsourcing partner has a team of experts ready to help you.
More Affordable Benefits
With a Professional Employer Organization (PEO), the most comprehensive HR outsourcing solution, you gain access to its benefits master plan negotiated at scale by experts. This enables small businesses to afford Fortune 500 benefits. Offering benefits to your employees is often one of the most costly endeavors. With a PEO, you can cut those costs while increasing the benefits package offering, making your company more competitive in the marketplace.
By offering higher-quality benefits to your employees, you can increase retention rates. Your employees want a best-in-class benefits package that includes health insurance, retirement plans, paid time off (PTO), among other items. For many small businesses, offering this level of benefits can be budget-busting. But with a PEO, you can offer your employees the benefits they want while getting those benefits for less than what you could without a PEO.
Not only do these benefits help you keep your existing employees, but they will also help you attract other employees. A best-in-class benefits package can be your competitive advantage against your rivals. This decreases hiring costs since employees will naturally be attracted to your company over others.
HR Compliance
Trusting HR compliance management to a single employee in-house is dangerous. You are essentially trusting that employee with knowing, understanding, and keeping up to date with all of the federal, state, and local employment laws, in addition to handling all of their other HR duties.
Employment laws are constantly changing, and businesses need a partner they can trust to keep them updated. When a law changes that impact your company, your HR outsourcing partner can help you implement any changes required to stay compliant.
Without a trusted partner, you risk costly and embarrassing government fines and employee lawsuits. These frequently happen when companies do not pay employees' accurate wages. Whether they have miscalculated the hours worked or the overtime rate, employees will not be pleased if their paycheck is short. They may even have grounds for a lawsuit against your company for missed pay.
Companies also have to stay compliant with document requirements. If you don't verify an employee's eligibility to work, for example, that could lead to government fines and penalties.
You can avoid these legal headaches by partnering with a PEO. With a PEO guiding you through all aspects of HR compliance, you can trust that your company will avoid non-compliance fines and minimize the chances of an employee lawsuit.
Comprehensive Outsourcing Through a PEO
Lowering your overhead, increasing your benefits package, and avoiding compliance fines and employee lawsuits, all while saving money, can only be achieved by partnering with a PEO. There are other HR outsourcing companies out there, but only a PEO can give you the cost savings you're looking for.
It's hard to get a positive ROI from a less comprehensive HR outsourcing solution. One of the reasons for that is that a PEO is the only HR outsourcing company that can give you access to better health coverage than you could get on your own.
When looking to outsource your company's HR needs, you should look no further than a PEO. You will find many options available to you. However, only a PEO can provide your company with the cost savings you seek and still provide your employees with a competitive benefits package.
