An employee earning $14 per hour actually costs the employer $20 when you take into account all the associated costs. Given a 40-hour week, this means that while the employee earns $29,120 a year, they actually cost the employer $41,600. This seems to be an important cost to manage well if your business is to be profitable.
In the current economic climate, organizations are seeking ways to reduce their costs and increase their efficiency. Read on to learn how outsourcing HR functions can save you money.
Outsourcing HR Functions
Outsourcing HR to an HR solutions provider means contracting with a third party to provide one or more HR services. The range of HR services covered by an outsourcing contract can include payroll, benefits, taxes, administration, recruitment, onboarding, and legal advice. The HR solutions provider can handle it all or you can have a hybrid option with some HR services provided in-house.
One major benefit of outsourcing is the potential to save your business money.
Payroll and some other HR services are more efficiently delivered using the latest HR software. To make the most of the latest software a business needs to have a critical mass of employees. Without enough transactions, the cost per employee is too great so it can be out of the reach of many small businesses.
Pooling your employees with other businesses by using an outsourced payroll provider means you can share in the benefits. The cost per employee can be significantly less than an in-house cost.
The hardware maintenance, software upgrades, technical support, and user training are all covered by the HR services provider. This significant cost is covered by them and included in the client fee. That’s less cost for your business.
HR and payroll are exposed to constant change. Compliance, tax rules, data protection, employment regulation, state and federal law all change frequently. It’s a challenge for any business, especially small business to keep up to date.
The cost of maintaining the expertise of your in-house HR professionals is considerable. It can mean additional external training, legal advice, subscriptions to information services and recruitment and employee retention costs. Outsourcing HR and payroll pushing the challenge and the cost to the service provider.
Smoothing HR Costs
The workload for HR and payroll is not smoothly spread throughout the month or year. There are peaks of workload around pay dates and tax dates. If you have a recruitment drive the workload for HR and payroll can suddenly increase.
A small business can find coping with these peaks of activity difficult. The choice is to maintain more capability than you need at quiet times to cover the peak requirements or to be stretched at busy times. Overstretched people make errors and this results in extra cost.
An outsourcing HR and payroll solution handle these peaks for you. They have little effect on your business and you don’t have to carry the overheads.
And That’s Not All
Outsourcing HR functions can save you money but that’s not all. It can also keep you up to date, help manage data security risks, and ensure compliance with regulations. What’s more, it can allow you to concentrate on your core business.
Talk to us about HR and payroll outsourcing.