Five Factors to Consider When Selecting a Human Resource Outsourcing Firm
Over the past few years, Human Resources Outsourcing has grown as an accepted business practice by a broad range of business markets and industries.
Even with the slow moving economy, the HR Outsourcing industry continues to boom as employers look for ways to improve efficiencies, cut overhead and consolidate vendors.
According to Global Industry Analysts, a business strategy and market intelligence firm that recently conducted a comprehensive analysis of almost three hundred human resource outsourcing firms, the global HR Outsourcing market could surpass $160 billion by 2015, up from $103 billion in 2007 and $61 billion in 2002.
Businesses that are currently investigating Human Resources Outsourcing firms should take the following factors into consideration.
As an outsourcing relationship can continue for many years, choosing the right firm should be given a great deal of time and research.
Consider the following five criteria when selecting an HR outsourcing firm: Financial Stability Many HR firms manage the fiduciary obligations of their clients.
These employment responsibilities include processing payroll, submitting payroll taxes and paying insurance premiums.
Firms should be in business for at least ten years, have strong financial credentials, long-term banking relationships, and can verify taxes and insurance premiums have all been paid.
Proven Service Track Record While solid financial references may prove stability, they do not necessarily equate to good employment practices or superior customer service.
Prospects should check the HR credentials of the staff, including a team consisting of licensed human resource experts, at least three client references, and verification that they have a successful track record in all areas of regulatory compliance, benefits and safety.
Niche vs.
Diverse Client Base Depending on the industry of the business, in some circumstances it may be more beneficial to work with a 'niche' human resources outsourcing firm.
Some HR companies develop an expertise in a particular market - hi-tech, transportation, construction, or the entertainment industry, for example - and it may in a business's best interest to work with specialty HR outsourcing company.
On the one hand, it may behoove the business to work with a firm that has a diverse client base.
The benefit of working with a broader, 'non-niche' HR firm is that this diversification can help protect clients against economic fluctuations or insurance instabilities.
Were one industry to crash, such as the dot-com bust in the early 2000's, it would have minimal impact on other industries.
Diversification also dilutes insurance and employment risks over a broader base.
This diversity can be reflected in geography, industry, or size of employee base.
Local Market Presence Many employment laws and tax guidelines vary from the state to state, and differ from the federal laws.
It is highly recommended to work with an employment firm that is experienced in the state in which the business is located.
For example, California's overtime and minimum wage guidelines differ from their federal counterparts.
Additionally, dozens of new California-specific employment laws are passed each year.
A local HR vendor will be well versed in the nuances of the law.
Flexibility in Service Offering Finally, many HR outsourcing firms take a service approach that can be best described as "one size fits all".
They typically require their clients to purchase all offered services as a package deal.
This can include everything from insurance products and payroll processing, to recruiting, handbooks and training.
Clients will pay an all-inclusive fee whether they take advantage of all the services, or not.
While some businesses may indeed require the full spectrum of offered services, many will not.
It is advisable to assess which areas of employment compliance require help, and which do not.
Select a vendor that is flexible and offers customization to their HR service offering to match your company's precise needs.
For employers in the market of human resources outsourcing, these five pointers are an excellent starting point in finding the perfect HR outsourcing relationship.
Even with the slow moving economy, the HR Outsourcing industry continues to boom as employers look for ways to improve efficiencies, cut overhead and consolidate vendors.
According to Global Industry Analysts, a business strategy and market intelligence firm that recently conducted a comprehensive analysis of almost three hundred human resource outsourcing firms, the global HR Outsourcing market could surpass $160 billion by 2015, up from $103 billion in 2007 and $61 billion in 2002.
Businesses that are currently investigating Human Resources Outsourcing firms should take the following factors into consideration.
As an outsourcing relationship can continue for many years, choosing the right firm should be given a great deal of time and research.
Consider the following five criteria when selecting an HR outsourcing firm: Financial Stability Many HR firms manage the fiduciary obligations of their clients.
These employment responsibilities include processing payroll, submitting payroll taxes and paying insurance premiums.
Firms should be in business for at least ten years, have strong financial credentials, long-term banking relationships, and can verify taxes and insurance premiums have all been paid.
Proven Service Track Record While solid financial references may prove stability, they do not necessarily equate to good employment practices or superior customer service.
Prospects should check the HR credentials of the staff, including a team consisting of licensed human resource experts, at least three client references, and verification that they have a successful track record in all areas of regulatory compliance, benefits and safety.
Niche vs.
Diverse Client Base Depending on the industry of the business, in some circumstances it may be more beneficial to work with a 'niche' human resources outsourcing firm.
Some HR companies develop an expertise in a particular market - hi-tech, transportation, construction, or the entertainment industry, for example - and it may in a business's best interest to work with specialty HR outsourcing company.
On the one hand, it may behoove the business to work with a firm that has a diverse client base.
The benefit of working with a broader, 'non-niche' HR firm is that this diversification can help protect clients against economic fluctuations or insurance instabilities.
Were one industry to crash, such as the dot-com bust in the early 2000's, it would have minimal impact on other industries.
Diversification also dilutes insurance and employment risks over a broader base.
This diversity can be reflected in geography, industry, or size of employee base.
Local Market Presence Many employment laws and tax guidelines vary from the state to state, and differ from the federal laws.
It is highly recommended to work with an employment firm that is experienced in the state in which the business is located.
For example, California's overtime and minimum wage guidelines differ from their federal counterparts.
Additionally, dozens of new California-specific employment laws are passed each year.
A local HR vendor will be well versed in the nuances of the law.
Flexibility in Service Offering Finally, many HR outsourcing firms take a service approach that can be best described as "one size fits all".
They typically require their clients to purchase all offered services as a package deal.
This can include everything from insurance products and payroll processing, to recruiting, handbooks and training.
Clients will pay an all-inclusive fee whether they take advantage of all the services, or not.
While some businesses may indeed require the full spectrum of offered services, many will not.
It is advisable to assess which areas of employment compliance require help, and which do not.
Select a vendor that is flexible and offers customization to their HR service offering to match your company's precise needs.
For employers in the market of human resources outsourcing, these five pointers are an excellent starting point in finding the perfect HR outsourcing relationship.
