Human resources departments can play an integral role in driving business. But when HR professionals are tasked with a laundry list of administrative responsibilities, strategic pursuits often fall to the wayside. Fortunately, there is a solution.

As the gig economy rises, there’s a growing trend to outsource HR’s administrative responsibilities. In the next four years, the global HR outsourcing market is expected to grow at a compound annual growth rate of about 8.7 percent. This helps HR professionals ensure compliance and control costs by delegating difficult functions to experts.

The challenge is determining which responsibilities should be outsourced and which should be kept in-house. As an employer of record providing payrolling services nationwide, Innovative Employee Solutions has to be wise when outsourcing services such as unemployment claims, reference checking, reporting and tax filing for the Affordable Care Act, local and state paid sick leave accruals, and more. Through this experience, we’ve identified key factors that can help you decide where outsourcing is appropriate for your company.

The ins and outs of HR outsourcing

Often, the right solution is a unique balance between outsourcing some things and maintaining control of others. Based on its successful relationships with key vendors, IES has found that it generally comes down to cost, the complexity of the process, and the nature of vendor relationships. Here’s how those should guide your decision to outsource or not:

1. Cost

One U.S.-based retailer prioritized cost considerations to recalibrate its HR department and found that it could offload less essential activities to reduce costs by more than 30 percent. To determine whether you could see such savings, start by asking whether a third party can sufficiently perform the outsourced function at a lower cost. And when comparing internal cost to outsourced cost, think about more than the money. Account for the opportunity cost of the time devoted to that function that could be spent elsewhere and the time it would take for your internal staff to manage the vendor relationship.

2. Experience

Navigating complex processes to ensure compliance demands a lot of time. Especially when the penalties are steep for non-compliance, outsource complex functions to more knowledgeable vendors. For example, because paid sick leave regulations can vary greatly across states and localities, its administration is best left to the experts. This is also true of regulations that change frequently. IES outsourced the creation and filing of Affordable Care Act forms because laws around healthcare reporting change so rapidly. A dedicated external resource can stay on top of these challenging processes for you.

3. Relationships

Outsource a task only if you find the right vendor. IES has been able to establish great outsourcing relationships with a number of key vendors because we look for cultural fit and a history of exceptional service. The right vendor should have great references, availability when you need them, the appropriate sense of urgency, and a simple process for addressing concerns and issues. Don’t outsource otherwise.

4. Time

The last main consideration should be the timing of the outsourced process. Are you able to gather and provide information to the vendor when it’s needed? For example, payroll processing would be natural to outsource, but only if your timeline matches up with the vendor’s. For example, if a contingent staffing firm needs paychecks four hours after clients submit payroll data and a third-party payrolling provider requires at least 18 hours of processing time, this would not be an opportunity for outsourcing.

Ultimately, outsourcing allows companies to focus on their core competencies. For IES, this buys us more time for our own priorities: providing payrolling and employer of record services. Even within that specialty, it can make sense to outsource portions of business processes to a company like Innovative Employee Solutions to ensure compliance, focus on areas that add the greatest value, and perform business operations efficiently.

By: Sara Jensen, Vice President of Business Development

Sara Jensen is Vice President of Business Development for Innovative Employee Solutions (IES), a leading global Employer of Record in more than 150 countries that specializes in contingent workforce solutions such as outsourced payrolling, independent contractor compliance, and contractor management services. Founded in 1974, IES has grown into one of San Diego’s largest women-owned businesses and has been named one of the city’s “Best Places to Work” for 10 years in a row.

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