HR Outsourcing FAQ

Updated: April 30, 2009

What kinds of processes can my business outsource?

The most common HR tasks to outsource are the management of employee benefit programs, including medical benefits , COBRA, employee assistance programs and retirement programs such as defined-contribution plans . Small to midsized businesses may also want to outsource other key processes such as payroll , recruiting, leave management, and learning and development.

What benefits are there to outsourcing?

As benefits and other HR functions become more legally complex and entangled with changing regulations, outsourcing is looking more attractive to many organizations.

Outsourcing companies can offer industry expertise and have the time and initiative to stay up-to-date on the latest standards and legislation. Outsourcing can give you access to skills and expertise you might not be able to supply in house. These experts might be better able to serve your employees efficiently and give them more comprehensive information about benefits or retirement plans, for example.

In addition, outsourcing will free up your staff's time, so that they can focus on other HR tasks and have the time to develop and improve other HR functions or programs. This added time can have the side benefit of allowing the HR department to provide better service and support to employees.

A third, important benefit is the cost savings your company may be able to realize.

Are there privacy or compliance problems with outsourcing?

Anytime you give personal or sensitive information to vendors , you add another security risk. You have to ensure that this is a safe endeavor by making sure vendors follow best practices for safeguarding the data:

  • Does the vendor have adequate network and data security devices, software and policies in place?
  • Has the vendor been involved in a data-compromise situation, and if so, have new processes been placed to ensure it doesn't happen again?
  • Does the vendor have an adequate backup system in place?
  • How many of the vendor's contractors will have access to the information, and do the contractors take effective security precautions when handling the information?
  • Are other companies who use the vendors service satisfied?

Should my company start slowly by outsourcing one process at a time, or go for a full outsource relationship that covers multiple disciplines, such as recruiting, payroll, benefits and so forth?

Finding a vendor that can serve all of your outsource needs can offer many benefits. The vendor will understand your business culture, processes and business strategy more clearly, and their greater involvement can make the processes more efficient. Having one vendor on a large account also allows both companies to collaborate and coordinate more easily. You may also reap a cost savings.

Will my business have to give up too much control?

It's important to develop a strong relationship with the vendor, so that you can explain your needs, customize the processes for your company and communicate if something is not done to your wishes. All stakeholders should be involved to some extent in this process so that everyone's needs are met — from senior managers who control the funding for the program, to end users who will benefit, as well as the HR staff who will be managing the vendor relationship.

How does my company find the right vendor?

Many companies turn to a sourcing adviser for assistance, one who is familiar with various vendors available and can identify the right vendor based on the company's needs. When you are comparing or evaluating vendors, you may want to consider a vendor's amount of experience and expertise, track record serving other companies and the service-level agreements in the contracts.

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