Win/win relationship benefits bottom-line
Contracting your organization’s HR function out to an ABC Associate member presents many advantages that surpass cost savings. ABC Associate members perform HR functions independently, hiring qualified consultants to manage the HR activities for their clients. These companies value the relationships they have with ABC and are focused on helping our contractor members increase their bottom-line. This allows a contractor member to continue to grow and focus on expanding their business.
“Labor costs are a big part of how contractors control costs and build in profitability,” said ABC SEMI Membership Director, John Manor. “Too much labor costs put a business in jeopardy and cutting too much makes it hard to provide the quality and service your customers are looking for. Outsourcing HR services that are important, but not part of your day-to-day activities, is one way to save money on your labor expenses.”
Contracting HR functions to an outside provider—such an independent contractor whose expertise is in HR management—can reduce your company’s salary expenses. That’s why it’s advantageous for contractors with limited resources to hire firms to handle HR functions. Staffing an accountant can be costly when you add up the salaries, and benefits for one along with other HR staff members who may be responsible for managing the HR functions, responding to employee issues and processing payroll.
“Many small business owners aren’t accounting experts and could use some help in meeting payroll and balancing their books,” said Jeff McMichael, of accounting firm Cohen & Company and incoming ABC Board Member. “Fortunately, there are individuals and firms who will take on this area of your business, providing you with their expertise at a fraction of what it would cost to hire a full-time employee. This gives you additional capital to invest in hiring more crews to bid on work allowing you to generate additional income. The good news for ABC contractors is that as associate members we are part of the same association and have a vested interest in their success.”
Mark Majoros, agent with AFLAC and ABC associate member feels that organizations like his serve the insurance needs of ABC contractors and can negotiate lower rates for group health insurance costs. In this competitive world of commercial and industrial contracting, often it is the benefits that determine whether an employee stays or leaves a company. According to Majoros, not everyone has the time of expertise to shop around for the right product to meet the needs of their employees. Some many need long or short-term disability coverage, full coverage health or a supplemental plan. It is the job of the agent to help determine not only what makes the most sense for owner, but saves dollars and cents.
“It can be a very complicated process to try to navigate on your own,” said Majoros. “With so many health care insurance options out there, it is not realistic to think a company would have someone that can stay up to speed on all of the continuous changes in health care coverage on staff to handle this. This is where companies like AFLAC can make a big difference in assisting a contractor in providing this essential benefit to their employees.”
According to Frank Mamat of Foster, Swift, Collins & Smith PC and ABC SEMI Chapter attorney, legal services outsourcing offers contractor businesses the opportunity to form strategic partnerships with experts specializing in contract labor areas. Having someone to provide legal and litigation support from outsourcing legal services is a huge cost savings. Hiring and maintaining an in-house legal department is often much costlier than utilizing an outside vendor.
“Outsourcing legal services provides more expertise in specific legal areas and leverages the economic comparative advantage to provide high-quality work with lower costs,” said Mamat. “Legal services vendors also allow for greater flexibility, so that small companies with varying legal issues can better scale up or down.”
Cort Niemi, ABC Board member and ABC associate member Lake Agency Group, believes that companies that outsource their HR functions can mitigate their risk of liability for HR issues that may not be properly handled by someone on the company’s staff who doesn’t know enough about HR to protect the employer’s interests. Delegating HR functions to an independent contractor can keep the organization from becoming embroiled in litigation, which can affect the bottom line as well as the company’s reputation through negative publicity that often accompanies high-profile lawsuits and employee complaints. When offering his clients advice on properly insuring their companies, he will often ask who handles their HR for their company.
“Businesses that contract their HR functions to an independent firm can relieve the company of a huge administrative burden,” said Niemi. “By sending the HR function to an outside company, it eliminates the need for contractors to focus on administrative functions, freeing up time to devote to what they do best. Business growth. No one can be an expert in all HR functions and the cost to attempt to handle these efforts inhouse can be exorbitant. I know that we are very conscience when quoting insurance for our members that they have a proper HR support team in place to ensure they reduce their liability. It keeps their employees safe and their company in business.”
5 Simple Ways to Outsource and Win for Your Company
1. Redistribute Your Employees’ Time
When you’re HR instead of giving it to your own staff to deal with, you can give other tasks to your professionals. Small contractors often do not have an employee on staff who is dedicated to human resources management. Instead, other staff members are forced to spend their valuable time handling tasks they do not excel at. This in turn causes their other work to languish and productivity to suffer.
Who is currently handling your human resources? An office administrator? Another managerial staff member? You? Your time, and your employees’ time, is valuable. Imagine how much more productive your employees would be if they were focusing their time and energy on tasks you hired them for. An office administrator may do an excellent job organizing the office but may not do well with HR since he or she is not an HR expert. When you waste your employees’ time, you waste money. Outsource your human resources department and let your employees get back to their job descriptions. Ultimately it will save you money.
2. Reduce Your Liabilities
Another area where you may not be as well versed as a human resources expert is the arena of law. Lawsuits involving contractors can be expensive, and unfortunately even when you make your best efforts to avoid them, legal issues may still arise. State, local, and federal laws governing labor are complicated and change regularly. Instead of struggling to keep up with the shifting regulations and the complexities of work-related lawsuits, why not hire an expert to help you avoid legal hassles and resolve them when they do come up? Consider the cost of a single lawsuit, and then think how much money outsourcing your HR department could save you on lawsuits alone.
3. Recruit Better Talent
By choosing to outsource HR jobs, you can find better talent in the process. One of the many responsibilities allocated to your HR department is to bring new talent on-board that can bring value to the workplace. Finding the best candidates is often a slow, tedious process, and if you don’t have an expert on your staff, your recruiting staff may struggle to reach out to the right population of job candidates.
According to ABC associate member, Sarah Forgrave, account manager for Aerotek’s Architecture and Construction division, when you outsource HR services, you hand over your job candidate search to experts who know exactly where to post job listings and how to reach out to the most qualified professionals.
“Recruiting can be a time-consuming process,” said Forgrave. “But you can cut back on your recruiting budget by out sourcing to a company that specializes in that area. By opening yourself to a much larger pool of candidates you ultimately have a much better chance to hire the right person who is specifically qualified for that particular job. When you take into consideration the cost of posting, searching, vetting and interviewing candidates for a job you really enhance your company’s productivity when you outsource to a professional recruiter.”
4. Reduce the Cost of Labor
Another way that a professionally outsourced human resources department can help you is by reducing the cost of maintaining your employees. HR experts can look over your payroll, your benefits plans, workers’ compensation, and other aspects of your employment plan. According to HR professionals can spot areas where your plan could be improved, and cuts could be cost without reducing the value you provide to your employees and the value which they return to you. Even for a relatively small business, this can translate to savings totaling thousands of dollars per year.
5. Reduce Employee Turnover
Employees turn to HR departments as much as employers do for solutions to their problems. If your human resources department is unhelpful or incompetent, employees can become frustrated when they are unable to resolve issues. This can increase turnover as employees leave your company to find a company which looks after their needs. By outsourcing your HR administration, you can bring experts onboard who will have the time, resources and know-how to see to your employers’ needs and ensure that they are happy. Happy employees stay on with their companies and don’t jump ship the first chance they get.
When your human resources team knows what it’s doing, your employees will have clear expectations regarding their duties and perform more efficiently. The HR department can also take the time to organize team building exercises and other employee activities which create a more cohesive and enjoyable workplace for everyone. When you’re relying on other members of your staff to turn away from their own duties just to manage payroll, benefits and other necessary aspects of HR management, they often lack the time they need to arrange these extras.