HRO Cost Savings
Cost reduction may be the biggest selling point with decisions to outsource HR. According to Hewitt survey findings, “This shouldn’t be surprising considering these services are supported by proven delivery models and given the high transaction nature of these services. With cost cutting at the top of HR’s agenda, absence management and administering dependent audits led the group of HR-related services that companies plan to outsource in the near future. These services can directly impact a company’s bottom line by ensuring that employees use their time off appropriately and accelerate return-to-work efforts and also by verifying the benefits eligibility of employees’ dependents to reduce health care plan leakage.”
Your company should realistically estimate costs of outsourcing human resources. Looking at your companies HR budget and estimating the amount of work a HRO provider will take on, will help you determine the potential cost savings of each service.
An added benefit of outsourcing your HR is the flexibility that HRO provides. As your business grows, HR outsourcing offers the options to add additional services or a more comprehensive plan. This could provide cost savings as your fixed costs are turned in to variable costs that your business can leverage for profits.
Benefits administration is a huge advantage of outsourcing. Your outsourcing partner will likely be able to optimize and streamline common HR activities. For instance they will be able to negotiate cheaper benefits programs for your employees.
Overall, the cost savings of outsourcing HR can be a long-term goal or a short-term profit center. According to Hewitt Survey Findings, “62 percent who identified cost reduction as a primary objective of outsourcing indicated that they met their costs savings objectives.” For some companies it may be more efficient to outsource specific processes such as time and attendance systems. Where as other companies find it is more cost efficient to employ full service HRO or PEO and employee leasing providers.