|
Friday, March 2nd,
2006.
The Cost of HR Paper Work
By the HRAD4Y Staff
A recent report
in the U.S. Small Business Administration (SBA) estimates that
small-business owners spend up to 25% of their time handling
employee-related paperwork. The figure jumps to 45% when factoring
in the owner’s time spent on all other HR tasks!
In companies without a Human Resources department, the activities
are usually handled by the President or Chief Financial Officer
which distracts the focus on the essential contributions for the
growth of the organization. It is suggested to hire a full-time
human resources employee or designate someone in house to handle
these functions or even to take advantage of outsourcing as the
complexity of managing human resource has become daunting.
It’s rare for one person to keep current in the following laws:
• Affirmative action
• Benefits
• Compensation
• Compliance issues
• Employment Law
• Employee relations
• Equal employment opportunity
• Health and safety
• Local and national wage and hour laws
They are many advantages to outsourcing the above functions,
companies can realize results by a reduction exposure to lawsuits,
the opportunity to develop a performance culture through metrics and
rewards, prioritizing programs which allow the business to focus on
the strategies. This in turn can eliminate manual recordkeeping,
measure management results via reports while enjoying the vendors’
economies of scale, technical tools and expertise by taking
advantage of Internet-based employee self-serve administration.
It is proven by outsourcing certain nonessential Human Resource
functions, companies stand to reap significant rewards, some more
visible than others, e.g.:
• Expertise of specialists for current compliance
• Scalability by transforming a fixed cost into a variable cost and
buying only the time and services when needed
• Eliminate cost of purchasing and maintaining in-house systems
• Primary focus shifted to company’s mission and vision
The decision to fully outsource or partially outsource HR depends on
the organizational strategy, the organizational size and location
and what stage the organization is in their life cycle.
• Level 1 (0-2 years in life cycle) Level 2 (2-3 years in lifecycle)
that are limited by people resources and financial restraints make
excellent candidates for a full outsourcing model. This model can
provide savings of at least 45-55% a year versus having your own
internal HR staff.
• Level 3 (3-6 years life cycle), there are specific areas that may
be financially viable to outsource including benefits, compensation
administration, payroll, employee relations, and recruiting.
• Level 4 organizations may need to cut overhead expenses and reduce
administrative burdens by outsourcing human resources. The decision
to in-source or outsource HR should follow a careful organizational
analysis. Fully outsourced models do have disadvantages by lack of
internal focus and dedication to personnel through HR.
Human Resource processes can be grouped into categories, within
these categories many sub-categories exist. If you are doing
business in the State of California, and have two or more employees,
then many of the following categories will apply:
Assessment, Selection, Recruiting, Benefits, Compensation and Reward
Systems, Employment Law/ Employee Relations, Labor Laws, Health and
Safety, HRIS/Payroll, Performance Management, Organizational
Management and Strategy Formulation, Federal and State Labor Law
Compliance, Quality of Work, Management and Retention.
If you make one mistake in any of these areas listed above, your
business will suffer, even possibly fail.
For companies deciding to outsource, it is important to set clear
expectations for the outsourcing process focusing on the quality of
service delivery, direct and indirect impact on employees and the
provider's ability to handle the organizations needs.
For companies that decide to use a partially outsourced model due to
certain areas may be better served internally and others areas are
more cost-effective if managed externally. Organizations’ may wish
to retain certain Human Resource administrative functions and
outsource the specialty areas. For example, an organization may
decide to manage their own health and safety function, facilitate
in-house recruiting, payroll and workers compensation programs and
all other HR functions are outsourced.
By outsourcing administrative services to the specialists whose
primary business is delivering such services, in-house HR
professionals can pursue more strategic functions and eliminate all
the transactional work.
Industry research forecasts that Human Resources and benefits
outsourcing is expected to generate nearly $60 billion by 2006.
 |
 |
