In the early going many external HR companies failed miserably, but in the last few years, the outsourced HR industry has grown to an estimated $165 billion annually, as nearly 85 percent of firms now outsource at least some of their HR functions.
Smaller businesses have started to get in on the trend, with startups like Beyond Meat, who contract Private Employer Organizations (PEOs) to create a fully functioning HR department externally. The motivation is two-fold. PEOs share the liability of legal compliance, and offer a range of employee benefits small employers could never otherwise afford.
When it comes to health care, for example, most small employers can only afford to offer their employees one Preferred Provider Organization (PPO) plan.
Paul Belliveau, a veteran HR manager with more than 30 years of experience, agrees there is tremendous benefit to outsourcing the administrative side of HR, but cautions that the human side should not be overlooked. "Organizations need to make sure they are not giving away the candy store. As a business, you need to identify the things that HR does to increase the value of the humans within the company and keep that in house. If you have employees with promise you have to develop them." That not only helps maintain a workplace where employees feel valued, it's strategic, and actually builds the company’s financial value.
It's this type of "blended approach," says Talent Spot outsourcing team, "that works best for employers regardless of their size." Part of a global auditing firm working in 156 countries, Peters advises businesses that range in size from 2,000 to 300,000 employees.
These days it's easy to point at that number, which is admittedly striking, and wonder how employees could possibly benefit from such a budget slash? Factor in the way PEOs and likeminded HR organizations work with their remote "shared service centers". They are staffed with hourly employees armed with scripts on maternity leave and health plan basics, but they have zero connection to the employee on the other end of the line. For many, it feels as if this trend is just the latest in a corporate push toward cost reduction and a dehumanized work place.
Though centralized services frequently mean scripted responses, Cappelli maintains those responses are more accurate and lead to better overall service -- especially in America, where professional services like payroll, benefits and compliance -- once the domain of in-house staff -- are becoming massive industries in and of themselves.
