What to look for in an HR Outsourcing Firm

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If you are at the stage of investigating if a Professional Employer Organization or Human Resources Outsourcing relationship is right for your company, there are several important factors to take into …

If you are at the stage of investigating if a Professional Employer Organization or Human Resources Outsourcing relationship is right for your company, there are several important factors to take into consideration. An outsourcing relationship can continue for many years, so selecting the right firm is a serious decision that should be given a great deal of thought.

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  • 1. What to Look For in an HR Outsourcing FirmIf you are at the stage of investigating if a Professional Employer Organizationor HumanResources Outsourcingrelationship is rightfor your company, there are several importantfactors to take intoconsideration. An outsourcing relationship can continue for manyyears, soselecting the right firm is a serious decision that should be given a great dealofthought.Consider the following criteria when selecting a provider:Financial StabilityMany HR firms are entrusted to pay payroll, payroll taxes and insurance premiums.Look for a firm with at least 10-20 years’ experience and one that has strong financialcredentials, long-term banking relationships, and the ability to prove taxes and insurancepremiums have been paid timely.Proven Service Track RecordStable finances and longevity does not necessarily equate to good humanresourcepractices or customer service. The HRO firm must have a strong team oflicensedhuman resources professionals with a proven track record of assisting clients inallareas of regulatory compliance, safety and benefits.Size and Diversity of Client BaseThe ideal HRO firm will have a large and diverse client base, serving a wide range ofindustries. The diversification insulates the firm from fluctuations within a particularmarket and dilutes the risk over many industries. Diversification can takethe form ofindustry, size of employee base, and geographic location. A large,diversified base ofclients also adds to the depth of experience of the firm andtheir ability to service yourparticular business.
  • 2. Local Market PresenceMany labor and tax laws vary from state to state. Look for a firm that has expertisein thestate in which you do business, and has strong relationships with localvendors andinsurance companies. For California employers, this is particularlycritical as Californiaregulations differ greatly from federal guidelines. Additionally,a local corporate office willensure quicker response time and on-site presence.Flexibility in Service OfferingMany PEO and HRO firms take the “one size fits all” approach by requiring clientsto takeall the services offered, from payroll and insurance, to benefits andtraining. It is importantto look for a vendor that is flexible in their offering and isable to customize an HR solutionto match your company’s individual needs.High-Touch Service ModelMany HRO firms follow a high-tech/low-touch approach with services providedprimarilythrough on-line self-service platforms. While this is attractive to manyemployers, look fora firm that is also available for on-site appearances. It is crucialfor the HRO firm to have aqualified team available to meet live with your staff,whether for benefits openenrollment, claims investigations, employee relations,or manager training seminars.