Many businesses today struggle with:

• Rising cost of healthcare
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• Providing competitive benefits to their employees
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• Complying with ever-changing federal and state regulations
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• Recognizing the risks associated with employee-related liability
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• Increasing administrative burdens

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But these businesses may not realize there are solutions that can assist them with these make-or-break issues.

Many business owners have heard of the benefits of outsourcing, but few are aware that by outsourcing their administrative and human resource (HR) issues to an HR services firm, they can obtain help in these areas and many more.

Recent research by consulting firm Gartner Dataquest indicates that the HR outsourcing market will more than double to $58.5 billion by 2005. Why the increase? Along with the issues listed above, businesses are faced with more responsibility and fewer resources. Today, business owners spend between 7 percent and 25 percent of their time handling employee-related paperwork, and HR management is becoming more complex and time-consuming. In fact, businesses must contend with more than 40 federal labor laws.

As a result, business owners are increasingly embracing the outsourcing concept because it frees them to focus on their core competencies instead of spending time on payroll processing, benefits and retirement plan administration, regulatory compliance, unemployment, workers´ compensation and other HR management issues, such as employee recruitment and retention.

What is an HR outsourcing company and how does it work?
An HR outsourcing company is defined as an organization that assumes certain responsibilities in order to help businesses be more successful. These companies help manage the responsibilities, costs and liabilities that accompany employee administration, HR management and employee-related risk. More specifically, they:

• Reduce the business owner´s administrative hassles related to payroll and benefits administration
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• Provide healthcare and retirement benefits at competitive rates
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• Assume some of the risks and liabilities associated with being an employer
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• Assist companies in staying compliant with government labor regulations
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• Offer risk management services (including workers´ compensation)

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While the client retains responsibility for the day-to-day management of the business and for hiring and firing of employees, the HR outsourcing company assists with payroll administration and all the functions associated with proper HR management and processes.

Benefits of outsourcing
There are many reasons to outsource payroll and HR functions, but businesses are also finding another benefit-productive, loyal employees. By providing employees with Fortune 500-quality healthcare benefits and by practicing effective personnel management, these companies are able to foster better relationships with their employees. Because of this, many are beginning to see increased returns on investment. According to a study by the University of Southern California´s Center for Effective Organizations, businesses with a formal HR management practice (such as that offered by a human resource outsourcing company) boast the following:

• 66 percent higher return on sales
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• 20 percent higher return on investment
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• 20 percent higher return on assets
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• 13 percent higher return on equity.

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Furthermore, of companies who have outsourced their HR functions, 9 in 10 are satisfied and 6 in 10 say cost reductions have met or exceeded expectations (PriceWaterhouseCoopers and Yankelovich Partners).