Why Companies Outsource Staffing to Contingent Firms

in-house and outsource road signs pointing opposite directions

Human resources management involves everything from labor to employment to compensation. Every organization relies on HR professionals to recruit, hire, train, develop, discipline and terminate employees. Many companies choose to outsource certain HR functions, such as screening and hiring, to headhunters and contingent firms to increase productivity, compliance and organizational effectiveness. The HR department is the cornerstone of an organization’s structure, so it’s important to have the right people performing these duties.

HR Management Specializations

From a personnel perspective, HR involves the recruitment, screening, testing, and orientation of new employees. HR professionals help with training, discipline, development, benefits coordination and performance appraisals for existing employees. Benefit coordination is often a separate specialization because this involves insurance contracting, HIPPA compliance, regulatory reports and claims processing.

From a legal perspective, HR management involves compliance with applicable state and federal labor, safety and business laws. This includes union and employee grievances, complaints, counseling, and coaching. From a managerial view, it involves diversity, communication, pay plans, job analyses, strategic planning, dispute resolution and record keeping. HR management is quite complex, so many companies outsource certain functions to third-party service providers.

Job Analysis and Understanding

Every job position should come with a detailed and up-to-date job description. HR managers must complete this by performing a job analysis to determine exact duties, role restrictions, and communication expectations. This can be very challenging for HR professionals with minimal industry or technical experience. For example, most state governments forbid nurse aides from administering medications and the SEC heavily regulates financial employee conduct and transactions.

Companies with over a hundred workers and positions may struggle to understand all the job descriptions. It may be difficult to ensure that the content is annually reviewed and accurate. This type of oversight may create serious legal or operational issues. Placement agencies will be intimately familiar with specific job functions and descriptions, so they will masterfully recruit the right employees for the right company.

The Burden of Recruitment and Hiring

Inc. magazine states that employee turnover rates will lower productivity, lose knowledge, increase costs and overwork the remaining staff. Every time an employee quits or is terminated, the HR manager must post a job ad, adjust current staff schedules, review hundreds of resumes and conduct dozens of interviews. This entire business process may cost between two to five thousand dollars to re-hire and re-train a new employee.

When it comes to technical, financial and administrative positions, the decision-making process will be very detailed time-consuming. HR managers ensure that the company’s hiring process and interview questions meet state and federal employment laws. This is why many small- to medium-sized businesses prefer to outsource their staffing needs to firms that maintain active databases of job seekers.

The Advantage of Outsourcing HR

Forbes magazine says that around 50 percent of large companies outsource part or all of their HR functions. Internal HR departments are still important because they help build a culture, establish values and meet organizational goals. They are the keys to creating a conducive and welcoming working environments. HR professionals mediate conflict, uncover issues and take proactive action to minimize legal risks.

However, many businesses prefer to outsource certain HR duties to third-party service providers. Some of the most common outsourced HR tasks are staffing, compliance and benefits administration. Screening and hiring candidates are the most common because each job ad will receive hundreds of applications. Staffing firms save money and avoid problems because they have the best business acumen, industry knowledge, and market insights. Outsourcing hiring will allow internal HR professionals to focus and specialize in certain areas.

Staffing firms may help their clients streamline hiring processes and decision-making models. Companies in competitive industries will benefit from better compliance, strategic planning and risk management. Contact us to allow us the privilege of guiding, serving and protecting your organization.