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Human Resources Outsourcing: A Client Case Study

Guest post by: Ari Rosenstein

Article Overview: Human Resources Outsourcing continues to grow as one of the fastest growing BPO (business process outsourcing) sectors. Despite years of recession and corporate cut-backs, outsourcing human resources grew over the same period of time. Here is a case study of a business that utilized human resources outsourcing to reduce risk and cut HR overhead.

Human Resources Outsourcing: A Client Case Study

Human Resources Outsourcing continues to grow as one of the fastest growing BPO (business process outsourcing) sectors. Despite years of recession and corporate cut-backs, outsourcing human resources grew over the same period of time. Here is a case study of a business that utilized human resources outsourcing to reduce risk and cut HR overhead.

Background and Business Challenges

This Woodland Hills, California-based real estate investment and management company was founded in 1980. It grew to 35 employees and focused on property development and management throughout Southern California. Shortly after joining the firm in 2007, their new CFO quickly identified four critical challenges within the organization which needed to be quickly addressed.

Payroll. The processing and production of payroll was being handled by outside CPA firm. The CPA was charging exorbitant fees for the preparation of payroll, electronic tax deposits, quarterly tax returns, annual tax returns, and W-2s. Despite the excessive fees, the CPA firm had no system for tracking vacation, sick and other time off, and the organization constantly found itself requesting information that was unavailable.

Medical Benefits. Any questions, clarifications or employee health benefit issues needed to be handled through an outside broker or directly with the insurance company. All of the health plan administration was being managed through the organization’s accounting department. This process was extremely time consuming and did not provide them with accurate results. “The process caused a great deal of stress to myself, my department, and other employees within the company,” explains the CFO. “I knew we had to make a change”. Additionally, their benefit premiums were extremely expensive. It was one more reason they needed to look for alternative health care solutions.

Workers’ Compensation. While they did not face excessive workplace injuries, there were several incidents that required attention from the insurance company. They found that claims were not being addressed satisfactorily from their insurer, and as a result, faced increases to their workers’ compensation insurance premiums.

Employee Management. Lacking a dedicated personnel department, the company did not have proper Human Resources systems established. Employee termination issues were not handled properly, many employees’ exempt vs. non-exempt statuses were questionable, and employee personnel files were in disarray.

“There was no way we could continue managing our HR responsibilities as we were,” says the CFO. “We began researching alternative HR management options. After extensive research we selected a local HR outsourcing provider to assist us.”

HR Solutions.

The human resources outsourcing firm conducted an initial consultation to determine which service package would best fit the needs of their company. Due to them multiple challenges, the complete HRO package was selected. This program included payroll and tax administration, human resources management, workers’ compensation and safety services, and full range of medical and voluntary employee benefit packages.

The first step was to provide each employee with a new employment packet, including I9’s, W-4’s, general information sheet, and other mandatory state and federal documentation. The client’s management team then reviewed the benefit options with the HRO’s Benefits Representative, discussed options, and selected a variety of HMO and PPO plans to offer their staff. Finally, the Business Implementation team conducted an Employee Orientation with all their existing staff and assisted them in completing the paperwork and enrolling them in their new benefit programs.

Once on-board, the HR outsourcing firm provided the client with a dedicated Human Resources Representative that acted as their primary liaison with all other departments – Workers’ Compensation, Benefits, Payroll and HR. One by one, each employment challenge was addressed, and solved:

• Payroll was processed accurately and timely, and all paid-time-off benefits were tracked and managed;
• Health benefit premiums were significantly reduced;
• All employee benefit issues were managed by the HRO Benefits Representative who acted as the intermediary between the client and insurance carrier;
• Workers’ Compensation premiums were significantly reduced, and a Claims Manager was assigned to address all future workplace injuries;
• Employee files were updated and all exempt and non-exempt status questions were resolved.

Tangible HR Results

To cover the services provided, the HR outsourcing firm charged a monthly administration fee as a percentage of payroll. “The administrative fee charged by the HRO firm was most reasonable,” reflects the CFO. “It provided our company a significant cost savings in both hard and soft costs.”

Offsetting the fee were reductions in workers’ compensation, health and other benefit premiums, consolidated vendors under a single roof, streamlined employment processes, and a reduction in employment risk.

“Beyond the savings, the HR company protected our company against making bad employment decisions and running inefficient HR systems. They provided exemplary advice on employee termination issues and kept us out of trouble on numerous occasions. Outsourcing human resources was probably the best business decision our company ever made.“

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Article Tags: HRO, human resources outsourcing, outsourcing HR, small business



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