How Much Will It Cost to Outsource My HR Function?

For many companies and nonprofit organizations, outsourcing their human resources (HR) function has become a popular option as they look to streamline operations, reduce overhead costs and receive greater value. This approach also enables them to devote more time to their core activities.

Determining the cost of outsourcing your HR function depends on several factors. ARI operates on a fixed monthly fee for all ongoing HR engagements. This fee is based on what the client’s needs are, the level of support they expect, and the size of the organization.

 Many factors influence cost. Here are a few:

Organization Size and Locations

When calculating an HR client’s monthly fee, one of the primary factors influencing cost is the number of individuals employed in the organization, because, as you can imagine, as the number of employees grows, so too does their overall HR needs. There tend to be more performance or employee relations-related issues, more benefits and HR administrative tasks, and more interpersonal issues that arise.

When our clients operate in multiple U.S. states, the cost of the engagement can increase. Each state maintains its own HR laws, which means that the more states an organization operates in, the more time that is devoted to staying up to date on changes in legislation, alerting clients of these changes, and ensuring employee files and company policies are compliant with each state’s laws.

Scope of the Engagement

When it comes to HR, each organization has unique needs and expectations. So, when determining the cost of a client engagement, we look to understand what type of support and level of support the client requires.

• Are they looking only for administrative HR support or only benefits administration?
• Do they need hands-on employee relations expertise?
• Does the organization have frequent turnover of staff?
• Are they looking for payroll administration?

Each HR service is performed and/or managed by professionals with various levels of expertise within our organization and are billed commensurate with their experience. This results in a blended monthly rate based on estimated hours for the respective level of HR support needed.

On-site vs. Off Site

Some clients prefer that we have an onsite presence, varying from once per week to once per month. Others don’t require us to be onsite at all. Having a dedicated ARI staff person on site at your location typically increases cost.

Use of Technology

Technology is designed to accelerate tasks and improve efficiencies and the use of HR information systems (HRIS) does both. For example, if we have access to electronic employee files versus having to wade through paper files, we can build in efficiencies and spend less time doing required monthly work. Similarly, if it’s not necessary for us to be on site each week or each month because we can do everything electronically, this may translate into lower costs for the client.

You may wonder if we require our clients to adopt a specific HRIS. The answer is a resounding no. There are a multitude of HRIS on the market and, oftentimes, our clients are already using a specific system when they approach us, so our team is able to adapt to using whatever HRIS you currently use. And, if you haven’t already implemented an HRIS, we can recommend one.

Will costs change during my engagement?

Sometimes circumstances emerge that require both sides to take another look at the number of hours involved in an outsourced HR engagement.

For example:

• Sometimes a client requests services that are outside of the scope of their engagement agreement. When this occurs, we can provide an estimate of the number of additional hours needed and either bill this on a one-time project basis or add it to the monthly fee if is work that is ongoing.
• Many clients stay with us for years or even decades. Organizations mature – they may acquire or merge with another company, or expand their offering of services, and their HR requirements evolve. Because we have an experienced team on hand, we can adapt to provide whatever HR services you may need whenever you need them.
• Occasionally costs may go down if the size of the organization decreases.

We pride ourselves on educating our clients. As our relationship with our clients evolve, we often hear, “We didn’t know what we needed until you got here. We need to get our HR affairs in order.”

If the amount of work each month exceeds our engagement agreement, we are very transparent and will schedule a meeting to review where we are spending more time than anticipated and where we might make adjustments. Following this discussion, clients can agree to an increased monthly fee or may opt to have us bill them out-of-scope on an hourly basis.

Are emails and calls included in my monthly fee? 

Yes, emails and phone calls are part of ongoing monthly service. Of course, if the volume of calls and emails exceed normal rates, this goes back to the volume conversation. If we’re spending much more time than average on communications, we’ll meet with you to discuss options.

What is project-based pricing?

Unlike ongoing monthly work, we view project work as having a beginning and end point. Projects can arise anytime and can be initiated at any point during our engagement. Oftentimes we will estimate and quote the entire cost of the project and bill the client in installments.

For example, you might need to create an employee handbook or update an existing handbook. You may require a compliance audit during which we review all personnel files to ensure your organization’s records and practices align with state and federal employment laws. Or you may want a comprehensive analysis of your organization’s job descriptions or salaries to determine if they are competitive. Each of these are considered projects and billed according to the number of items to be analyzed and the number of locations involved

Examples of Project Work

ARI has robust recruiting capabilities that our clients often take advantage of. Recruiting new hires is always considered project work and is billed on an hourly rate with a modest placement fee.

Employee trainings are considered projects and can be billed over the course of the year. For example, your organization may want to host a training for seasoned managers to learn how to communicate with a multi-generational workforce or you may want to offer training for newly promoted or recently hired supervisors or managers. Our team can arrange various trainings based on your organization’s needs.

Open enrollment for employee benefits is an annual event and is considered separate from ongoing general benefits administration. Open enrollment is billed separately on an annual basis.

While general employee relations are included in monthly costs, HR investigations are always billed on a project basis according to the number of hours required. An example of this would be investigating an employee’s harassment complaint, which requires interviewing employees and witnesses, compiling and analyzing findings and writing a report of findings and recommendations.

Am I bound by a long-term contract?

Once we engage with a client, our contracts are ongoing. But, if you ever want to terminate our engagement, all we require is 30-days’ written notice. And the same goes for us. If, for some reason, we determine ARI is not a good fit for your organization, we will provide you with at least 30 days’ written notice.

Outsourcing is a Cost-Effective Option

Outsourcing your HR function can be an effective way to ensure your organization complies with state and federal laws and regulations, maintains effective communication with employees, and implements best practices around HR processes and procedures. Outsourcing provides consistency, which can reduce liability, improve company culture and employee morale, and enrich overall communication within your organization.

Many of our clients also find they can outsource their HR function to us and realize a cost savings. And, they enjoy the added benefit of having access to multiple HR professionals.

While cost is an essential consideration, it’s crucial not to compromise on the quality of service. Choosing a reputable HR outsourcing firm with a proven track record of delivering high-quality HR solutions can help minimize the risk of errors, avoid compliance issues, and maximize employee satisfaction. Investing in an experienced firm upfront may result in long-term cost savings and mitigation of risk for your business.

Here are eight benefits of outsourcing your HR management.

Watch this video to discover how we can help you manage your organization’s HR needs.

Ready to discuss your HR needs? Contact us today.