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The Evolution of the HR Outsource Model

May 1, 2023

By Mary Rizzuti

In recent years, human resources has rapidly evolved as a multi-faceted functional area in business, with organizations increasingly investing in new programs for their people, driven by senior HR leaders’ inclusion in the organization’s C-suite discussion and decisions. With the growing importance and demonstrated benefit of an effective HR function, it is difficult to identify a company that would not benefit from some level of HR expertise.

The HR function has evolved in its delivery model for different organizations, both in-house and externally. Leaders are leveraging fractional HR outsourcing services to dial into their specific business needs while maintaining a cost-effective way in which to create best-in-class programs and organizational culture.

Understanding the Role of HR for Different Organizations

Beyond the core responsibilities, the way in which a company staffs its HR function is unique to each organization, based upon its size, complexity, and business cycle. Some organizations may have an HR department staffed with specialists who focus on specific HR functions such as payroll, benefits, compensation or DEI. Others may utilize talent that covers all areas of HR at different hierarchical levels, such as HR business partner, manager, specialist, coordinator, etc. Still others may task some other role in the company with the responsibility for HR, such as operations, finance and/or administration.

Additionally, many companies still rely on a single HR professional, or in some cases, a general business administrator, to cover a growing number of responsibilities, recognizing that their operational budget does not allow for an HR headcount greater than one person.

As the responsibilities of human resources professionals increase, senior leadership is recognizing the importance of staffing their HR function with professionals who have the expertise necessary to mitigate risk; attract, retain and protect employees; to create a culture of inclusion and open and honest communication; and to develop a unique company brand for their most important asset, their people.

The Rise of Outsourced HR

It is not always easy to find one individual with the broad skill set that is needed to properly run the HR function in an organization. Enter the concept of HR Outsourcing – a model where a company has access to a team of individuals who have the expertise in the various areas of HR. For companies where a full-time HR person is not needed (e.g., start-up companies, small businesses), the HR Outsourcing model can be an effective solution.

Another solution to the HR staffing challenge is the evolving concept of fractional HR Outsourcing.

Fractional HR Outsourcing is the practice of supplementing your existing team based on specific needs. For instance, if an organization is struggling with employee engagement, they may look to outside professionals who have specific experience with identifying and implementing unique and impactful ways to reward top performers. Additionally, if the HR function is not properly staffed for due to turnover, leave or particularly busy periods (e.g., open enrollment), part-time assistance from highly experienced professionals may be the most cost-effective, efficient option.

Fractional HR Outsourcing enables business leaders to be agile when utilizing additional resources on an as-needed basis, especially when they need to fill in gaps during particularly busy periods of time, when colleagues are on leave or an incumbent has vacated a position. With all fractional outsourced HR services, the key to an effective resource is one that takes the time to fully understand the company, its culture, philosophy and strategic plan.

Examples of fractional HR Outsourcing services are:

  • Performance management
  • Compensation planning
  • DEI program development
  • Voice of Employee (VoE)
  • HR administration
  • Benefits administration
  • Talent acquisition

HR plays a critical role in mitigating risk and creating effective policies, practices and strategies to engage employees and create a value proposition for talent attraction and retention. When companies prioritize human capital initiatives, a solid foundation is created, from which businesses may leverage their strategies, goals and objectives. Having a deep bench of HR talent that provides specific expertise in a variety of areas when needed demonstrates a commitment to excellence, compliance and best practices.

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Mary A. Rizzuti

Mary Rizzuti is a Partner with Eisner Advisory Group LLC and the Practice Leader of Compensation Resources.

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