Nonprofits: Outsourcing HR Could Save Time and Money

Employers that outsource HR are no longer outliers. Approximately one-third of U.S. employers outsource at least one HR function, according to software company ZipDo. And for good reason: Many HR responsibilities, such as benefits administration and recruiting, have recently become more complex and specialized. If your nonprofit’s HR staff is still trying to do everything in-house, you may want to consider handing over some duties to outside professionals.

Potential savings and other benefits

First, decide which HR functions you would farm out — for example payroll; benefits planning and administration; leave management; recruiting; worker training; performance reviews; and diversity, equity and inclusion (DEI). These are all labor-intensive responsibilities where expertise counts. Transferring all or some of them to the right outside party could vault your organization to a higher level of professionalism and efficiency.

Next, gauge potential savings and other benefits. Even if the cost to outsource is more, you may decide that the extra dollars are worth freeing up staff hours for other initiatives. Also assess the drawbacks to outsourcing. Certain tasks may require an understanding of your organization’s culture and history to be effective. Plus, you need think about the impact of terminating HR people currently on staff.

Vetting vendors

Be sure you get buy-in from your management team and board of directors before you decide to vet HR vendors. When you start screening providers, ask questions about the scope of their service, how long they’ve been in business and how many nonprofit clients they have in your sector and of a comparable size.

Before choosing a vendor, make sure you understand what and how it charges — for example, by the hour or on retainer. And be clear about whether services will be provided on-site, off-site or in a combination of the two. It’s also important to set mutual expectations, including what the provider will depend on your staff and board to do. Once you’ve selected a vendor, ask your attorney to review the contract before you sign it.

Stretched too thin?

If you’re still undecided, here’s a sobering statistic that you might consider: The Society for Human Resource Management has found that nearly 75% of HR professionals feel their department is stretched too thin. Even if you don’t think outsourcing is the right choice for now, be sure to talk to your HR manager about workload issues. Unhappy HR staffers can affect your entire organization’s morale and your nonprofit’s ability to serve clients.