Organizational spending on HR departments is on the rise. Is your business part of the trend? Here's what you should know.
The human resources department is central to business success. A well-run, highly organized HR department can contribute to an efficient workforce and be a key factor in generating profit. Conversely, a disorganized HR team can hinder operational efficiency and prevent growth.
If you have recently analyzed your organization’s spending and profits, you might question if you are allocating the right amount of money to staffing HR. Are you spending too much? Too little?
Let’s review the industry trends.
Is your company spending more on HR today compared to recent years? If so, you are not alone.
HR funding is consistently increasing year over year. From 1997 to 2004, HR routinely received less than 1% of total operating expenses budgeted by their organizations. This figure increased to about 1.5% in 2015 and 2016, before skyrocketing to a median average of 3.1% in 2017.
The spending trend doesn’t stop there.
The median hike in HR’s staff salary budget was 4.2% in 2017, up more than a percentage point from the 2012, 2013, and 2014 survey years. And although HR staff make up just 1.4% of the overall workforce, their salary equals 2.7% of employers total wage and salary expenditures—HR staff enjoy more of the compensation pie than other employee types.
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It isn’t surprising to see considerable increases in HR staffing and overall budget allocation, given the evidence that the people in charge have growing confidence in the expertise of their HR departments. C-suite execs are now more likely than ever to include HR staff when making major decisions—75% of respondents to the 2017 survey indicated that their HR departments have full or substantial involvement in key business decisions. HR departments are now seen as a partner, with the ability to influence top-level decision makers.
Regulatory complexity is driving up the cost of HR support.
Legislative changes put pressure on HR staff—this is especially true in 2021, as a slew of federal and state regulations were recently put in place due the coronavirus pandemic. Many of these new regulations, like Cal/OSHA’s Emergency Temporary Standards, must be implemented quickly and correctly, as the consequences for failing to do so are costly. So far, Cal/OSHA has handed out fines totaling millions of dollars for violating COVID-19 regulations.
While the pandemic has had a major impact on the operations of many businesses, significant compliance concerns exist in other subject matter areas as well. For example, 2010’s Affordable Care Act (ACA) required HR departments to update, revise existing and implement new policies. Consider the effort that must go towards implementing just one regulation change. ACA regulations changed the rules for employment leave, sick leave and protected leave, to name only a few of the regulatory changes.
HR departments realize this—80% said they planned to change company policy based on new legislation.
These demands have driven up HR costs. To keep up with changing regulations, organizations are hiring HR specialists, who command salaries that can be significantly higher than those of rank-and-file HR staff. More than 70% of HR departments report at least one specialist on staff. The most common specialty area is benefits, followed by employment and recruitment. While businesses may balk at these increased costs, they are more than offset by the financial consequences of not staying in compliance with increasingly complex regulations.
But are there ways to get access to the expertise of specialists on an as-needed basis, without having to shoulder the cost of specialists’ salaries?
HR outsourcing allows you to leverage
scale and specialization.
You have seen the numbers. You know new regulations demand more of your HR team.
Relying entirely on internal HR to implement new guidelines often results in noncompliance. As discussed, more and more companies are hiring HR specialists. These topic experts are an important part of the team, managing specific areas that others are unfamiliar with.
However, when noncompliance issues pop up in subject areas outside their specialties, costly fines, time-consuming litigation, and general inefficiencies can result.
If your topic expert or experts are familiar with the noncompliance issue, that’s great! If they are not familiar, or only somewhat familiar, you will likely experience problems. However, by leveraging scale and specialization, HR outsourcing can alleviate some costs—especially the cost incurred due to noncompliance.
HR outsourcing services, like those offered by our team at Employer’s Guardian, can solve every noncompliance issue. We take a top-down view of your company, determining where things went wrong. And once we find the faults, we correct them with long-term, fully-compliant solutions.
6 out of 10 employers now rely on an outsider HR service provider. Why? It works!
At Employer’s Guardian, we cultivate genuine relationships with your internal HR team. We work with them to improve day-to-day processes, and provide them with EGForce, our online employee management and payroll software. Use of metrics, analytics, and dedicated employee management software result in greater departmental efficiency, cost savings, and data-driven strategic decision making. New laws and regulations? We’re there to update company policy and help you implement new procedures. We don’t give you access to just one or two topic experts. You get a team of experts, well versed in every aspect of HR.
Contact us to learn more about how we can manage your growing HR needs while increasing your bottom line.
Want a professional to walk you through your HR needs shopping list?
At Employer’s Guardian, our experts are here to help. We are happy to work with you to understand your HR needs. Get in touch—give us a call or fill out our online contact form and we’ll promptly get back to you!
