Can you afford not to outsource Human Resources?
Job descriptions vary with business needs, and salaries reflect regional compensation expectations. Nonetheless, you can price the personnel in any given department.
Median wages
For example, if your mid-sized business has approximately 600 plus employees, you can estimate the cost of a typical Human Resources Department. According to the 2010 Bureau of Labor Statistics, the HR function will cost $246,280 a year in wages alone.
Job Title Median Annual Wages
Human Resources Manager $99,180
Human Resources Specialist $52,690
HR Administrative Assistant $33,710
Payroll Clerk $33,710
Human Resources Clerk $29,990
Total $246,280
Additional Costs
But, this is not the whole story. If employees enjoy standard benefits, the cost to the private industry non-union employer is an additional 29.7% according to the Bureau of Labor Statistics (2012).
- Paid Leave/Holiday/Vacation 6.9%
- Supplemental Pay 8.2%
- Health Benefits 7.7%
- Retirement and Savings 3.7%
Legally Required:
- Social Security and Medicare
- Federal Unemployment Insurance
- State Unemployment Insurance
- Workers' Compensation
Total 34.2%
Additional expenses include training, administration, technology, office space, furniture, and other assignable costs that cannot be as easily calculated across industries. That makes 34.2 X $246,280 = $84,277 in additional costs or a total of $330,557 Human Resources Labor Cost per year.
In the real world, these figures are low and unpredictable until the Patient Protection and Affordable Care Act (PPACA) is up and running. However, whether your company is at this size or you can see it getting there, you only have so many options to control the labor burden on personnel who do not directly affect sales, quality, or productivity.
Too Negative?
Admittedly, this is a tough assessment. Human Resources personnel often wear their hearts on their sleeves, and it can be difficult to imagine the business without their human touch. In addition, in a company where HR is very central to the corporate culture, the HR staff may indeed contribute to productivity.
However, in most situations, the HR functions can be outsourced. By eliminating payroll-centered functions, you can save $97,410 (wages) + $33,314.22 (34.2%) or $130,724.22/year or the price of installing an HRIS program. Then again, you can save the whole department labor burden by contracting with a Professional Employer Organization (PEO).
What’s to become of human assets?
After removing the administrative and payroll functions, your culture may still value training, succession planning, and talent management. Without the HR burden, your business can redeploy its resources, define strategies, and find new value in its people.
