At one time, not-for-profit HR departments might have been responsible primarily for recruiting and hiring and occasionally for intervening in disciplinary or conflict resolution matters. Today, HR staffers usually also administer benefits, provide employee orientation and training, draft and update various policies, ensure regulatory compliance, and keep employee records. They may even oversee payroll.

That’s a lot of responsibility, and not every nonprofit has the resources to do it all in-house. If your organization is understaffed and overworked, you might want to consider HR outsourcing.

Cost Factors

Before you outsource, decide which HR segments to “farm out.” Look particularly at labor-intensive responsibilities, such as employee benefits and compliance requirements. Transferring some or all of them to the right outside party can vault your organization to a higher level of professionalism and efficiency in those areas.

The move also might result in improvements. For example, an HR specialist firm is likely to have more tools, contacts and time to find affordable health care insurance and retirement savings plans.
Indeed, the primary draw for most nonprofits to outsource is reduced costs. So you should perform a cost-benefit analysis (and your financial advisor can help). Even if the cost to outsource is more, you may decide that the extra dollars are worth freeing up staff hours for mission-critical initiatives.

Acknowledge Potential Downsides

One of the biggest drawbacks to outsourcing is the loss of control. So think through the ramifications of handing off various HR responsibilities. Certain tasks may require an understanding of your organization’s culture and history.

Also consider the impact of potentially terminating current HR staffers. Make sure you have buy-in from members of management and your board of directors prior to contacting outsourcing service providers.

Vetting Providers

Before you hire a provider to handle HR tasks, do your homework. Ask candidates questions such as:

• How many nonprofit clients do you have that share our rough location, mission and size?
• Do you provide services on-site, off-site or both?
• Who on your staff will we work with?
• What expectations do you have of us?

Also ask about rates (hourly, by the job or on retainer) and billing procedures. And get — and follow up on — references. Once you’ve identified your top choice, meet with your attorney to review the contract.

Perfect Partner?

Hopefully, you’ll find the perfect HR partner. But be sure to set up a monitoring system that enables you to keep tabs on the new arrangement — and be prepared to do some tweaking if it isn’t perfect. Contact us for more advice on outsourcing and other cost-cutting initiatives.

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