If you think handling payroll and human resources on your own is a huge expense saver, you may be missing crucial costs. Organizations that work with multiple vendors to manage employee benefits and payroll face even higher expenses. Employers have many misconceptions about the real cost of managing HR and payroll in house and it can harm the bottom line.
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Up to 65 percent of true HR costs may be hidden within large organizations. Chief financial officers can’t gain a real sense of the expense of HR management when only a small portion of the total is visible. In addition to the cost of contract with vendors, executives may not consider the price of software upgrades or paperwork processing. In-house HR costs as much as $1,403 per employee per year on average. This adds up to 28 percent of total operating costs.
Misconceptions can cost you
Part of the issue with in-house HR and payroll management is some companies severely underestimate the costs. Businesses assume the cost of handling payroll is $2 to $6 per check, but it’s actually $16. There could be other hidden costs CFOs aren’t aware of as well.
Significant labor costs are associated with internal HR operations. According to PwC, they found that there may be a problem if HR staff members spend more than 50 percent of their time on administrative tasks and labor costs are more than $1,000 per employee served. HR has the capability to drive an organization forward by hiring the right employees and developing top performers, but many businesses don’t fully utilize this potential. In addition, some companies don’t invest enough in updates for their HR technology, which can further slow down this department.
The problem with multiple vendors
To cut costs, many companies outsource to multiple vendors or professional employer organizations. This can quickly get complicated. Employers want to add benefits that give them a competitive position in recruitment, but it may require multiple vendors if their current partners don’t offer the right capabilities. However, working with multiple vendors causes companies to spend 18 percent more on HR than they would if they managed it internally. In fact, organizations that outsource their HR and payroll needs to a single vendor manage to spend 32 percent less than companies that handle all these responsibilities in house.
Removing the extensive labor from the HR department enables them to approach the role more strategically.
Doing HR and payroll on your own, or with multiple vendors, is expensive! Let Zuman help you save time, reduce cost and grow your business with our PREMIUM Single Source solution for HR, payroll and talent management.