Due to rising costs in both capital and manpower, to effectively negotiate complex federal and state compliance mandates while attempting to rein in operating overhead, many aggressive-growth private companies are outsourcing human resources functions previously handled in-house.
According to the Trendsetter Barometer, a periodic survey conducted by Big Four firm PricewaterhouseCoopers, the chief executives of 360 privately held product and service companies revealed that some 83 percent are currently outsourcing portions of their company's HR functions and planned to continue to do so over the next two years.
According to PwC, 71 percent of those surveyed said that they presently outsource their 401(k)/defined contribution plan administration, while 64 percent responded that they farm out their payroll processing. The companies participating in the survey ranged in size from $5 million in annual revenue to roughly $150 million.
According to the survey, the most common reason for outsourcing cited was difficulty in complying with a maze of federal and state regulations (82 percent), while 71 percent turned to outsourcing to control operating costs to eliminate the need to acquire and maintain various HR functions systems in-house.
Other HR functions being shifted to third-party administrators include health care and welfare plan administration (49 percent), background/criminal background checks (41 percent), Cobra administration (38 percent) and flexible spending account administration (32 percent).
Meanwhile, 61 percent of the CEOs in the Trendsetter poll said that their company has been saving an average of nearly 17 percent as a result of outsourcing.
