Not-For-Profit Organizations Shift to Outsourcing HR

Many not-for-profits (NFPs) are discovering that outsourcing human resources (HR) functions offers numerous benefits, often exceeding what a single in-house HR contact can provide. 

Key Takeaways 

• Tax-exempt organizations are increasingly adopting HR outsourcing to formalize human resources solutions. 

• Outsourcing HR functions can be more cost-effective for NFPs than hiring a full-time HR business partner. 

• HR outsourcing benefits organizations of all sizes by providing access to diverse skills, technologies, and compliance support. 

• Various HR outsourcing models, including hourly, fractional, interim, and project-based, offer tailored solutions to meet specific organizational needs and budgets. 

4 Common Misconceptions of HR Outsourcing 

1. HR outsourcing is unaffordable. 

Many boutique organizations fear that outsourcing HR is cost-prohibitive. The reality is that outsourcing is more cost-effective. The ROI of having a team of HR professionals available to provide high-level HR support on a less-than-full-time basis is more affordable than hiring a full-time HR business partner. 

2. There aren’t enough HR needs to justify outsourcing. 

One might think only large organizations can benefit from outsourcing their HR functions. However, small organizations reap numerous benefits from HR outsourcing.  

NFPs, specifically, face a variety of complex issues. By gaining access to skills and technologies via outsourcing, small organizations can streamline processes, enhance decision-making, and maintain compliance.  

Any organization, from a staff of 3 to 3,000+, will benefit from the tools and resources that come with a strong HR presence. 

3. Outsourcing HR does not align with NFP organizations. 

NFPs sometimes worry that outsourcing will dilute the mission or create a disconnect between HR and the organization’s values. However, outsourcing HR functions can help align missions, improve volunteer experiences, and identify potential opportunities for growth and resource allocation. How? By freeing time spent on HR demands, NFPs can refocus efforts on delivering impactful, mission-driven services. 

In summary, HR outsourcing is a strategic, scalable, and cost-effective solution that empowers organizations of all sizes, enhances operations, and optimizes resources –   without compromising quality, compliance, or values. 

4. An outsourced HR professional isn’t invested in the organization. 

Some NFP leaders are concerned that outsourcing HR will make their operations feel impersonal or corporate, potentially alienating employees. It’s an understandable concern given the culture- and mission-driven nature of nonprofits discussed above.  

Outsourcing can actually enhance employee experience by providing stronger, dedicated support. Moreover, an outsourced professional provides a level of confidentiality and impartiality that internal employees cannot match. Finally, an external HR professional is well-versed in the tactical side of HR, not just in employee relations. Safeguard your organization’s compliance with an expert on your side. 

What Are the HR Outsourcing Models? 

Every not-for-profit is unique in its structure, goals, and needs. With three HR outsourcing models, there is a tailored solution to meet your objectives within your budget. 

Hourly HR Outsourcing 

Rather than offering a bundled package where clients need only three out of fifteen services, clients can buy a set number of hours. This allows entities to pay only for what they need, even if it is as little as five hours a month. This flexibility enables organizations to assess their current situation and shift as needed, providing scalability and the opportunity for growth. 

Fractional HR Outsourcing 

Fractional HR outsourcing means an organization has some internal HR presence but does not have tailored knowledge. Fractional outsourcing also includes periodic help. 

Every organization needs assistance in some way. For instance, it might be time to review end-of-year compensation, which would require cycle performance management. Having extra support while keeping one headcount can equip your organization with enhanced knowledge and resources to improve your decision-making abilities. 

Project-Based HR Outsourcing 

Project-based HR outsourcing occurs when a client outsources services for a specific project. This could be to examine their Fair Labor Standards Act (FLSA) compliance or to redo their job description(s), for example. 

What Should NFPs Look for in an Outsourced Partner? 

When looking for an outsourced partner, NFPs should begin by evaluating firm offerings to determine alignment. It is crucial to select an outsourcing partner who not only aligns fiscally but also aligns with other metrics, including: 

• Culture 

• Level of engagement 

• Depth of knowledge of the outsourcing team 

• Industry experience 

When selecting an HR consultant, NFPs must make sure the provider’s strategy aligns with how their organization prefers to receive information. For instance, some consultancies are very tactical, some want to build culture, and some like to offer training programs. 

Since not all models or approaches to HR outsourcing are the same, you want to understand what you are getting. Ask yourself these questions to find a provider that fits your criteria: 

• What is the level of service I will receive? 

• How deep is the bench from an expertise perspective? 

• What is the fee structure? 

By answering these questions, you will be better equipped to select an HR outsourcing partner that can contribute to your organization’s success. 

Why Compensation Resources for Outsourced HR? 

Our dedicated team of outsourcing HR professionals strives to deliver quality service to all organizations. With increased knowledge in the not-for-profit sector, we understand your unique needs and challenges. For more information about our HR outsourcing services that can benefit your not-for-profit, contact us using the form.