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More HR professionals are striking out on their own to work as independent contractors.
Jonna Contacos-Sawyer built the entire human resources infrastructure for a Native American tribal government in California. Penny Miller developed workplace policies and a leadership training program for a 130-employee business. Katie Busch created a compensation system for shipping company DHL Express in South America.
If these sound like the kinds of projects you’d expect HR practitioners to undertake as a matter of course, you’d be right. But what’s notable here is that Contacos-Sawyer, Miller and Busch (each of whom has earned SHRM-SCP certification) did this work as independent contractors.
They run businesses that serve organizations whose HR functions are limited by the realities of budget or bandwidth, and they represent an important component of the profession: HR free agents that provide companies with a full range of services—recruiting, compensation, training and development, employee communications, and nearly every other function. If these individuals don’t have their own experts on staff, they usually have ties to professionals with the needed skills.
The idea of outsourcing in HR isn’t new. For years, organizations have contracted with third-party vendors like Ceridian, Paychex, ADP and Fidelity to handle payroll and benefits.
What is new is the rapid growth of the HR outsourcing industry. It is expected to generate $53.9 billion in business globally by 2020, compared with $42.6 billion in 2015, according to market researcher Global Industry Analysts. That’s more than a 25 percent increase in a few short years.
Under pressure to become strategic players, more HR departments are turning to outside specialists to handle nuts-and-bolts responsibilities so staff can focus on the organization’s business needs.
Under continuous pressure to become strategic players while also operating with budget constraints, more HR departments are turning to outside specialists to handle nuts-and-bolts responsibilities so staff can focus on the organization’s business needs. “It’s shifting because the outcry from business to HR is to help grow the business,” says Paul Belliveau, SHRM-SCP, academic chair at HR consulting firm HRPMO and director and global advisor at Avancé Human Capital Management Advisors in Bedford, N.H. “Fundamentally, this is about the transformation of HR. Wherever there’s transformation, you have to take away the things HR shouldn’t be doing anymore so they can be more strategic.”
HR’s shift from tactical to strategic functions isn’t the only reason companies use outsourcers. For a range of smaller businesses, it’s the only realistic option. “Generally, companies don’t need a full-time HR staff person until they reach the 100-plus employee mark,” says Kristen B. Deutsch, president of New Focus HR, an Indianapolis consulting and training company. “In many ways, it is much more cost-efficient for a small to medium-sized business to outsource their HR functions compared to paying a salary and benefits for an in-house HR professional.”
It boils down to simple math. Depending on the location, an HR generalist may earn between $50,000 and $80,000 per year, plus benefits. By comparison, to conduct the same work, an outsourcing company may charge between $18,000 and $30,000 a year, Deutsch says. “That’s a significant savings for the client company.”
In some cases, independent contractors work with an employee who shoulders HR as part of a collection of responsibilities—an owner or partner, for example, or the finance director or office manager. In other cases, a client’s HR department may be run by a solo practitioner who needs help with a couple of functions, like benefits management or recruiting.
Some HR contracting businesses consist of single practitioners who devote their time to a handful of clients. Others have a number of specialists who spend a designated amount of time each month with specific customers. All of the freelancers we spoke to were veteran HR practitioners who, for one reason or another, decided to leave the traditional in-house career path and offer their services for hire.
Based on interviews conducted for this article, HR contractors seem to share several common traits:
For some, the transition from HR practitioner to business leader is something of a career change. Outsourcer Kim Silvers, SHRM-SCP, estimates that she spends only about 30 percent of her time on client work and the rest on running her business, Silvers HR LLC, in Granite Bay, Calif. She opened shop in 2001 as a solo practitioner but soon began hiring staff and now has eight employees. “At first, I was working with every client, but that’s evolved. Now my job is more about strategy and business development. For example, what services should we offer?”
Before starting her business, Silvers spent 20 years in corporate HR. Her last position was HR director for a public company that was acquired. “I was just burned out with meetings and the like, and my options had vested,” she says. After taking a year off, she knew she didn’t want to return to a large company, but she did want to stay in HR. “People were calling me with projects,” she recalls. And because of her state’s complex legal and regulatory landscape, she says, “California was made for HR.”
While Delise West, president of Human Resource Partners in Dover, N.H., finds it rewarding to help her clients grow by allowing them to “focus on their business without distraction,” her role has also evolved. She now spends almost all of her time running the company while her partner oversees client services.
“Outsourcing’s not for everyone,” West says. “You need to think long and hard about how comfortable you are with sales and management before you start your own firm. Especially at the beginning, you have to understand you’re not going to have your own life.”
‘Outsourcing’s not for everyone. You need to think long and hard about how comfortable you are with sales and management before you start your own firm.’
—Delise West, Human Resource Partners
So, not surprisingly, motivation and drive are requisite, too. “You have to be extremely self-starting. No one’s sitting here with me to make me do my job,” says Judy Lindenberger, president of the Lindenberger Group, an HR consulting and training company in Titusville, N.J. “I had to learn so many details to start and grow the business. Things will be out of your comfort zone.”
Many people thinking about becoming HR service providers don’t consider that “you have to spend a certain amount of time just running the business,” says Miller, head of VentureHRO LLC, in Wichita Falls, Texas. She hired a part-time bookkeeper to keep her accounts in order, but she spends much of her time building and maintaining relationships with active, inactive and prospective clients. It’s a worthwhile investment, she says, because all of her business comes through referrals.
In some cases, an HR outsourcer may end up working in completely new ways. Kristie Evans, president and managing principal of HRPMO in Raleigh, N.C., had worked in HR positions in health care for more than a decade when she decided to strike out on her own. As an independent practitioner, she began to apply her interest in finance and analytics to benefits administration. “I always felt a bit out of step because I was more financial and analytical than most HR people,” she says. Today, her company conducts technical and business process assessments for HR departments and manages the implementation of HR information systems.
“If I’d just been an independent contractor and had people funnel work to me, I wouldn’t have fundamentally changed the way I worked,” she says. “Because I created a business entity, I look at business holistically. It’s changed my view as an HR person, too. All pieces of the organization have a role to play. HR’s job is to make sure they’re all optimized.”
That’s a task HR freelancers are well-suited to take on.
The People Behind Your HR Outsourcing
Mark Feffer is a freelance business writer based in Philadelphia.
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