Hiring an HR Team or Outsourcing HR: Which is Better for Manufacturers?
HR is a significant challenge for manufacturers, especially now that a talent shortage is hitting the industry hard and making it even more challenging to attract and retain highly skilled workers. In fact, the National Association of Manufacturers (NAM) recently reported that 77% of manufacturers expect the challenges of acquiring and retaining top talent to continue into the next couple of years. It was also noted that the industry will see as many as 2.1 million jobs go unfilled by 2030.
The problem is that business owners are often too focused on daily operations and overwhelmed by HR tasks to optimize the company's potential. After all, you can't do it all — but then what is the answer? How do you overcome HR challenges in the manufacturing industry?
Enter the options: PEO vs. In-house HR team.
Many may wonder whether hiring a team is worth it, but you should know it isn't the only solution. The benefits of outsourcing HR, particularly the ROI of a PEO partnership, should never be underestimated. To help you make your decision, here is what you need to know about hiring in-house vs. outsourcing HR and our top tips on how to overcome HR challenges.
HR Challenges in the Manufacturing Industry
Although keeping and acquiring top talent is a rapidly growing concern, HR challenges in the manufacturing industry go far beyond that. To name a few more, some common challenges can include:
- Not enough time
- Time-consuming paperwork
- Uncertainty about laws and guidelines
- Lack of knowledge about policies for employees
- Not enough financial resources to acquire attractive employee benefits
Moreover, many small to mid-sized businesses think they can take on all HR administration themselves, which can only cause more problems. Although you may realize how much time is dedicated to payroll, benefits, onboarding, employee claims, disputes, etc., too much time can be wasted losing employees to competitors with better company culture, benefits, and policies.
Business owners have a lot to do, and HR paperwork can take up hours weekly —where you could be focusing on other tasks that are just as important. Running a business is hard, but it’s even more complicated when bogged down with HR tasks. PEOs take this burden away, freeing up tons of time for you to give your all to other important areas of business while resting assured that your HR is taken care of in the process.
Should Manufacturers Hire an HR Team or Partner with a PEO?
Taking the burden off your hands can go one of two ways: either you hire in-house or outsource your HR to a PEO. This doesn't always mean that you won't need any in-house HR staff, but you can have a more manageable and affordable HR team while accessing the experience and expertise that PEOs offer.
While determining if a PEO is the best fit for you, there are at least two areas to consider.
PEOs cost less than hiring an HR team. You'll have to consider the costs of every team member's payroll, benefits, hiring, training (new hire and ongoing), etc. Then you'll want to ask yourself, "What is the average salary of an HR manager?" In this case, Rasmussen University says you can expect somewhere around $116,720, with many companies going much higher. As for other team members' salaries, the University says you can expect to pay the following:
- HR Assistant — $41,430
- Payroll and Timekeeping Clerk — $46,180
- HR Specialist — $61,920
- Training and Development Specialist — $61,210
- Compensation/ benefits specialist — $64,560
- Labor Relations Specialist — $69,020
For smaller businesses, there is a need for HR, but the cost is too high and not worth hiring in-house. A PEO can help with that.
PEOs are not only less expensive than in-house, but the ROI is greater. According to NAPEO, companies in a PEO partnership grow 7 to 9% quicker than those that are not, and:
- Have 10 to 14% lower turnover
- Are 50% less likely to go out of business
- Benefit from an ROI in cost savings up to 27.2% or more
Who Should Outsource HR?
Although most — if not all — businesses can benefit from outsourcing HR in some way, those that would benefit most from a PEO are typically companies that want to expand and grow their business but have limited resources to make it happen.
According to Indeed, an excellent way to evaluate whether your company should outsource HR is by considering how well a PEO will align with your business objectives, considering what your employees think about your current in-house HR team operations, and assessing how well your HR team is keeping up with rapidly evolving laws, practices, benefits/plans, technology, and more.
For manufacturing businesses, in particular, outsourcing can be ideal if you can relate to the following:
- Are Small to Mid-Sized
- Have 25-500 Employees
- Allows you to shift focus from transactional HR to strategic HR, which allows for greater employee-centric focus and company objectives
You're Not Partnering With Just Any PEO When You Partner With PRO
Working with the right PEO can be the 'make-it-or-break-or' for the success of your HR. You don't want to work with just any PEO — you want to work with PRO for outsourced HR. Why? Because PRO team members are at the top of their fields and committed to helping your manufacturing company reach its full potential. Worried about losing the incredible HR team you currently have? No problem! Even if you have a small internal team, you can supplement with a PEO.
Contact us to learn more about PEO partnerships and what PRO Resources can do for you.