Why Outsourcing Makes Good Business Sense

One of the biggest challenges facing business owners is the continued performance of necessary but non-strategic critical functions such as payroll, human resources and information technology.

Business owners know that running a successful business requires much more than expertise in their trade. Often the most difficult challenge in business is keeping the firm’s critical functions running smoothly, including:

  • Payroll,
  • Accounting,
  • Human resources,
  • Collections, and
  • IT.

Many of these functions come with numerous subfunctions. Human resources, for example, includes recruiting and retention, training, leave management, benefits planning and administration — not to mention an array of compliance responsibilities. All of these are labor-intensive activities where expertise matters. And that expertise frequently can be obtained in a more cost-effective manner by turning to external service providers.

The potential benefits of outsourcing go far beyond expertise, though. The primary draw for most firms is reduced costs, which come from a variety of sources. Vendors can pass on the benefits of economies of scale and high-capacity utilization. They may also wield superior negotiating leverage when it comes to dealing with third parties. They also provide access to best practices and the latest technology without incurring the normal capital costs.

If you outsource functions, your firm may see reduced overhead and staff costs, including employment taxes, paid time off, benefits, salary and wages. Moreover, unlike internal staff, outsourcing partners are paid only for work performed — you won’t have to compensate them for being on vacation or idle time sitting at their desks!

Selecting vendors for outsourced services requires careful consideration. Not every vendor will be able to provide the functions and level of service you require. Begin by soliciting referrals from other business owners. Pay special attention to the experience of firms that are comparable to yours in terms of size and geographic area. Ask about vendor customer service. How do they react when problems arise? Do they resolve issues satisfactorily?

Also, analyze vendor fees and cost structures. Do they have a complex fee structure? Do they have hidden fees? Can the vendor adapt in case you expand or downsize in the future?

Once you’ve selected a vendor, it’s important to maintain frequent communication with the vendor through implementation and then regularly throughout the course of your relationship.

As businesses continue searching for greater efficiency and lower costs, outsourcing arrangements not only promote savings but can also provide your firm with a competitive advantage. Regardless of size, your firm might find that outsourcing makes good business sense!

©2019 Thomson Reuters

The New DOL Proposed Overtime Rule

The U.S. Department of Labor has released a Notice of Proposed Rulemaking. This new rule would revise current federal overtime regulations. This notice initiates a 60 day public comment period which allows members of the business community to provide feedback regarding the proposed regulations.

Background

As many business owners may recall, a similar overtime regulation update was initiated by the Obama Administration in 2016. However, a federal judge in Texas struck down the proposed Obama-era federal overtime rule, which would have made more than 4 million exempt employees eligible for overtime pay. As a result, the business community has cautiously anticipated the unveiling of this new 2019 overtime update.

Under this new 2019 DOL proposal, the new salary threshold for exempt-level workers would increase to $35,308 per year or $679 per week. This marks a 49% increase over the current level of $23,660 per year or $455 per week, which was established in 2004. Any employees with salaried amounts less than this threshold will be required to be paid overtime for any hours worked exceeding 40 in a work week.

The proposed 49% salary level increase may seem large to certain business owners. However, this proposed change is far less extreme than the Obama-era proposed previously blocked by the federal court in Texas. By comparison, the Obama-era change, slated to go into effect in 2016 would have doubled the minimum salary amount $47,476 annually or $913 per week.

The Trump administration and the Department of Labor (DOL) have worked to revise regulations concerning overtime in this new proposal. Their work focused on several key topics:

  • Whether to vary the salary threshold on a regional basis?
  • Where the salary threshold should be?
  • Whether the salary threshold should be updated automatically on an annual or multi-year basis?

The resulting 2019 DOL proposal does not vary on a regional basis. It also does not include a plan to automatically update the salary threshold and it does not alter the existing “duties test” regarding exempt level workers. However, the new proposal does allow employers to include commissions and bonuses to make up 10% or less of an employee’s total salary.

Lastly, the DOL would be committed to reviewing this topic every four years. However, any future modifications to the new salary threshold amount would be required to go through the same existing update process.

How does the new DOL proposed overtime rule affect you?

If this update is finalized, employers will be required to:

  • Review the salary levels of all exempt level employees
  • Calculate the cost of increasing the salary to the new threshold amount
  • Compare these new thresholds to the commensurate overtime expenses for hours worked in excess of 40 per week

You can review the Notice of Proposed Rulemaking and access additional resources on the Department of Labor’s website here.