The benefits of human resources outsourcing for financial institutions

Financial institutions looking to navigate change, strengthen organizational performance and incorporate new tools like AI will often benefit from focused HR leadership. But does that leadership have to involve a full-time hire?

Often, HR outsourcing services can offer a more cost-effective approach that not only enhances operational efficiency but also allows financial institutions to focus on their core competencies. Keep reading to learn more.

Understanding the role of outsourced human resources

Human resources plays a pivotal role in shaping the overall landscape of an organization. When outsourcing HR functions, HR becomes instrumental in facilitating the alignment of departmental operations with the institution’s strategic goals.

Key responsibilities of an outsourced human resources team

• Strategic alignment: Your outsourced HR aligns human resources with your overall business strategy. This includes understanding the unique challenges faced by financial institutions and tailoring solutions accordingly.
• Compliance oversight: Financial institutions must adhere to stringent regulations. Outsourced HR brings expertise in compliance, helping to navigate the complex legal landscape while minimizing risks.
• Performance management: Your outsourced HR is essential in setting performance metrics that enhance employee engagement and productivity, supporting an organization’s focus to remain results-oriented.

The benefits of outsourced human resources services for financial institutions

Outsourcing HR offers financial institutions several advantages. Outsourced professionals can bring specialized insights into HR strategies tailored to the industry, allowing organizations to access high-level knowledge without the overhead costs associated with a full-time executive. Their industry-specific experience can also assist in navigating the complex regulatory environment that financial institutions face.

Additionally, outsourcing HR provides an objective perspective, which is crucial for identifying areas of improvement within the organization. This external viewpoint, combined with their ability to offer flexible engagement based on the institution’s needs, allows for cost-effective solutions and adaptable HR strategies. By leveraging an outsourced HR, financial institutions can enhance their HR capabilities, drive strategic initiatives and gain a competitive edge in attracting and retaining top talent, all while focusing on their core business operations.

The advantages of HR outsourcing for financial institutions

Outsourcing your HR functions can yield significant benefits for your financial institution. Some key advantages include:

1. On-demand, experienced insights

Outsourcing HR allows financial institutions to tap into specialized knowledge as needed. This can include:

• Access to experienced industry professionals: Engaging with seasoned professionals who have hands-on experience in HR for financial services can bring in-depth insights that drive better decision-making.
• Tailored solutions: Outsourced HR providers can offer customized services to address the specific needs of financial institutions, from compliance to talent acquisition.

2. Flexibility and scalability

The dynamic nature of the financial sector requires HR solutions that can adapt to changing demands, and outsourced HR can assist with this, offering:

• Scalable solutions: Financial institutions can easily scale their HR operations up or down based on current needs, allowing for efficient resource allocation.
• Agility in response: Outsourced HR allows organizations to quickly adapt to market changes, keeping HR practices aligned with business goals.

3. Cost control

Managing costs is a critical concern for financial institutions, and outsourcing HR can help achieve this goal through:

• Reducing fixed costs: By outsourcing, organizations can minimize fixed HR costs, allowing them to allocate resources more effectively across other areas of the business.
• Focusing on core activities: With HR functions handled externally, financial institutions can concentrate on their core activities, enhancing overall productivity.

Outsourced HR can also help your financial institution implement AI more effectively

AI is transforming how financial institutions do business. Most financial institutions already use or plan to use AI-based tools, creating a push for change that is disrupting not just processes, but people.

Institutions looking to adopt or make better use of AI need to reevaluate their talent strategies, consider what roles should look like in an AI-powered workplace, update existing performance management metrics and reassess their overall approach to workforce planning in light of AI’s capabilities and limitations — all areas where outsourced HR can provide leadership.

Further, because AI adoption is also a major exercise in change management, outsourced HR can help your institution navigate that process more effectively. Look for support in how to communicate with your team, listen to and address concerns, maintain momentum from a people perspective and avoid harming your culture during a time of transition.

Operational and strategic support through outsourced HR

Outsourced HR can provide both operational and strategic support, which is essential for the success of financial institutions. Operational HR functions are vital for your organization’s day-to-day management. Key areas like compliance, employee relations and hiring processes all benefit from the insights an outsourced human resources team can bring.

• Employee relations: Maintaining positive employee relations is crucial for morale and productivity. Outsourcing HR can help manage conflicts and foster a positive workplace culture.
• Onboarding and offboarding: Efficient onboarding and offboarding processes facilitate seamless transitions and preserve organizational knowledge.
• Compliance management: Adhering to labor laws and regulations is crucial, particularly in the highly regulated financial sector. An outsourced HR can assist in maintaining compliance with these standards.

In addition to operational functions, outsourced HR can also provide strategic support that drives long-term success, in areas such as:

• Talent strategy development: A strategic approach to talent management helps financial institutions attract and retain top talent, which is critical for maintaining a competitive edge.
• Workforce planning: Effective workforce planning helps financial institutions maintain the appropriate number of employees with the necessary skills to address future needs.
• Leadership development: Investing in leadership development through outsourced HR can enhance the capabilities of current and future leaders, fostering a culture of excellence.
• Evolving team culture: Less than 50% of current CHROs say their current workplace culture offers a solid foundation for future success. However, outsourced human resources support can help change that by spearheading efforts to reevaluate your employee value proposition (EVP) to better attract and retain talented people to power your organizational success.

Navigating compliance challenges

Compliance is a significant concern for financial institutions, and outsourcing HR can help mitigate risks. Financial institutions are subject to numerous regulations, including those related to employment practices. Non-compliance can result in severe penalties and reputational damage.

Outsourcing HR provides extensive knowledge of industry regulations, helping financial institutions remain in compliance. They can assist in conducting regular audits to help identify potential compliance risks and enable proactive measures to be taken. They can also provide training on compliance-related topics to help ensure employees are aware of their responsibilities and the importance of adherence to regulations.

What’s next for the role of outsourced HR in finance?

As the financial landscape continues to evolve, the role of outsourced HR will adapt to meet new challenges and opportunities. Advancements in technology, shifting workforce expectations and increasing regulatory demands will drive financial institutions to seek more strategic and flexible HR solutions.

Outsourcing HR functions will not only help organizations streamline operations but also enhance talent management, compliance and overall efficiency in an ever-changing industry. Some trends shaping the future that outsourced HR can provide support for include:

• Technology integration: The integration of technology in HR processes will enhance efficiency and data management, allowing for more informed decision-making.
• Increased focus on employee experience: Financial institutions are placing greater emphasis on employee experience, and outsourced HR can play a key role in creating positive workplace environments.
• Investing in continuous improvement: Financial institutions must prioritize continuous improvement in their HR practices to remain competitive and responsive to industry changes.
• Building strong partnerships: Collaborating with outsourced HR providers that understand the financial sector will be essential for success in the future.

Outsourcing HR functions offers financial institutions a pathway to enhanced efficiency, compliance and overall organizational success. By leveraging on-demand insights, flexibility and cost control, financial institutions can navigate the complexities of human resource management while focusing on their core business objectives. As the financial landscape continues to evolve, embracing outsourced HR strategies will be vital for staying competitive and fostering a thriving workplace culture.

How Wipfli can help

The strategic outsourcing of HR functions presents a compelling opportunity for financial institutions to enhance their operational capabilities and achieve long-term success. If your organization is looking to modernize its approach to HR, Wipfli can offer the guidance and knowledge you need to align your HR practices with your business goals. Contact an advisor today to get started.

Get outsourced help to strengthen your institution

Read more

• Regulation Z trigger terms that can derail your ads
• How should financial institutions respond to the federal compliance pullback?
• How can financial institutions get more value from using AI?