Pros and Cons of Outsourcing HR Functions
Getting bogged down in the trenches can get in the way of big picture thinking in any department of a company. Be that as it may, HR departments are particularly heavily hit. Payroll and taxes alone take up a significant amount of time, as do recruitment, training, and development. For this reason, outsourcing HR functions is becoming increasingly popular.
An Overview of Outsourcing HR Functions
The HR tasks that are outsourced are largely determined by the needs and goals of each individual organization; however, it is customary for businesses to outsource less strategic work. Often, these tasks are extremely manual, highly specialized, or fairly unprofitable.
The most frequently outsourced services include:
- Payroll management
- Recruitment and employee training
- Monitoring organizational structure
- Tracking department and company-wide objectives, targets, and strategies
- Inductions for new employees
What Makes Outsourcing HR Functions So Helpful to Fast Growing Companies?
The goal of outsourcing is to get better results for the same amount of money. And the numbers prove that it works. According to a survey by the Hackett Group, organizations that subcontract these services spend 26% less and employ 32% fewer people. Internal staff who remain are focused on strategic planning, while talent acquisition, onboarding, and other tasks are delegated to others.
Additionally, outsourcing is important for the following reasons:
- Outsourcing HR services might save you anything from 24 to 32 percent.
- Since the Great Recession, 57% of US businesses have expanded their outsourcing. Moreover, just 9% of outsourcing agreements were canceled, indicating that most businesses regarded outsourcing to be a very cost-effective alternative.
- A mere 19% of respondents say they have concerns or problems with their supplier. And 46% of those surveyed said it’s because they’ve received reactive rather than proactive care.
- The flexibility to focus on other responsibilities is cited by 72 percent of businesses as the key benefit of outsourcing the service.
The Pros of HR Outsourcing
Several of the advantages of outsourcing HR tasks are obvious, such as cost reductions or improved efficiency; nevertheless, there are some other important benefits to take note of.
Saves You Money
Fast-growing companies can’t always justify the expense of full-time internal HR staff. Large firms regularly work with outsourced experts to supplement their own internal staff. Outsourcing somewhat repetitive operations that need a lot of time but don’t require a lot of training, supervision, or personalized knowledge yields the most benefits. Large-scale recruiting, payroll, independent contractor compliance, and background checks are all good examples.
Enables Staff to be More Strategic
Recruiting, hiring, training, morale-building, policy-making, risk management, and more are the key responsibilities of HR professionals. That’s a lot for a single department, let alone a single person, to deal with. Mitchell claims that outsourcing some of these responsibilities allows the internal HR team to focus on strategy rather than tactics.
They Have the Benefit of Vertical Expertise
When you don’t have the necessary skills in-house, outsourcing can be a smart solution. As a firm grows, jobs like legal compliance become increasingly challenging.
Complying with Legal Obligations
Workplace compliance is difficult to achieve. You’re never sure if you’re doing the correct thing because there are so many laws, many of which are altered or amended every year. A single blunder might have enormous ramifications. An outside supplier might assist you in staying current and meeting your commitments.
Cons of HR Outsourcing
Outsourcing HR does, however, have drawbacks. The following are the most significant ones to be aware of include:
Loss of In-House Expertise
Companies must have a small foothold in HR even if they outsource their HR operations. You should still appoint someone on staff to monitor the outsourced tasks; otherwise, you risk your firm and HR team being on completely different wavelengths. Given their intimate relationship with employees, HR should also share the company’s culture.
Loss of Control
The HR department is the “heart” of a company. Delegating it to a third party means giving up some control, which is a common concern when considering this option. It is much easier to keep your goals aligned if you can locate a partner who shares your vision.
Less Availability and Flexibility
There’s a good likelihood that an external company won’t respond as quickly as an in-house HR employee would. Typically, the HR manager has preconceived notions about how things should be done within the department. To guarantee that expectations are satisfied, it is critical to align these perspectives with the provider.
Tips to Make Outsourcing HR Functions a Success
HR outsourcing is a critical component of many business models; nevertheless, there are a few guidelines to follow in order to make it work for you:
Read Reviews From Other Customers
Examine what other customers have said about the company on the company’s website, social media, Google forums, and so on. Before beginning to engage with any service provider, it is critical to conduct some preliminary research.
Consider the Level of Assistance Required
You need to select your outsourcing partner based on the level of support you need. As a result, you’ll need to carefully select which tasks you’ll delegate. Administrative responsibilities, IT services (such as the employee assistance platform), recruitment, and so on are examples.
Ensure a Smooth Transition
For an HR outsourcing provider to do their work well, you need to carefully manage the handover of responsibilities. Make sure you have all of the necessary information and spend aside time to explain how the organization and processes work, among other things. It’s also a good idea to emphasize the goals and expectations.
Keep the Lines of Communication Open Internally
It is not necessary for the presence of external HR providers to be kept a secret within your company. Notify all of your teams of the change and, if applicable, how it will affect them on a daily basis. It’s crucial to know who to ask for help when you need it.
If you’re interested in what outsourcing HR functions can help you achieve in your business, contact us for more information.