Should You Outsource Your HR Functions?

Should You Outsource Your HR Functions?

You will, sooner or later, need a human resource operations wing and outsourcing it could prove beneficial. Here are some pros and cons of outsourcing HR.

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There is no question about the relevance of HR in any company - they ensure that the employees in an organization are treated as good as, or better than their competitors, and keep track of every human capital requirement. Most of the organizations we know handle their HR operations in-house thinking that it will help them stay in tune with the employees. Whether you are a growing organization or a well-established one, from building or modifying policies to hiring employees or assessing them, there are many tasks in hand for a Human Resources Manager and they are not easy at all. To create a work culture that stands at par with the organization's vision and mission is a challenging task. While there is no doubt that any organization should invest in reliable and efficient HR, whether to spend its capital expenditure on a full-time HR is a major consideration. With plenty of business process outsourcing solutions available, these organizations could consider outsourcing their HR operations for more efficiency and profitability.

HR and outsourcing, according to Forbes: “Once upon a time, most HR departments provided one-stop shopping for employees with questions or concerns about benefits, hiring, training, complaints, colleagues, etc. For leaders, HR was the place to go for recruitment, retention and terminations. HR is a critical function and most companies handled it in-house. That’s all changing very rapidly.

Today an estimated 50 percent of large companies outsource all or part of their HR needs.”

Though it is true that having an in-house HR lets the employees respond quickly, it is to be said that it costs more. Below are four main factors to decide whether outsourcing is the best choice for you: • Expense - This is the obvious thing to consider. An in-house full-time HR costs yours business its salary, space and equipment, payroll taxes, benefits and training. On the other hand, if you are outsourcing the same role, it will cost you only an hourly rate or a monthly rate. Though the rates will depend on the work you need, it might become costlier to outsource than hiring a full-time employee. In such cases, it is advisable to negotiate with the contractor and make sure all the services are included before signing the agreement.

• Competence - It is common that HR consultants have good working relationships with many benefit providers. Hiring an external HR consultant gives you an added advantage

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on issues such as tax, labour and benefit packages. On the other hand, an in-house HR will be seeing and communicating with your employees on a daily basis. This relationship and experiences will help them create better policies. •

Accessibility and Availability - You hire an in-house HR for one main reason - that she should be available to you and your employees daily. This gives immediate access to files and records, and having any grievances or disputes inside the company can be acknowledged then and there.

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Consider in-house and outsourced HR - at a time - Having an in-house HR has its benefits and so does hiring an HR consultant. Businesses can opt for both – for example, when the company needs a new recruitment, in-house HR can handle the interviewing and bringing them on-board, and the HR consultant can handle payroll issues. Or the HR consultant can create benefits program and your HR can manage it.

Outsourcing HR brings a major benefit that it can help get rid of many outdated practices among in-house HR departments such as the following: -

Recording and tracking employee hours manually. Even in this electronic age, there are many companies that are concerned with the security of e-records and consider the switching from papers to paperless a massive task. A 2015 study from Towers Watson showed that almost half of all HR departments still use paper and spreadsheets to track employee hours. This is an inefficient and error-prone process. Organizations can consider outsourcing this requirement to providers that have the experience and expertise to handle these challenges. Outsourcing will help to improve productivity, efficiency, and security.

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Striving to address complex legal issues without expert support. Labor laws and government regulations are constantly changing and complex. In-house HR may not have the time or legal expertise to handle the challenges involved. Using outsourced HR solutions will help to ensure ongoing compliance with present and future laws and regulations, and enable companies to focus on core business functions.

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Poor management of employee performance and development. Many businesses may find it time-consuming and unsuccessful to track and evaluate employee performance and implement improvement plans. This becomes more challenging for organizations using

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paper records. This is an important HR function that is best outsourced to experienced providers.

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Using many vendors to handle HR needs. You may be using multiple vendors, each entrusted with a different HR task such as payroll, benefits, legal issues and so on.

Managing all these vendors can be very difficult in-house. On the other hand, you can obtain customized services to handle the entire HR needs of your company from a good provider of outsourced HR services.

All said than practised, there are cons to every good thing. An HR employee handles and manages many day-to-day activities in a company - both simple and complex. While outsourcing these tasks are mainly cost saving, there are disadvantages too.

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Poor performance

As said, minimizing cost is one main reason why companies outsource their HR operations.

This can lead to low quality performance by the contractor. As the HR is responsible for handling day-to-day operations in a company, any poor performance will eventually bring a negative impact on the whole company.

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Distance

Outsourcing HR to a provider who is situated far away from you can bring a sense of distance between the employees and the company. Whenever the employees find the HR is not easily accessible, it can lead to frustration and reduced morale among them. Also, the fact that the company outsourced one whole department may lead to concerns that other departments may be outsourced too.

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Recruitment

Only if a company is lucky will they get outsourced employees who will try and understand what the company is all about. If they lack the understanding, new employees recruited by these very outsourced employees will also lack the knowledge. They may even recruit new people who don’t really fit the job. This gradually affects the success of the company.

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Credibility

Outsourcing HR means even your most important and sensitive company information is to be shared. With this, there is always a possibility for an information leak.

With as much business process outsourcing companies as there are fish in an ocean, it is a difficult task to pick the best one for your HR operations. To make things easy, hire only an experienced provider so that your company can focus solely on its core business operations.

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