HR functions are very important in the operations of any organization today. However, it is not always possible and feasible for companies, especially SMEs to manage the entire HR department in-house. This is where the services HR outsourcing services can come in handy. Outsourcing of some of the tasks can help organizations to obtain professional assistance in handling particular functions of human resource (HR) department without directing and overloading the company’s staff with tasks that could be more effectively performed by outsourced service providers.
Here, we are going to discuss some of the major benefits of using HR outsourcing services.
Reduced operating costs
The main advantage of HR outsourcing is the possibility to decrease operating costs. Classical in-house HR departments need more resources, such as the employees themselves, their payroll, working area, equipment, and software licenses. Thus, outsourcing those non-strategic or lower value added activities eliminates such fixed costs for the companies.
Another advantage of HR outsourcing is that it enables organizations to transform their expenditure from fixed capital costs, to contingent operating costs, users pay only for the amount of service they required in the monthly basis. This makes a lot of sense because it also saves expenses in instances where internal HR staff could be over-staffed and underutilized most of the time. Outsourcing providers also have an advantage when it comes to per-employee cost since they are able to work for several clients at a time which makes the cost per head lower.
Tasks commonly outsourced to reduce costs:
- Payroll processing
- Benefits administration
- Recruitment processes
- Training and development
- Performance management
Access to specialized expertise
HR outsourcing opens access to providers, who work only with certain HR functions like compensation, benefits, talent acquisition, etc. These specialists, as a rule, possess quite exhaustive and profound knowledge and work solely in their fields. They always keep themselves updated with new compliance regulation, technology, and tactical to remain on the forefront.
Scalability and flexibility
With outsourcing, fixed costs such as those associated with staffing internal employees are eliminated since companies only pay for the present level of services. In the other case, when the business volumes rise sharply, more services can be procured at the same time through outsourcing partner. Likewise, when volumes reduce during such situations as a recession, service levels and spend can always be cut down.
Improved efficiencies through centralized services
Outsourcing helps companies to take advantage of the best practices in dealing with HR issues that may be adopted across different companies within the outsourcing firm. This results in an efficiency higher than that of fragmented systems within the organization. These may encompass, for example consolidated payroll processing, applicant tracking, performance reviews, documentation archives, benefits administration portals, HR dashboards and reporting systems to mention but a few managed by the outsourcing provider.
Technology expertise
Even though some aspects of the service delivery may be integrated with the client’s existing infrastructure, HR outsourcing providers have their own cutting-edge, world-class HR technology environment developed for various service deliveries. They invest time and money into being aware of new tools and then making them fit into great user experiences.
Concentration on core business
Outsourcing non-core transactional HR tasks can free up internal staff time and efforts to place them on strategic initiatives that will support organizational goals. This brings the benefit that the emphasis will be on the further development of the business for which the time and energy of HR and management is necessary.
Improved compliance and risk mitigation
Outsourcing also shifts a considerable amount of compliance responsibility to specialized service providers. They also make sure that all policies, process and documents are reviewed frequently and will update and adhere with the legislative requirements through dedicated compliance personnel. This is helpful for the client companies to have that assurance that everything that needs to be done is being done for them.
Table: HR outsourcing services vs In-house HR services
| Criteria | HR Outsourcing Services | In-House HR Services |
|---|---|---|
| Costs | Variable costs based on number of employees and services used. No need to invest in HR infrastructure and staff salaries. Often more cost-effective. | Fixed costs like salaries, benefits, infrastructure, systems etc. for full-time specialized HR team. |
| Expertise | Access to niche expertise of specialists focused only on their domain like payroll, compliance etc. | Requires deep expertise across all HR domains which may be difficult for generalists or small HR team. |
| Scalability | Flexible scaling up or down of services and costs based on business needs. | Rigid costs of internal team which may not fully utilize at low volumes or scale up fast enough. |
| Systems | Leverage advanced centralized HR technology platforms optimized for efficiency. | Requires own IT budgets and expertise to implement and upgrade HR systems. |
| Compliance | Dedicated compliance resources ensure updated policies, processes as per changing regulations | Compliance management is additional responsibility for internal HR. |
| Focus | Frees internal teams to concentrate on strategic HR initiatives core to business goals. | Split focus on both administrative tasks and strategic work. |
| Risks | Compliance and legal risks are mitigated being vendors’ responsibility. | Higher compliance and legal risks of errors or failures with internal management. |
| Global Capability | Strong multi-country operating models for global clients with varied needs. | Challenging for internal teams to deliver global HR services effectively. |
FAQs
1. What are some common HR functions outsourced?
Some of the most popular areas of HR outsourcing services involve payroll and benefits administration, recruitment and staffing, record keeping and documentation, training and development, and compliance services.
2. How do companies benefit from outsourcing payroll?
The outsourcing of payroll processing helps in acquiring accurate calculation of salaries according to the policies or tax regulations and deductions, for every pay roll. It decreases the burden of paperwork, minimizes errors and also cuts down on expenditure.
Conclusion
Therefore, businesses should consider seeking HR outsourcing services, as it has more advantages than disadvantages when compared to the conventional in-house services. It enables internal teams to shift their focus towards key activities imperative to achieving business objectives while taking advantage of the third-party service providers.