Should HR Be Outsourced? Everything You Need to Know About HR Outsourcing
Outsourcing human resource functions have become a recent trend. Now, here is what to know about outsourcing HR functions.
Third party HR functions is a huge trend in today’s business world.
Here’s what you should know about outsourcing HR department functions before you take the leap. Keep reading to find out how it works, what it entails, and who can help you make the right choice.
What Are Human Resources for a Company?
Human resources (HR) is an essential department in any company. Their main goal is to find, screen, recruit, and train candidates for potential job positions. It also focuses on handing out employee benefits and creating or maintaining employee-benefit programs.
As more and more companies work toward getting a leg up over the competition, human resources plays an important role in helping that company deal with changes in the workforce and with the demand for equality, happiness, and fair-practice in the workplace.
The human resources department is absolutely essential for any size of company, including startups, because employee satisfaction leads to customer satisfaction.
If you are wanting to increase your employee productivity and protect your company from issues in your workforce, you need a high-quality human resources department.
The human resources department has many different functions, most of which other departments would not be qualified to do. For instance, human resources deal with:
- Benefits and compensation
- Laws that impact the company or employees
- Hiring and firing
- Management styles with employees
- Performance and satisfaction appraisal
- New approaches to the work process
- Communication styles with employees
- Integrating technology into the workplace
- Career development and succession planning
- Increasing creativity, adaptability, and innovation among employees
- Inter-organizational and inter-departmental mobility
To have a happy and healthy work environment, you need a good human resources department that will help you with any issues. They have the skills and knowledge necessary to do this type of work.
What Is Human Resources Outsourcing?
You can outsource your entire human resources department to fulfill all of the functions mentioned in the previous section, or you could choose to outsource just a few of those functions.
In the end, it depends on what your company actually needs.
A lot of companies choose to outsource functions that have less of an impact on day-to-day management, including benefits administration or taxes. While these tasks are obviously very important, they can be time-consuming and outsourcing these services will allow your in-house HR personnel to focus on other tasks.
The flexibility that comes with outsourcing these departments, or even just non-core department functions, can make it a great investment for the long-term.
The services provided by a good outsourced firm will always be top-notch. It is important to remember that these are professionals just like your in-house team would be. They know what they’re doing.
They know the same laws, requirements, and regulations that in-person human resources personnel would be fluent in.
Another thing to keep in mind is that even though these individuals are working for your company, they are not literally working for your company. They will not count as employees and are paid through a separate service instead.
If you have business needs and you’re concerned about price, it makes sense to go with the options that are cheaper and tick all the boxes.
Types of Human Resource Outsourcing
The different types of outsourced HR services go back to what function is being performed.
The main types of human resources outsourcing you will find include:
- General human resources
- Benefits management
- Payroll and billing
- Employment compliance
- Recruiting, training, and onboarding
You can get services that encompass all of these qualities or you can find services that just focus on one or two areas.
The great thing about outsourcing is that you can pick and choose what you need, so it doesn’t have to be an unnecessary burden in an area.
Human resource management outsourcing, for instance, is one area that you may want to consider because this is a function that is necessary but does not have a direct impact on daily operations. You can still have great management even if it is not in person through your human resources department.
While there are still cons that must be considered (and are discussed below), this is a big reason that companies may choose to outsource.
Why Do Companies Outsource Their HR Functions?
You may be curious about why a company would choose to outsource their HR functions. It truly depends on what that company needs versus what they have available.
Some common reasons for outsourcing include:
- More time for in-house personnel to work on other functions
- Access to best-of-the-best competencies worldwide
- Reduce and maintain operation costs
- Not enough resources internally for proper HR functions
- HR functions are too time-consuming or unmanageable
- Turn the focus of services
- Cost reduction for overall services
In the past, the main focus when it came to outsourcing was the cost. Today, the main focus could be the cost, but it could also be strategy, change in focus, or necessity.
The Pros of Outsourcing HR
The advantages of choosing to outsource your human resources department are great to know if you choose to go forward with this idea.
Here are three reasons why outsourcing could be a huge benefit to your business.
Large Talent Pool
If you’re hiring someone, you only have access to the people that apply, are qualified, and are local. If you outsource, you can get people from all over the world with various levels of expertise.
This means that getting specialized help is easier if you outsource because you have more options.
Don’t Have to Hire More People
By outsourcing HR functions, you don’t have to hire anyone else. This means you don’t have to pay to train or onboard them because they already know what they are going to be doing.
Outsourcing means you pay them as a contractor and they are not actually your employees. This can take away a lot of stress on your end.
Lower Cost for Labor
It is cheaper to pay a contractor than an employee, especially when you consider benefits.
Every company that chooses to outsource knows that it’s going to cost them less money to outsource than to hire a new person onto their in-house team.
You obviously don’t want to trade out the quality of your work for a cheap price, but outsourcing lets you get both sides of that coin. You can get great talent at a price that works for you. You’re employing trained professionals at a fraction of the cost!
The Cons of Outsourcing HR
Along with the pros of outsourcing, there are cons that have to be considered because they may directly impact the success of your business.
Here are the three negative sides of outsourcing that can’t be overlooked.
This is not always a problem, but if it becomes an issue, it can be a huge drawback to outsourcing.
You need to know what time zone the outsourced personnel are in and how it will match with your business’s operating hours. You also need to know how they plan to communicate with you (email, telephone, or messaging) and if they have a good, reliable internet connection.
Setting up these parameters before you start is crucial to a successful relationship. If you don’t, you may find that outsourcing is bad for your operation.
Lack of Control
One downside to outsourcing is that you don’t have control over what the people give you. They will give you what they are able to do and while you can give direction, you cannot have authority all the time.
It may be difficult to get the level of perfection that you desire, but it can also be difficult to get what you need if there is a lack of communication (or miscommunication as mentioned earlier).
Anything less than the quality that you are expecting is going to be a huge disappointment. This is a possibility with outsourcing since you are giving up some of that control.
This doesn’t mean that your outsource partners are not going to be good at what they do, but they may not do it the way you want or they may not understand your expectations right away.
The Overall Cost of Outsourced Human Resources
HR outsourcing does not have to be as expensive as you may imagine. It can actually cost as little as $95/month per employee.
If you consider how much value you may be able to get from this type of service, you will see that this is a worthwhile investment in some situations. Not all businesses will benefit from an outsourced human resources department, but yours may! Especially if you’re a large conglomerate.
Choosing to hire an outsourced human resources firm to take care of all internal human resources problems can end up saving you money when you look at the fees you pay versus the fees you would be paying with a regular, in-house department.
A good outsourced human resources department will be able to look at the size and the needs of your company to figure out how much your billing should be per month.
This allows you to pay for the services you need without the extra cost for services you may not even use.
Depending on the services your company provides, you may be able to get a very low price.
Some of the factors within your company that may end up influencing the overall cost include:
- Tax reporting features
- Payroll services
- Screening and/or background checks on new employees
- Training for new and current employees
- Recruiting management personnel
- Size of company
For more information on pricing and any other questions about the services we offer, feel free to contact us. We want to help you make the right decisions for your company.
Is Outsourcing Here to Stay?
With all of this talk about outsourcing, you may be wondering whether or not it is going to be around for the long haul. Is it worth changing your company dynamic for something that you’re not sure about?
Truthfully, outsourcing has been around since the Industrial Revolution. During this time period, some services were outsourced by companies that simply had too many orders to fill. The outsourced work was typically still in the same city.
As mass production has started to take hold over the years, outsourcing has become a practical necessity for some businesses.
Now, businesses are still outsourcing production, but also outsourcing functions like payroll or accounting to keep costs low.
It is projected to still be used for the coming years, as many businesses have had success with it and appreciate the convenience of the service.
Outsourcing HR: Weighing the Pros and Cons
Now that you’ve learned what you need to know about outsourcing your human resources department, it is time to decide if the pros outweigh the cons for your company.
Human resources are integral for every company, but some companies may benefit greatly from outsourcing this service.
Do you want to learn even more about having an outsourced HR department? Are you looking for help with meeting your company’s needs?
If you’re interested in outsourcing HR at your company, please check out our quote form and see what your cost could be today!