No longer just in the realm of daring, trendsetting companies — outsourcing HR is increasing in popularity as it has gained momentum both locally and overseas.
Imagine being an online retailer. Maybe you employ someone to look after your website and other IT infrastructure. But if you want to create an app for customers, there is a greater likelihood of outsourcing that work than asking your employees to learn how to create an app. After all, it involves highly specialized skills, and the stakes are relatively high.
The same can be said of HR processes. Even if you employ a full-time HR representative, an HR expert must possess an extensive understanding of many processes and regulations, a number of which have costly consequences if unmastered.
Here are significant reasons why an organization should outsource its HR functions:
1. Save Money With Lower Administration Costs
When HR functions are outsourced, companies lower prices while still focusing on their core business and customer-facing duties. Studies have shown companies tend to save over 20 percent of regular expenses compared to keeping all human resources functions in-house. Furthermore, having the right service provider gives the confidence of knowing a seasoned expert is handling HR functions. Now that sounds like a win-win if I’ve ever heard of one. Being able to bring on specialists as you need is fundamental to having the right expertise and talent focused on your most prized gem – your business.
2. Ability To Offer More Services Due To Lower Limitations
Outsourcing all or some of the HR functions broadens a company’s horizons and often makes it possible to provide services and benefits that can’t be offered as a small business. HR experts typically have the opportunity to benefit from economies of scale since they work with multiple clients. This advantage can open up access to perks that the service provider can offer in turn.
3. Happier Employees
You may be thinking, “I have a highly qualified HR professional as an employee; what impact does outsourcing serve my business? Well, great question. The truth is, HR is stringent, specialized, and extensive. Even companies with HR professionals often find that outsourcing some HR functions is a significant necessity. Outsourcing ensures HR problems are not felt in other aspects of the business; this is suitable for risk mitigation. When you have an HR business partner to help build your culture while mitigating potential issues, the results can be very positive. A recent Oxford University study found that happier employees are 13% more productive, allowing the business to achieve objectives sooner, having a positive impact on their bottom line. Happy employees = Happy workplace = Successful business
4. Minimizing And Effectively Managing Risk
One central area where organizations can mitigate risk through outsourcing is employment and labor law. Employment and labor laws change frequently, and remaining up-to-date on laws and regulations that significantly impact the workplace can be a daunting task. Outsourced HR professionals have the duty to stay aware of various federal and state employment laws and further help businesses comply with these laws to avoid costly lawsuits brought on by employees. Also, they maintain and audit company policies and practices for the organization and its employees.
5. Streamlining Vital Functions
Efficient and productive employees are the drivers of a workplace. Outsourcing has the advantage of creating greater efficiency and simplification within HR Systems such as payroll administration and compliance management. These efficiencies further help employers and managers spend less time performing mundane tasks like paperwork (boring!) in comparison to dedicating more time to improving the efficiency and effectiveness of their employees.
6. Efficient Performance Management
With employee performance and development being more crucial than ever to maintain a competitive edge in your marketplace, outsourcing this HR function can ensure you facilitate, utilize, and measure performance with the top tools and metrics. HR experts can implement performance management plans to ensure employees act per company policies and procedures, resulting in successfully meeting business goals.
As our business landscape continues to change in unimaginable ways rapidly, organizations are pondering the value and need for HR outsourcing services. While there have been critics who argued on some demerits, the data is apparent that its key advantage is leaders’ ability to focus on their business truly. At the same time, the people piece remains in the best and most capable hands possible. Think about it, if you had to get open-heart surgery, would you want a general practitioner taking the lead or a cardiologist? Exactly.