Outsourcing HR has become a trend in some industries. As a small business or medium-sized business owner, you may be debating whether to outsource your HR. The answer is that it depends on what are the goals of your company, what are the specific needs of your company and how would outsourcing your HR align with those goals and needs.
The fact is that outsourcing human resources can be a win win situation for many companies, and it very well could be right for your enterprise, depending, once again, on what your specific situation is. Are there drawbacks that need to be taken into consideration? Of course, and we will discuss some of those briefly at the end of this article. But for the most part, outsourcing your HR provides more potential advantages than disadvantages. Let us examine some of these advantages first and then briefly discuss a few of the disadvantages:
5 ADVANTAGES OF OUTSOURCING
- Cost-effectiveness
Outsourcing your HR could be cost-effective for your business because it would mean fewer people on your payroll in the HR department. Indeed, you may not need to maintain an HR department at all when you outsource your HR. The result of this is a reduction in your business’ operation costs, and a reduction of waste. In the latter, outsourcing will allow you to streamline your HR services and to pay for and use only those HR services you truly need and want. In the former, obviously you will save a tremendous amount on payroll. It may even allow you to downsize your office space, saving on your commercial rent costs.
- Best practices and Expertise
Another key advantage of outsourcing human resources is that it allows you to bring on experts in the field of HR who can offer a high level of HR know-how to your company. Because they specialize in HR, they know the best practices and latest trends in the field and so they are able to bring that to the table. This allows business owners like you to keep up with compliance requirements that otherwise may accidentally get overlooked. It also allows business owners to better keep up with industry trends without having to do all the heavy lifting themselves. It could also help to keep small business owners from running afoul of the law when they have experts keeping them abreast of these matters on their behalf.
- Increased productivity and focus
When you outsource aspects of your business, like human resources, it allows you to spend your time and resources on other core aspects of your business. You can spend more company hours on developing the strategic objectives of the company while leaving the HR functions to more highly specialized firms (usually at a lower cost than if you had an internal HR department). This leads to higher rates of productivity and output for your company – which will be good for your bottom line.
- Access to state-of-the-art HR technology at a lower cost
When companies outsource their human resources, this can be beneficial because they can gain access to state-of-the-art HR technology that they may not be otherwise be able to afford or may be able to afford but at a much higher cost. Providers of outsourced HR services can invest in these technologies more cost-effectively. These providers can pool their resources so they can invest in state-of-the-art products. That means that they often have the latest HR tools for processing payroll, handling benefits and managing employees.
Not only that, but outsourcing HR can be beneficial to both your in-house HR staff and your employees because quite often, outsourced human resources providers provide employees with “self-service” HR options. Your employees can therefore manage their own HR products online, such as benefits information, payroll information and personal information (which they can update when necessary via the self-service portals). The in-house HR staff enjoys a huge benefit because many of these mundane tasks which are outsourced can be handled directly by the employees themselves.
- Legal protection from risk
Outsourcing has another advantage in that it helps small business to mitigate their risk with regard to compliance with the law. Many HR outsourcing providers have an in-house legal team that are specialized in labor and employment law. They are able to provide small businesses with tailored labor and employment law advice as part of the packaged deal. So, the small business owner can mitigate their non-compliance risk but at the same time, they are not required to make additional financial outlays.
3 DISADVANTAGES OF OUTSOURCING HR
While outsourcing HR functions can offer various benefits, it also comes with potential disadvantages. It’s important to carefully consider these drawbacks before deciding to outsource HR. Some common disadvantages include:
- Loss of Control
For some companies, outsourcing HR could bring on anxiety about their control over a crucial aspect of their business: recruitment. It could be difficult to imagine relinquishing this much control and involvement of such a key aspect of their business to a third party.
- Hidden Costs
There could be hidden costs with outsourcing that are not immediately discernible and that could render outsourcing less cost-effective than originally thought.
- Breaches of confidential data and information:
Outsourcing HR functions may pose risk of breaches to data, security and confidentiality. If the third-party outsourcing vendor does not have the proper data protection protocols in place, then your company could face some problems when outsourcing.
All in all, it is crucial that before you decide to outsource your HR you make sure that the vendor’s policies and your policies are properly aligned.
