Internal HR departments are bigger and have a more important role in a company. This immediately translates in an increase of costs in maintaining and even implementing HR functions internally. The good news stands in the fact that companies are now available to outsourcing a part of their HR tasks or even all of them to a specialized HR outsourcing provider. This practice does save both time and costs.
We can also say that besides the two benefits of HR outsourcing mentioned above, a company will also have others that they should consider. Through HR outsourcing they can focus their efforts on more business oriented tasks and they can get rid of a lot of activities that are difficult to manage and consume a lot of time. Through HR outsourcing you can be sure that your employees are always receiving the best possible in class human resources services.
This includes retirement plans, rewards programs, recognition programs and health benefits. All this is obtained at lower costs than ever before. To make everything even better, HR outsourcing providers also bring in a lot of support and experience when dealing with complex issues that might appear. If a company can not have its own HR in-house department it should definitely opt for HR outsourcing.
When organisations put forward a business case for HR outsourcing there are a number of potential benefits that many cite. In practice, these benefits are not necessarily mutually exclusive and a number of them could be achieved through some alternative solution rather than via outsourcing. Commonly mentioned benefits include:
- Reduced cost.
- Increased efficiency.
- Access to improved HR IT systems without capital outlay
- improved people management information (including human capital metrics).
- Access to HR expertise not available internally
- increased flexibility and speed of response to HR problems.
- Part of an overall strategy (for example the organisation is outsourcing a number of its support functions, of which HR is just one part).
- Reduced risk as it is possible to scale up and down more efficiently.
- HR resources can operate more strategically.
The top 3 reasons cited for undertaking outsourcing in our 2009 outsourcing survey (see above) are access to skills and knowledge (71%), quality (64%) and cost reduction (61%).
Other Advantages of HR Outsourcing include:
Provide employees with greater accessibility to HR representatives to get prompt, accurate answers to their questions
Reduce the risk of lawsuits by minimizing mistakes and violations
Pay a variable cost to cover only the HR functions that are absolutely necessary, rather than a fixed cost that doesn’t fluctuate with the workload
Save on the costs of hardware, software, and systems that would be required for an in-house HR team
Have access to a full team of HR professionals, including benefits administrators, HR managers, payroll specialists, attorneys, and more
Build employee morale by providing the tools, rewards, and motivations they need to succeed
Receive professional documentation, such as employee handbooks, forms, and policies
Spend more time on core business functions geared toward producing revenue, promoting your products or services, and building your brand
Replace time-consuming manual recordkeeping with automated, efficient processes
Receive professional reports of all HR initiatives, allowing you to quickly gauge your return on investment
Access a much wider scope of tools, knowledge, and technologies, including state-of-the-art HR management software.
Control capital costs. Cost-cutting may not be the only reason to outsource, but it's certainly a major factor. Outsourcing converts fixed costs into variable costs, releases capital for investment elsewhere in your business, and allows you to avoid large expenditures in the early stages of your business. HR Outsourcing can also make your firm more attractive to investors, since you're able to pump more capital directly into revenue-producing activities.
- Increase efficiency. Companies that do everything themselves have much higher research, development, marketing, and distribution expenses, all of which must be passed on to customers. An outside provider's cost structure and economy of scale can give your firm an important competitive advantage.
Reduce labor costs. Hiring and training staff for short-term or peripheral projects can be very expensive, and temporary employees don't always live up to your expectations. HR Outsourcing lets you focus your human resources where you need them most.
Start new projects quickly. A good HR outsourcing firm has the resources to start a project right away. Handling the same project in-house might involve taking weeks or months to hire the right people, train them, and provide the support they need. And if a project requires major capital investments (such as building a series of distribution centers), the startup process can be even more difficult.
- Focus on your core business. Every business has limited resources, and every manager has limited time and attention. HR Outsourcing can help your business to shift its focus from peripheral activities toward work that serves the customer, and it can help managers set their priorities more clearly.
- Level the playing field. Most small firms simply can't afford to match the in-house support services that larger companies maintain. HR Outsourcing can help small firms act "big" by giving them access to the same economies of scale, efficiency, and expertise that large companies enjoy.
Reduce risk. Every business investment carries a certain amount of risk. Markets, competition, government regulations, financial conditions, and technologies all change very quickly ensuring that your company remains compliant. HR Outsourcing providers assume and manage this risk for you, and they generally are much better at deciding how to avoid risk in their areas of expertise.
With HR outsourcing, client companies can utilize their resources more effectively, as the human resources department is taken care of. It results in streamlined business processes.
HR outsourcing enables employees of client companies to enjoy benefits typically offered in larger companies, these being outsourced from the PEO or employee leasing organization. The comprehensive benefits package offered by PEOs increases the buying power of companies in the job market and facilitates greater retaining of employees. Choosing the Right HR Outsourcing Provider Once you’ve made the decision to save time and money by outsourcing HR functions, it’s important to choose the right vendor to suit your needs.
The bottom line is that most companies out there can really benefit from HR outsourcing providers. They usually gain experience and cost cuts that can not be achieved without such an investment. Whether you have a small or a large company, you should seriously consider the possibility of hiring professional help to aid you in maximizing profits. It might well be the best decision you ever made.