HR are responsible for a number of functions within a business, including performance management, recruitment, payroll and employee development. Many companies make the decision to outsource some or all of their HR functions to external suppliers, such as HR consultancies, recruitment agencies or to a self-employed HR professional. They may choose to use outsourced HR services on an ongoing basis or only for ad-hoc purposes, such as offering advice when issues arise or for specific recruitment campaigns. Although outsourcing HR can have some potential risks, there are also many benefits for a business who choose to go down this route, instead of using in-house resources.
Why invest in HR Outsourcing?
The main reason for investing in HR outsourcing is first and foremost, the potential savings it can bring, which is definitely beneficial for a small business. However, there are many more reasons why investing in HR outsourcing can offer benefits. HR comes under many different branches and usually, HR professionals will be experts in their own field. For instance, an HR administrator will usually have excellent organisational skills and will be able to provide support with paperwork, which can allow managers to get on with other tasks. An experienced recruiter on the other hand, will be able to find the best places for recruiting talent and will be effective at managing candidates and maintaining the reputation of the business.
Unless you can afford to hire into each specific function of HR, you will not be able to access this kind of expertise. This is something you can do when you outsource, as you can pick and choose the type of skills and experience you need, as and when you need it. There is also the flexibility which outsourcing HR can give. You will often find that those who work on a freelance basis will be available at times that wouldn’t be feasible with full time members of staff.
The Benefits of Outsourcing Your HR Services
Outsourcing your HR functions can significantly reduce your costs. Some businesses, particularly small businesses, don’t really have the need for an HR department or full time HR staff and so, to save costs, they can use HR as and when needed. They may not recruit very often or have many employees within their business and in these cases, it makes sense to use an outsourced HR consultancy to support their needs. In addition to this, it can also reduce overhead costs as they may not need to invest in expensive HR and payroll systems.
An outsourced HR function can provide the expertise you may be missing within your business. With small businesses, managers can usually take over some of the responsibilities of an HR professional, but they may not have the knowledge to ensure everything is above board. HR is a skill and in order to ensure processes are undertaken properly, there is the need for a good level of expertise within this area. For instance, you couldn’t expect another member of staff to pick up payroll, without the knowledge that goes with it, as otherwise, you could end up with some disgruntled employees when they don’t get paid or get paid wrong!
HR issues can often arise without warning and you need to be able to deal with them quickly, in order to keep within the law. If you don’t have the expertise in-house, this could prove to be problematic. However by using outsourced HR, you can deal with any issues as and when required. This also means you can ensure your employee relations are kept at a high standard. Good employee relations are imperative for the smooth running of any operation within a business, after all, there would be no business without the employees!
With the absence of HR staff, managers would be expected to take over some of the functions. This can take them off important tasks which bring money into the business. Outsourcing some of the functions can allow the company to become more efficient. For example, managers are often involved in the full recruitment process when there is no HR function in a business and this can be very time consuming. This time can often be used for more important tasks which make the business more successful.
Without an in-house HR department, there is the danger that you are not being compliant and this can cause a number of problems for a business. With the use of an outsourced HR consultancy, it can give peace of mind to a business that they are compliant with the law and are not doing anything which could get them into trouble in the future. HR professionals will have a good understanding of the law and will be able to advise the business on any processes they are unsure of.
Unfortunately for most businesses, employee development seems to fall under the radar, no matter how much importance is placed on it. An outsourced HR professional can design and develop a performance management process, which managers can then run with. This can help to improve the overall success and efficiency of the business and thus, make them more profitable. Employee development is also important for retention, as it is one of the main reasons employees will leave and go to a competitor. Most managers won’t really know where to start or have the time to put this into place, which is where the outsourced HR assistance can help.
A strong reputation takes time to be developed and it can be quite easy for a business to find their reputation declining, just by making a few simple mistakes. For instance, if candidates don’t receive feedback from applications/interviews, it can easily cause the reputation to decline, which can make it more difficult to recruit in the future. An outsourced HR professional can dedicate their time to ensure candidates are informed throughout the process and can use their expertise to enhance the overall branding of the business. This is important for businesses which want to grow and develop in the future.
There tends to be much greater flexibility with an outsourced HR consultancy, than you would get with in-house HR staff. As an HR consultancy or HR professional is reliant on the business, they will probably be willing to work in the evening, weekends and at different locations, to suit the needs of the business. This may not be the kind of flexibility you would get with those employed within the business. This degree of flexibility can offer up new opportunities to grow the business, which may not be possible otherwise.
When businesses use in house HR staff to support processes such as grievances and disciplinaries, it can make it difficult and uncomfortable for the employee, as they know they need to work together with the HR support. However, when HR is outsourced, it can offer better confidentiality and can make employees feel safer and less nervous about these types of processes. The outsourced HR person will only turn up to offer advice and support these processes, which makes it easier for everyone. It means that employees are also less worried about other people talking about their situation, as the outsourced service wouldn’t be chatting to anyone else about it.
Trends in HR Outsourcing
There are many different trends in HR outsourcing which we have seen over the last year. Many businesses have chosen to outsource specific areas of their HR function, even if they have some in-house capabilities. As mentioned previously, this allows them to tap into different skillsets. For example, businesses might only recruit from time to time, so they won’t have a need for a dedicated recruiter. However, they will outsource this function to a professional, as and when it is needed. Other trends on the recruitment side of HR outsourcing are that more recruiters are making use of social media to find candidates to fill roles. Job advertising has definitely seen a decline, so recruiters can’t afford to be lazy. Recruitment has now become a very pro-active function.
What is next for your Business?
If you are looking to cut costs and grow your business in other areas, it is definitely worth looking into outsourcing some, or all, of your HR functions. HR outsourcing can offer good flexibility and can free up time for your managers, who can get on with the important task of generating sales for your business. It may be worth spending time analysing your costs and what functions you would benefit from outsourcing and whether you have staff who can pick up any of the responsibilities, in order to reduce costs. It is important to look at the bigger picture when deciding on the next step for your business and not just the costs, but how these additional skills can benefit your business in the long term.
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