Outsourcing HR: The Good, the Bad, and the Tasks

There are many reasons to have an in-house human resources team within your organization. From new staff onboarding to benefits management, having easy access to HR is a tremendous resource for any organization with a growing workforce.

Still, there are many instances where outsourcing your HR needs makes more sense. According to the Society for Human Resources Management, there are definite advantages to outsourcing HR tasks, among them a focus on strategy, improved compliance and accuracy, and a chance to leverage technology to streamline tasks and costs.

Let’s look at some advantages of HR outsourcing—also known as HRO:

  • Reduces costs. The fewer employees on staff, the smaller the payroll. By outsourcing, you are paying for what you need, not paying for what you don’t need. Whether it is a contract that spells out what you are getting or an hourly rate, you will end up paying less for the service than someone you have to pay a salary too. You will also save on the cost of benefits and payroll taxes
  • Allows HR to focus and be more strategic. An HR staff removed from the distracting elements of the company’s day-to-day operations can be more productive, especially regarding long-term goals like recruitment.
  • Offers more expertise and services. An outside agency who focuses solely on HR offers expertise in areas you might not have thought of and they have the staff to grow with you and take care of all your needs. Because the services they offer are wider, you can add services as needed, keeping your costs lower and your time spent growing your company.
  • Less burden on a leaner staff. HR is arguably one of the hardest-working parts of any organization. If it remains the same size while the rest of your staff grows in leaps and bounds, then tasks are bound to pile up.

Of course, you don’t have to outsource everything. Consider maintaining a slimmer HR staff in-house while outsourcing some of the more time-consuming tasks. Here are four tasks that can be outsourced for maximum results:

  1. Employee relocation. Employees who are moving to start or continue working with your company likely require highly personalized assistance. Avoid a major time crunch and hire someone else to handle it.
  2. Employee handbooks and policies. Your employees deserve the most up-to-date information about workplace policies and procedures, but maintaining what is essentially your organization’s bible may fall by the wayside in an overburdened HR department.
  3. Temporary staffing. When you hire short-term employees, you are constantly recruiting and onboarding new staff. Consider keeping full-time recruitment in house and collaborate instead with an experienced temporary staffing firm.
  4. Benefits and payroll. It’s a no-brainer to delegate this task, and as long as everyone gets paid on time, no one will complain. The same goes for benefits packages—when your employees have questions or concerns about coverage, let someone else address them.

As with every new strategy you implement, you must consider the disadvantages. Let’s look at the some of the potential risks of outsourcing HR:

  • Organizational resistance. Change is hard, even when it means progress. Employees accustomed to having easy access to HR might grumble about taking it outside of the company.
  • Reduced service levels. An in-house staff ensures dedicated focus to your company. When you outsource the work to an agency, you share resources with other client companies.
  • HRO vendor’s failure to deliver. Part of the reason you prefer having everyone under the same roof is to monitor workflow. When you outsource tasks, you risk an invisible workflow with potentially lackluster results.
  • Changes or disruptions in the HRO vendor’s business. When you sign on with an outside agency, you are buying into the way that staff currently operates. A major disadvantage of outsourcing is how to deal with a shift in an HR company’s strategic mission. Avoid this predicament with a shorter contract—you can jump ship if your HRO changes its strategy.

If it’s worth it to outsource at least some functions, try it on a temporary basis. In the end, if you’re thinking about how to better serve your growing staff and their HR needs, then it means your company is heading in the right direction.

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Top 5 Reasons HR Is On The Move

Once upon a time, most HR departments provided one-stop shopping for employees with questions or concerns about benefits, hiring, training, complaints, colleagues, etc. For leaders, HR was the place to go for recruitment, retention and terminations. HR is a critical function and most companies handled it in-house. That’s all changing very rapidly. Today an estimated 58 percent of large companies outsource all or part of their HR needs.

Is this a good thing or a bad thing? Neither. Like everything else in business and talent management, a one size culture fits no one. The key is to develop a strategy and solution that works for your organization.

Here are the 5 top reasons so many companies are turning HR over to outsourced experts:

1)  It frees them to concentrate on core competencies. HR does not produce a product, yet it can eat up a lot of an organization’s time and energy. A great HR department demands resources and continual oversight and innovation. Many organizations would rather focus on their core strengths and/or moneymakers by outsourcing HR.

2)  It saves money. Running an effective HR department costs bucks, sometimes big bucks. Many organizations do the math and just decide it’s not worth it. It also allows organizations to hire world-class specialists they could never afford to bring on-board permanently. This kind of virtual workforce will continue to find momentum.

3) It improves compliance. There are a whole lot of regulations out there these days. There is the constant threat of lawsuits for sexual harassment, wrongful termination, safety violations, etc. When you hire a compliance specialist, these headaches become theirs.

4) It improves recruitment. Recruiting top talent is an art (and a science) and a lot of HR departments are the equivalent of weekend painters. Many organizations would rather turn this critical function over a company that does nothing but recruit talent.

5)  It provides access to the latest tools and technology. The most innovative HR-services supplier will be up on the very latest technology, including big-data mining, analytics, virtual workforce leadership, cloud technology and social media, and will know how to exploit them to meet an organization’s specific needs.

Those are some of the advantages to outsourcing. But it carries some very real risks. First of all, you’re turning an integral part of your organization’s success over to outsiders. They have a different – and at times even conflicting – agenda than you do. Service providers have their own bottom lines, and sometimes the service they provide can be shoddy. I’ve seen more than one organization get saddled (at least for the length of the contact) with outsourced talent that is a bad fit. Finding the right partners is absolutely critical. Do your due diligence here – and then repeat it! Never be penny-wise and pound-foolish – you get what you pay for. And watch out for too many bells and whistles in any sales presentation. Know what you need and don’t buy anything more. I recommend that every organization retain a healthy HR department, even if it’s small and many of its functions are outsourced. Some consultants will not always care about your people as passionately as you do so it’s important to find talent who cares about your unique culture. In addition, when tough decisions on hiring and firing are being made, you want in-house expertise to help handle things. It’s still often the case that core strategy should be kept in house unless you have the right expertise and best fit.

Outsourcing has the potential to make your organization leaner, more adaptive, smarter and more profitable. However, it must be done with foresight, savvy and a secure understanding of what it will mean. Take your time and really think it through. And only hire the best fit for outsourced talent.

A version of this was first posted on Forbes.

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