The complexities of the HR world have inevitably evolved over the years, and the scope of HR duties is not what it used to be. Indeed, in a modern business, HR can be an incredibly time-consuming, complex and expensive process, and many companies struggle to operate an in-house department effectively.
However, an active HR department is absolutely essential if you wish to run a successful and productive business, no matter your size, industry or product. Without a qualified HR representative, you – and your company's staff – will be responsible for every aspect of your HR strategy, including everything from recruiting and onboarding to employee relations and development.
Unsurprisingly, this doesn't come without its risks and can soon lead to disaster if not managed properly. As the landscape of employment law continually changes, your company could be unknowingly violating any number of policies or regulations, not to mention that a more significant burden will be placed on your shoulders if an HR crisis does arise.
While HR outsourcing has traditionally been the reserve of Fortune 100 companies, it is now something that is used by organisations of all levels and sizes and is considered one of the most effective ways to overcome the various associated complications of HR.
The Benefits of Outsourcing HR
When you outsource human resources to a third party outsource provider (TPO), you can select a company that tailors their approach to meet your needs as they occur.
As mentioned, some of the many HR functions that can be outsourced include recruiting, training, employee management, risk management and payroll (to name but a few), although you can pick and choose based on your specific needs.
Some of the key benefits of HR outsourcing are outlined below:
1. Compliance
With regulatory environments changing frequently, it's easy to slip up. There is no sympathy, either; your business is expected to keep up with these changes, even if you are small in size. With all the other responsibilities that come with managing a business, it can be challenging to keep up with local, national and international laws, and as your business grows, staying apace will only become more difficult.
Remaining compliant is hugely important, though. Any mistakes that do arise will not only result in penalties (including, potentially, fines) but can also damage employee morale.
By outsourcing, you’ll be better able to focus on your core business while the HR firm concentrates on complying with the latest laws and supplying the necessary guidance.
2. Cost-Effectiveness
In order to operate effectively, your human resources department is going to need the right space, materials, time, and money, as well as everything else that goes with running a separate department.
Not only will you need to pay overhead costs to physically house HR staff, but you will also need to ensure that they are up to date with the latest training and laws, which can be incredibly costly in itself. Outsourcing your HR needs reduces these operating expenses.
While you may be reluctant to outsource if you are on a tight budget, in most cases, outsourcing HR ends up being much more cost-effective than creating an in-house HR department.
Indeed, a 2016 study by Deloitte found that 59% of companies use outsourcing to reduce their expenses. There is no need to spend money on sophisticated software as the HR agency will be responsible for managing all the necessary elements, including attendance, time, benefits, and so on. As your company grows, you will likely save even more money from outsourcing.
3. Efficiency
As globalisation and modern industrialisation give way to broader and more complex HR operations, the need for outsourcing is becoming more evident.
One of the most significant advantages of doing so is that it allows you to prioritise the most critical areas for development in your business. This frees up both yours and your employees' resources so that all of you spend less time on paperwork and administrative duties, and more time on proactively problem-solving and growing the business.
Meanwhile, your administration outsourcing company can capitalise on their resources to keep operations running smoothly. Many HR agencies are fully equipped with the latest HR technology, which is designed to streamline a range of essential functions.
4. Employee Development
Organisational development is vital in supporting both your employees' and your company's growth. You can use an outsourced HR team to implement performance management plans and ensure employees comply with company policies and procedures – all while successfully meeting your business's goals.
While you and your management team focus on driving the business forward, your outsourced HR firm will remain committed to helping you get the most from your employees. HR firms can also be responsible for monitoring employee performance and implementing employee development programmes, which is a hugely important part of retention and motivation.
5. Time-Effectiveness
Outsourcing HR reduces the workload of managers by minimising the number of administrative responsibilities they must focus on. From hiring and training to employee retention and firing, HR outsourcing helps you spend less time on the stresses and responsibilities that come with human resources. This, in turn, frees up your time, enabling you to spend more energy on your core business functions.
6. Staff Retention and Happiness
With top talent scarce in many industries, it’s never been more important to hold on to your top talent and reduce staff turnover.
Outsourcing your HR functions enables you to focus on strategic HR management, such as employee programme creation, training, and staff development. This ensures that your employees feel appreciated, valued and respected.
When opportunities for development are taken seriously, employees – especially millennials – are far less likely to look elsewhere.
7. Talent Management
An enormous benefit of outsourcing is the ability to widen your potential recruitment pool, giving you access to top talent from around the globe. Such agencies are adept at offering efficient recruitment solutions that are also personalised, and can save on time consuming tasks such as looking through résumés.
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Of course, HR outsourcing is not without its challenges. However, outsourcing employee management functions does provide you with access to qualified, experienced professionals, as and when you need them.
As many companies have demonstrated, the benefits of using a TPO significantly outweigh the regular challenges that come with successfully running an in-house HR department. By taking the time to evaluate your company's needs, you may realise that outsourcing your human resources will enable you to focus on your core competencies and provide your business with a competitive edge. Therefore, it’s something that you should definitely be considering, regardless of your size.
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