Human Resources or HR is the backbone of every organisation – large or small, startups or enterprises. Broadly speaking, HR is an important and critical function that touches upon at every point during an employee’s tenure in an organisation. Right from recruitment and on-boarding till the exit interview, HR has an important role to play at every juncture. However, many organisations decide to outsource their recruitment and HR function so that they can better focus on their core offerings. If you’re still contemplating the idea of outsourcing your HR function, then this read is meant for you!
Why do businesses outsource their HR department?
• In today’s scenario, HR plays an important role in developing a company’s culture and brand building which in turn, serves as a key differentiator for the business to outperform its competitors. However, at times organisations (especially startups, small and mid-sized organisations) find it difficult to allocate resources for HR due to the short of budgets. Outsourcing HR services is a cost-effective solution for them. While businesses can expect professional HR services from their outsourcing partners, they can route their budget and resources on what they do best, focus on their offerings.
• HR is a Cost Centre which means it is a non-profit division. While many HR professionals will debate this, businesses see this as a cost centre for them, as this function doesn't contribute to the revenue generation directly or the top line. Hence, the outsourcing of HR function is an easy choice for them. HR does contribute to the bottom line but those gains are rather subtle.
• It saves cost for the company as they do not need to hire a team of HR professionals. In other words, they spend less on salary and other statutory requirements.
How business can focus more on their core offerings by outsourcing their HR activities?
1. Apart from the obvious cost saving, businesses get to hire better talent when they outsource their recruitment to an HR outsourcing partner. The external HR partner already has access to a vast talent pool. Acquiring the right talent with a specific skill set can be overwhelming for businesses and hiring indents can keep changing. Outsourcing recruitment optimises that cost.
2. While business can outsource the day-to-day HR operational activities, they can focus more on their core HR strategies. For example, businesses can concentrate on developing employer branding strategy instead of spending resources in payroll processing or employee engagement. Yes employer branding is a core HR area too.
3. By outsourcing their HR services, businesses can improve flexibility and increase profitability. According to a study by noted economists Laurie Bassi and Dan McMurrer, businesses that outsource their HR services “grow 7 to 9 percent faster, have 10 to 14 percent lower employee turnover, and are 50 percent less likely to go out of business.”
Things to remember when choosing an HR outsourcing partner
As discussed above, the benefits of outsourcing HR services to an external partner are immense. However, businesses need to remember that with outsourcing, they are also sharing a lot of internal information and hence they should be extra cautious while selecting their outsourcing partner. Here are some quick tips on choosing an HR outsourcing partner –
• Look for a proven track record
• Guarantee of service level
• Flexible contracting options
• Cost effectiveness
Give us a shout out if you’re planning to outsource your HR services!