6 Points Weighing the Benefits and Drawbacks of Human Resource Outsourcing
Outsourcing involves a contract-based agreement between a business function and an external provider. Two organizations make a contractual agreement of an exchange of services with returned payments for a period decided. Outsourcing is one of the components that contribute to the growth of labor across all societies encircling them. Worldwide, many corporations have increased outsourcing across and beyond national boundaries; this term is often replaced by subcontracting. These terms were incorporated in English-speaking lexicon in the 1980s.
Outsourcing of workers for BPO (Business process Outsourcing) is common, however, other services are also picking up adding to outsourcing services. Services like writing, web content writing, tax preparers, web designers, web developers, fashion tailors, security guards, and the most rising services of – Human resources. Human resource outsourcing services are not only catching up the trend but also mending and reforming as per the rising requirements.
Outsourcing of workers especially human resource outsourcing depends on the size of the business, the functions required to be performed, budget, and overall importance of the services. Considering the size of the business- small medium or large enterprise, HR outsourcing can prove to be more cost effective. An outsourced expert appointed to handle the office’s human resources functions would be better than keeping full-time HR employee(s). Though in-house HRs are available promptly to the employees, but if the HR is not needed day in and day out then keeping a third party involved is a good option. Payroll, Resource Management Reports, Employee Health Care, Pension and Retirement Plans, Recruitment, Relocation, Administration Support and Legal Expertise are some of the services offered by outsourced human resources.
Since a company outsources, it is a service provided to a business, the human resources outsource companies appoint competent staff, qualified consultants, and well trained employees so that they may serve their best to the organization that hires their services. The HR outsourcing promises to boost efficiency and benefit the company overall, with reliable HR services, costing relatively low, and always being upbeat to keep up the name of their hire company.
Below mentioned points would give you a better insight regarding the benefits an outsourced HR provides with some downfalls that might be possible-
A full-time employee in office cost a fixed-salary each month, taxes on payroll, special benefits, space, and system in office, training with other equipment. On hiring an HR consultant from outside, a fixed pay hourly or monthly fee is paid. Here the catch is that the work required by you may be less or more, the cost would not change according to that and at times it might just feel a little more costly than expected or costlier as compared to the work you have. Keeping this in picture, better is to sign a contract of 12months or more only after due negotiation on the budget. Be aware that the contactor is reliable and does not resort to stoop down the quality of services just to gain his profit.
An externally hired HR professional would undoubtedly provide better skills and expertise. The company providing the HR have an image to keep up, a brand to build and sustain. They have to keep their professionals up-to-date and well equipped on issues and legal knowledge as labor laws, tax laws, and other employee benefits. They are the service provider and a good name would never mar it.
Human resources outsource companies have well linked networks and maintain relations with prospective candidates, vendors, benefits providers, legal advisors and all other service providers that are involved in HR functions. This is beneficial when thought that you are hiring a professional for all your organizational functions of HR department and can be rest assured.
Human resource outsourcing mitigates the burden of the company from HR and administrative tasks. The company comes in better position to concentrate on business leadership and make the basic business functions, goals, motives and growth as the primary focus.
This becomes essential in start-ups, small or mid-size companies looking for growth and expansion in full velocity, especially the ones catering to client dealings.
Attention and Availability Disadvantage –
Outsourced HR may not and mostly does not interact with the employees daily. This may create a sort of disconnect among them. Interacting with employees daily or oftener helps the HR team in creating suitable policies. Issues concerning salary, performance, discipline, interpersonal relations of employees and so on take a back seat and leave employees helpless. This concludes that big organizations should prefer keeping in-house HR team and may be outsource some of the core vital tasks only, like lining up recruits, budgeting, formulating the payroll and so on.
As stated above and an extension of that, the employees working within the organization might not trust the HR professionals hired. . Unless the outsource HR team is capable in winning trust of employees by being present in the office oftener and organizing team bonding activities. There has to be a harmonious connects between the HR team and the employees for trust and reliability to build. The employees must believe that the HR activities are in their interest.
Liability, responsibility, accountability all fall in the same line. If anything goes wrong in handling the employees and their interests, the company can easily put it off to the hired HR team and get off the blame promising better services and not letting it repeat again. It helps the company keep off the litigations and keep their brand image. Well, with outsource options, it is always an open choice to change the outsourcing company (with due contract and conditions in mind) in case the matter is grave or makes it difficult to continue.
With just a bit of thinking, weighing the matter, it would become clearer whether the HR outsourcing is a good option for your company or not, and if both weigh equal, then there are combined options. Some of the work be done in-house and rest outsourced.