Deciding whether or not to outsource human resources is one of the most challenging question faced by an organisation.
Outsourcing is defined as the process when an organisation or a company instructs a team of individuals to take care of the human resource department of the organisation as such jobs might be tedious and complex to normal employees.
When taking such decisions try to keep in mind the financial capability and size of the business. Certain other factors should also be kept in mind. These are discussed below:
Pros and Cons of Outsourcing HR Services:
| S.no | Pros | Cons |
| 1 | Cost savings | Morale |
| 2 | Efficiency | Lack of in house expertise |
| 3 | Definite impact | Confidentiality |
| 4 | HR technology investment avoidance | Loss of human factor |
| 5 | Strategy delivery | Risks of Information Leaks |
| 6 | Quality improvement | Dependency |
| 7 | Risk management | Loss of Control |
| 8 | Knowledge base increases | Fears of disconnect |
| 9 | Employer branding awareness | Hidden charges |
| 10 | Regaining primary focus | |
| 11 | Increase in productivity and customer |
Pros or Merits of Outsourcing HR Services:
1. Cost savings:
Outsourcing helps to reduce the non-revenue and office taxes generated by the organisation. A fully functional and highly developed human resource department would require a large and developed infrastructure and a large amount of skilled employees.
A small business organisation where the budget is limited, prefers to outsource HR employees rather than building and maintaining for a large group of people and to meet the needs of another department at the same time. This can save a lot of money for the company both in terms of infrastructure and in terms of maintaining a large employee pool.
This also helps the company by preventing them to hire multiple people for various tasks. The larger the company grows the more cash human resource outsourcing can save for the organisation.
2. Efficiency:
Maintaining an efficient and productive workplace is critical. Advanced human resource technology developed by deployed individuals, employees and providers helps to focus on other human resource functions such as payroll, benefit administration and acquiescence and consent management.
Outsourcing helps the employees, supervisors and managers focus less on the paperwork and rather helps them to be more focussed and concentrated on how to improve the quality, efficiency and effectiveness of the workforce.
Once you begin to outsource from an organisation the employees become more efficient and the HR administration becomes more professional in their work. They also use highly advanced technology and devices to make the organisation more organised and productive.
3. Definite impact:
Just like introducing any other changes in the industry, introducing outsourcing of human resources within an organisation can have its set of advantages and disadvantages. This can be seasonal, depending on how the industry is behaving.
So try to make sure that there is a good amount of time spent studying about the industry being involved and the nature of the business before setting out for such a venture. Outsourcing can act both as a dream or a nightmare for small organisations.
Try to make sure that outsourcing brings you a positive impact that is the company should move towards the set goal and should not get lost in between the tide. If not sure of the steps you are about to take try consulting with a good, efficient and a trustworthy HR consultant.
4. HR technology investment avoidance:
Outsourcing in human resource administration prevents the company from further investing into human resources. Try to save on related technologies that can be both beneficial for the companies and the employees.
Try to save on technology and educate the employees on how to use such technologies. Many software programs are self-automated hence making it easier for the employees to easily handle HR clerical and paper works on their own.
5. Strategy delivery:
At first sight, human resource department may seem an unwanted part of the company, but many big and famous organisations rely on their respective HR departments for the success of their companies. This is a part that no new entrepreneur must not omit.
As the organisation increases, the human resource department becomes more and more valuable and ultimately becomes an indispensable part of the company. HR departments within a company are beneficial for long–term planning.
By using human resource outsourcing, large amount of resources are freed. These resources includes financial, operational and human resources. By this method, more and more projects can be focused and implemented by the HR department of the company.
6. Quality improvement:
Easing the administrative work of human resource employees, both at the top level, middle level and the cross functional workers with the help of systems, technology and standards introduced by the outsourced company.
An efficient group in human resource department at a company can assure you the completion of work. This saves a lot of time and money for the managers and hence they get to be free from all the unwanted paper works and other formalities. This will ensure a great level of motivation within the employees of the company.
7. Risk management:
Studies and research have shown that there is a direct correlation between the number of turndowns and the increase in the number of companies and employee related lawsuits. It has been found out that the number of lawsuits have been increased by 400% during the last 20 years.
As time passes by, laws regarding the relation between the employee and the employer and associated laws are being amended every year. To keep up with the changing laws and being updated about such changes is very hard for the companies especially in a highly competitive industry.
In such cases managing such complex functions cannot be done by a common employee. This is where the human resource department steps in. They will take care of the unwanted compliances and the paperwork and other formalities.
By outsourcing to a service providing company, you are automatically reducing your company being in risk of a lawsuit or be involved in a case as stated by the employees. This can prevent lawsuits based on any false allegations by the workers.
8. Knowledge base increases:
As time passes, companies starts to struggle in abandoning old technologies and learning new upcoming trends and practices. Hence, it is beneficial for small companies to be up to date with the big fishes of the industry.
Small companies also try to expand their learning horizons and spread their area of interests, but in reality most of the companies do not have the resources to do so.
Skilled professionals from a reputable human resource organisation can provide the proper training and practice to your human resource department and make them more professional and ready for the competitive world. This makes them more efficient and have a high potential to produce satisfactory results.
9. Employer branding awareness:
Recruiting demands large amount of time and work on procedural formalities. But recruiting is also one of the many factors that makes the brand name for the client company.
Choosing the right individual for the company is always a tedious job. Recruiting the right person can have many steps, from interviewing, to attending general discussions, written tests, to even a complete background check.
Parallely, the human resource department also ensures that the recruited employees are employed at reasonable and just prices that are aligned with the industrial and worldwide developments and helps to overcome rival companies. This will attract interested, skilled and competent candidates and will reduce the rate of turnovers within the company.
10. Increase in productivity and customer:
If it is a large company, most of the human resource departments might be in different time zones. This means that, even if the business is closed, a lot can be achieved in a single overnight.
Moreover, if the business is expanded internationally the customers can get information about their products through the human resource department in their respective time zones.
You will be rewarded with improved and a satisfied customer feedback as they get information without any delay and without waiting for the business to be opened in your area.
11. Regaining primary focus:
Large business leaders are always swamped by day to day human resource problems, distracting from their original goal.
Outsourced human resource employees tries to remind them of the main focus while assuring the fact that they have taken care of all the complex human resource paperwork and other necessities.
By working alongside HR employees, workers can learn and grow as well as be focused on the main aim to be achieved.
Cons or Demerits of Outsourcing HR Services:
1. Morale:
The biggest downfall in an employee’s mind is when an outsourced employee is brought in. This means less wages, job losses and pay cuts. Lower morale means lesser productivity.
It can also instigate the feeling of rebelliousness within the employees. This can also lead to the working employees asking the organisation about why wasting money on outsourced employees instead of giving out proper wages to the workforce.
To help avoid this problem, try to hire outsourced human resource personnel who can formulate a method in integrating and including the present employees and workforce more peacefully without any discrimination. This is because without any proper output or efficient employee turn in, the human resource recruitment processes and the change they brought in will be short lived and thus their hard work will be futile up to an extent.
2. Lack of in house expertise:
Another main disadvantage of outsourcing human resources from other companies is the lack of onsite experience and expertise. If a new consultant is hired, there is always a learning period which acts as an incubation period for the employee, where the employee learns about the organisation.
If this period is skipped, they have a higher risk of implementing changes that does not follow the philosophies and motives of the company. This can ultimately cost the company and may incur a large amount of loss to the company.
To avoid this problem, try to find human resource employees that take sufficient time in studying about the head and the philosophies of the organisation. Also try to ensure that the changes made are relevant and congruent to the values of the company.
3. Confidentiality:
Any HR consultant worth talking will try to ask you about confidentiality agreement. As an outsourced employee, try to do your job, and prevent such consultants getting hold of confidential information about other employees.
This is company information and such information should be kept safe. Try to insist that no sharing of confidential information will occur or walk away from such consultant.
4. Loss of human factor:
Reduction of face to face interaction with employees is the greatest drawback of outsourcing human resources. Employers would like to see a familiar face within the environment rather than talking on the phone when something happens. Such exchange is not a positive exchange.
Employers tend to prefer people who are present at the office trying to calm down the problem rather than calling them up asking advices through the phone. As a part of human nature, people tend to be more careful talking face to face. This creates a sense of security within each other. Employees also need to be assured that their personal information is with a safe person rather than a hoax.
To avoid such discomfort, try to make sure that HR consultants tend to visit your offices every once in a while, (weekends are usually preferable) and devote every week or month to work at your workplace.
There are many loopholes while hiring an outsourcing employee, but the process of outsourcing should not be taken lightly. Reduced costs alone should not be the only driving factor (which is the main reason for your company to outsource).
If you are in a dilemma of whether to outsource or not, try to enquire about all the problems and gaps faced by the company which currently exists. Determine how you can solve such problems and do you have the in house solution for it. Try to find if you have a proper consultant for the job.
Outsourcing human resources and introducing new changes within the company can be both eventful and fruitful and worth the risk taken. Finding the right consultant not only gives you a sense of satisfaction but also will reward you and your company in the long term and will provide you with long lasting benefits. Try to hire professionals that truly understands the sentiments of the company and its motives and values.
