Companies are always being challenged to put effort and time into growing their business. It does not always make financial sense for them to have an internal team to support certain aspects of their business. Nonetheless, an effective human resources department is integral to companies, although at times it may not be easy to oversee in-house HR processes. A lot of administrative work goes into running an efficient HR department, and it’s generally a lot more than managers and business owners can take on by themselves.
Offshoring HR functions like resume screening, benefits, etc. are something that a lot of up-and-coming companies as well as established ones have started opting for to increase productivity. This way companies can put more focus and attention on developing their core business processes rather than human resources.
Pros of outsourcing HR
1. Economic and Cost-Effective
The maintenance of an in-house HR involves a great amount of money, time, effort, and office space. Emerging start-ups and companies along with large companies can benefit from reducing the expense of hiring full-time HR employees. The best on-site HR experts usually require major investments in terms of salary and wage. So outsourcing to a third party allows even hard-up businesses strapped for cash to hire highly experienced professionals. Companies can outsource tasks like large-scale recruiting, compliance issues, background checks, and payroll that do not require personalized guidance or training to the HR team with ease.
2. Legal Compliance and Support
Employment laws are changing every year, such as taxes, healthcare, wrongful termination, safety violations, and sexual harassment among many others. The outcome of non-compliance with these laws can lead to very expensive fines. In the case of pensions or payroll, there are devoted HR specialists who are well versed with all the laws and legislations in that area, that stay up to date with the changes in the law guaranteeing legal compliance. The legal experts of the HR service provider companies would also be at the disposal of the business that has outsourced HR. So, if an employee sues the company, the outsourced HR department can guide and support the business towards the best results.
3. In-depth Skill and Knowledge
HR professionals from a specialized company generally have more in-depth knowledge about fields that in-house HR teams may not. Third-party agencies and independent HR specialists usually invest in cutting-edge technologies and software to stay relevant and have an edge over in-house HR consultants. Moreover, these outsourced HR teams are also fully trained in that one particular area and have excellent knowledge. Since they are HR specialists, they already have meticulous tried and tested procedures and processes to ensure information availability. Therefore, by outsourcing, companies have much easier access to information, like an employee’s profile.
Cons of outsourcing HR
1. Risk of Disconnect
Companies might feel that they have less managerial control when they are used to having complete authority over the staff and full burden of the responsibilities. So, it may seem scary to hand over such essential processes to an external team. The lack of seeing the HR representative in the office will make the employees feel neglected as well. However, a good provider can ensure a consistent connection between themselves, the employees, and management, even with simple things like regularly scheduled meetings to discuss and resolve any queries and expectations between the teams.
2. Lack of Personal Touch
HR generally deals with the most challenging and emotional experiences in an office as they also work on personal matters like life insurance, health, etc. with employees and their families. Employees may not feel the same level of comfort in discussing their issues or problems with a stranger as they would with a person they see every day in the office. Accordingly, there is a risk of interactions not being given personal attention or being handled as sensitively as by an in-house HR with excessive outsourcing. Nevertheless, a good service provider usually always has the tool to overcome the emotional divide between the onshore and offshore teams.
3. Distance and Availability
The utilization of an offsite HR Company may make it more difficult for employees to communicate with them and there are high chances that the responses may not be as quick as they would be with an in-house HR. They might not be that easily accessible and discussion and resolution of delicate matters might be harder to do over a call. Although to counter this, companies can take care that the service provider they choose is one with a more hands-on process to bridge the distance.